Green Dot Portfolio: November 2018 Update

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Includes: AAPL, AWF, BGX, C, CLNY, COR, D, DFP, DGAZ, DSL, EMD, FAX, FEO, FLC, FRA, FRME, GE, GS, HASI, HPS, HYT, JPS, KHC, KIO, LDP, MIC, MO, MSD, NVG, PCI, PFXF, QCOM, RA, RNP, SKT, SNV, SPXL, SPY, SYF, TNA, TQQQ, UCO, UGLD, USLV, VLO, VTR
by: Green Dot Investor
Summary

Total realized cash return on portfolio investment for November from dividends and swing trades was +0.78% and has totaled +13.54% for the past 13 months.

Dividend income slowed for November at $567, as I had taken profits on several REITs.  With a new cash contribution, I added to 9 CEFs and 3 dividend growth stocks.

I closed 7 ETF swing trades for +7.67% (average of 7 days, +257% annualized), and I entered 1 new option, 5 ETF, and 7 stock swing trades.

With the October pullback completed, the SPY is now rebounding short term before the next, larger downtrend resumes to end this bear market.

Welcome to my November update for my Green Dot Portfolio, a small, self-managed retirement portfolio created in a Roth IRA trading account.

Last month, I reported that the first year had arrived since my portfolio was presented on Seeking Alpha, and that I had surpassed my initial goal to achieve a total realized annual return of at least +8% in cash income, using high-yield dividend investments and swing trading. In one year, I was fortunate to realize total cash income of +12.76%. I also set a higher goal for this second year, at +10% in total cash income. With a volatile November now in the books, my second year is off to a good start.

1. Recap of Market Action for November 2018

Last month, October, was a major losing month for the markets, the second major sell-off in less than a year. In my monthly update article, using the SPDR S&P 500 Index ETF (SPY), I showed that from a technical analysis perspective the October pullback was nearly identical to the early 2018 pullback (34.09 vs. 33.71 SPY points). Then, using the analysis by Caldaro (Objective Elliott Wave), I presented his reasoning why the October pullback was only the first part of a decline of a larger degree than in Jan-Feb 2018.

November ended up being a more volatile month than I expected. On October 31, the SPY gapped up on volume lower than the preceding 3 days (see chart below). Then, it climbed for 5 days until 11/7, where it stalled at the .618 retrace for the recent month-long pullback. The SPY then moved lower for most of the next 11 days to SPY 263 on 11/23, which was above the previous low on 10/29 (SPY 259). At that point, it was back below all major moving averages. This past week, the SPY gained 4.7%, closing at SPY 276, above its 20-day MA and just below the 50% retrace, and near the convergence of the 50- and 200-day MAs. That's three points of short-term resistance.

(Source: Chart created by author from the TD Ameritrade thinkorswim platform)

In my weekly blog last week, I reported that Caldaro had presented a possible alternative wave pattern for the SPX based on a different time frame for the progression of the Minor a (down) wave and the Minor b (up) wave. However, with the strong price action in the markets this past week, it now seems that a clearer pattern count for the SPX is apparent. The major difference for this updated pattern is that previously Caldaro considered that Minor a completed at the October low and that the subsequent trading was part of Minor b up, whereas it now appears that Minor a actually just completed on 11/23. The last week of trading for November was the beginning of Minor b.

Here's Caldaro's most recent daily pattern chart for the SPX. The chart shows that Minor a down consisted of 3 Minute waves (a, b, c), followed by a simple Minor b up, and then a sub-divided Minor c down (Minute a-b-c) that also simultaneously completed Intermediate a. Intermediate b up and then Intermediate c down will complete Major 2 down and this bear market in 2019.

(Source: StockCharts.com - Note: Charts on the website update several times per week)

While a stronger-than-normal Minute-level pullback might occur early next week, Caldaro still expects that the Int. b retrace could reach SPX 2815, or higher:

"A normal retracement of Int. A would put the SPX right back around the 2815 area... B wave retracements, in recent years, have been stronger than normal. This would suggest possibly the 2858 or 2884 pivots."

If the higher level is reached, that's greater than a .786 retracement of the entire October pullback. I would expect that the media and many investors will at that point begin to think that this short-term bear is over. They may be very unpleasantly surprised when the last wave down then takes hold, taking the markets to levels below the February 2018 low.

As I have said previously, many investors ignore the ups and downs of the markets and rest knowing that eventually these downturns pass. But for traders who look to add profits to fixed-income investments, it's important to have a framework for understanding the changes in direction of the markets. I have found that Caldaro's analysis, despite fine adjustments over shorter time periods, provides a useful framework for my swing trading. Caldaro's latest pattern count works well for all of the recent swing trades that I have entered. So, I intend to wait for at least SPX 2815 (SPY 281.50) before taking any profits. That's at the 11/7 high, the .618 retracement of the October pullback, and near the current 100-day MA.

2. Portfolio Strategy and Asset Allocation for November

In November, I attempted to begin trading the bounce from the October market pullback. I also added cash at this time, and used the additional funds to both enter new swing trades and to add to fixed-income holdings. This included re-entering some CEFs that I had sold previously but which had also pulled back in price in October.

Highlights of changes to my portfolio in November are as follows:

  • I added a cash distribution of $40,000, bringing the total portfolio investment cost at the end of November to $154,374.
  • The number of holdings increased from 37 in October to 46 in November.
  • The total number of current shares increased from 6,684 in October to 8,597 in November.
  • The overall unweighted average dividend/distribution yield of my REITs and CEFs increased from 7.18% for 29 holdings in October to 7.39% for 33 such holdings in November.
  • The average investment per holding in the portfolio (excluding options) increased from $2,839 in October to $3,409 in November.

Portfolio Allocation

At the end of November, my Green Dot portfolio consisted of 1 preferred stock ETF, 5 REITs, 19 Closed-End Funds, 5 stocks for income and dividend growth, and 16 swing trade positions. The latter includes 1 option premium swing trade, 8 stocks, and 7 leveraged ETFs. The pie chart below shows the percentage of the portfolio investment allocated to these assets at the close of November.

(Source: Chart created by author from portfolio data as of November 30)

Readers of my previous monthly updates and weekly blogs know that I took profits on a number of REITs in the past few months, thereby reducing their composition in the portfolio. When REIT prices rotate lower, I plan to re-enter some of those positions.

Looking at the investment cost for only the 30 non-swing trade holdings, about 70% are domestic equities and income funds, as presented in the pie chart below. About 2/3rd are fixed-income holdings.

(Source: Chart created by author from portfolio data as of November 30)

3. Swing Trades in November

November was an especially busy month for my swing trades. I closed 7 ETF swing trades for profits, and I entered 13 new swing trades. All of this activity was intended to trade the market bounce after the October pullback. Time will tell the extent to which I was successful with this strategy.

For those new to my monthly updates, I provide detailed information, charts, and my trade logs for swing trades in my weekly blogs for followers. In May, I detailed my simple approach to swing trading option premiums in this article.

Closed Option Premium Swing Trades - None.

Closed ETF Swing Trades

In early November, I sold 7 ETF swing trades, all following the October pullback in the markets. Details about entering these trades were provided in my weekly blogs for followers. After I sold these ETFs, most continued to rise a bit more in price before reversing trend. These were small-ish trades, averaging about $1,191 in cost. They added a total of $640 in cash profits for November. Based on total costs and net proceeds, they returned a gain of +7.67%.

The table below presents the dates, symbols, names, number of shares, sell prices, percentage gains, and number of days in the trade for these 7 trades.

Date Sold Symb. Security Name Qty. Sell Price % Gain # Days
11/1 YINN Direxion Daily FTSE China Bull 3X Shares 50 $19.42 +8.23% 11
11/1 TNA Direxion Daily Small Cap Bull 3X Shares 18 $64.50 +10.30% 5
11/2 KBE SPDR S&P Bank ETF 25 $43.85 +7.24% 6
11/2 KRE SPDR S&P Regional Banking ETF 20 $55.06 +7.05% 8
11/2 pre-mkt. SPXL

Direxion Daily S&P 500 Bull 3X Shares

50 $44.73 +10.41% 6
11/2 TQQQ

ProShares UltraPro QQQ

20 $53.80 +6.67% 6
11/2 XLB Materials Select Sector SPDR ETF 20 $54.50 +2.62% 10

Newly Opened Swing Trades

In November, I entered 1 stock option premium trade (C), 5 ETF trades (DGAZ, SPXL, TNA, TQQQ, and UCO), and 7 stock trades (AAPL, C, GE, GS, MO, QCOM, and VLO). All of these trades were entered on the assumption that the first part of this short-term "October swoon" bear market pullback has passed and that the markets would then bounce moderately before resuming the downtrend. So, these are all "long" trades. As the short-term uptrend is not a straight move and individual stocks and ETFs vary in their detailed price moves, I added to some of the positions after my initial purchase.

The single option premium swing trade was for Citigroup:

  • On 11/14, I "bought to open" 4 C Mar 15 2019 70 Calls at $1.50/contract. On 11/26, I added 3 contracts at $1.29, bringing my average cost for the 7 contracts to $1.41.

The table below presents the dates, symbols, names, number of shares, and unit costs for the purchases of my 12 non-option swing trades for November.

Buy Date Symb. Name # Shares Buy Price per Share
11/6, 11/9, 11/14 UCO ProShares Ultra Bloomberg Crude Oil ETF 75, 75, 75 $25.50, $23.70, $21.25
11/9, 11/12 TNA

Direxion Daily Small Cap Bull 3X Shares ETF

25, 25 $66.939, $62.50
11/9, 11/12 TQQQ

ProShares UltraPro QQQ ETF

25, 25 $53.93, $48.93
11/12 GE General Electric Co. 100 $7.97
11/12 QCOM

Qualcomm Inc.

20 $55.15
11/12, 11/14 DGAZ VelocityShares 3x Inverse Natural Gas ETN 300, 300 $4.90, $3.08
11/14, 11/21 GS

Goldman Sachs Group, Inc.

8, 8 $201.99, $191.703
11/14, 11/20 AAPL Apple, Inc. 8, 8 $188.40, $179.109
11/16, 11/20 SPXL Direxion Daily S&P500 Bull 3X Shares ETF 50, 50 $41.60, $40.236
11/20 VLO

Valero Energy Corp.

15 $78.60
11/23 C

Citigroup Inc.

30 $62.06
11/23 MO Altria Group Inc. 30 $53.75
  • Note: On 11/26, there was a 20:1 reverse split for DGAZ, so my average cost is $79.80/share for my 30 shares.

Most of these trades are working as expected, or at least acceptably, except for the oil (UCO) and natural gas (DGAZ) trades. These are both 3x leveraged trades, and being on the wrong side of them too long gets very ugly, so I am really looking for oil to reverse to the upside and for nat gas to pull back from its recent spike. I missed exiting GDAZ with a great profit the day after I bought it. I heard that November was the worst month in the past 10 years for crude oil prices (of course, the sell-off is good for consumers).

4. Cumulative Swing Trade Results

Non-Option Swing Trades

For the first year of my Green Dot portfolio, from November 2017 through October 2018, I was fortunate to close for profit 41 out of 42 non-option swing trades. The total net cash return (price gains and dividends on swings) was nearly $2,900, resulting in a total net gain of +6.86% for an average of 39 trading days (+44.2% annualized). These were fairly small trades averaging just $1,003 in cost. Other details about those swing trades were presented in my October update article.

For my second year, I have planned to scale up the average investment in swing trades. The trades closed in November were only about 10% larger in cost. But for 13 of my most recent swing trades, the average cost is $2,470.

By the end of November, I closed 7 non-option swing trades for an average gain of +7.67% for an average of 7 trading days (+275% annualized). The chart below shows the percentage gains for the 7 non-option swing trades for November.

(Source: Chart created by author from portfolio data as of November 30)

Option Premium Swing Trades

Since I started trading option premiums in April, I have closed for profit 24 out of 30 option trades, adding $3,450 in cash to my portfolio.

For November, I added only 1 option trade, primarily because I expected that the bounce off of the October low might likely to be more difficult to time. I bought leveraged ETFs instead.

5. Dividend Income in November

For the first year of my Green Dot portfolio, I collected $6,190 in dividends, mostly from high-yield REITs, Closed End Funds, and preferred stock. Dividends contributed almost half of the total cash income from my portfolio, with swing trade profits comprising the remainder.

For November, I collected $567 in dividends, with most (82.1%) from CEFs and the rest from a preferred stock ETF, REITs, and common stocks. November's dividends were lower than those for October ($729), which was the monthly high for the first year. The main reason for the decline is that I took profits on a number of positions before the October pullback.

Additions to the Portfolio in November

With the pullback in some CEF prices in November, I decided to add to positions. I have also now started to re-purchase some of those sold positions, and I am accumulating shares at lower costs than previously. I added to 9 CEFs and 3 dividend growth stocks this month.

CEFs

Note: Data on distribution yield and discount to Net Asset Value are from CEF Connect as of 11/30. Because many CEFs bounced this past week, in most cases the yield on cost for my purchases was higher than currently and my discount to NAV was larger.

  • On 11/6, I bought 100 shares of Blackstone/GSO Long-Short Credit Income Fund (BGX) at $15.35/share, and on 11/21, I added 100 shares at $14.846/share (average of $15.098/share). When I held this CEF previously, my average cost was higher, at $15.911/share. This CEF pays an income-only distribution of $0.103/share/month (9.40%) and is trading at a -11.37% discount to NAV.
  • On 11/14, I added 100 shares of Flaherty & Crumrine Dynamic Preferred and Income Fund (DFP) at $21.72/share, and on 11/20, I added 100 shares at $21.035/share. This CEF pays an income-only distribution of $0.148/share/month (8.27%) and is trading at a -7.25% discount to NAV. These purchases bring my total position to 450 shares and lower my unit cost to $22.636/share.
  • On 11/14, I added 152 shares of Nuveen Preferred & Income Securities Fund (JPS) at $8.395/share. This CEF pays an income-only distribution of $0.056/share/month (8.05%) and is trading at a -8.23% discount to NAV. This brings my total position to 1,100 shares and lowers my unit cost to $9.335/share.
  • On 11/15, I re-entered KKR Income Opportunities Fund (KIO), buying 100 shares at $15.76/share. I also bought 100 shares on 11/26 at $15.309/share, for an average cost of $15.534/share. This CEF pays an income-only distribution of $0.125/share/month (9.89%) and is trading at a -9.74% discount to NAV. I previously held 200 shares at an average cost of $16.275/share.
  • On 11/21, I added 100 shares of DoubleLine Income Solutions Fund (DSL) at $17.81/share. This CEF pays an income-only distribution of $0.15/share/month (9.77%) and is trading at a -6.43% discount to NAV. This brings my total position to 645 shares and lowers my average cost to $19.8674/share.
  • With a sharp pullback recently, I finally re-entered my former position in PIMCO Dynamic Credit Income Fund (PCI). On 11/19, I bought 150 shares at $22.34/share, and on 11/20, I bought 100 shares at $22.09/share (average of $22.24). My former cost was $22.63/share. This CEF pays an income-only distribution of $0.1641/share/month (8.54%) and is trading at a -1.34% discount to NAV.
  • On 11/26, I bought 100 shares of John Hancock Preferred Income Fund III (HPS) at $17.18/share. This CEF pays an income-only distribution of $0.1222/share/month (8.41%) and is currently trading at a +2.28% premium to NAV. I previously held 100 shares of HPS at an average cost of $18.34/share.
  • On 11/26, I added 50 shares of First Trust/Aberdeen Emerging Opportunity Fund (FEO) at $12.73/share. This CEF pays an income-only distribution of $0.35/share/quarter (11.03%) and is trading at a -14.44% discount to NAV. This brings my total position to 100 shares and lowers my unit cost to $14.907/share. I added to this position now because I think that EM funds may have finally bottomed for this year.
  • On 11/26, I added 50 shares of Western Asset Emerging Markets Debt Fund (EMD) at $12.50/share. This CEF pays an income-only distribution of $0.10/share/month (9.83%) and is trading at a -15.94% discount to NAV. This brings my total position to 100 shares and lowers my unit cost to $14.135/share. I added to this position now because I think that EM funds may have finally bottomed for this year.

Dividend Growth Stocks

In November, I added to 3 recently purchased financial stocks that have been increasing their dividend payouts. I presented YCharts in my October update that show the 5-year percentage growth in dividend yield and the share price growth, which in these cases, has lagged dividend growth.

  • On 11/14, I added 50 shares of Synchrony Financial (SYF) at $26.85/share. This brings my total position to 130 shares and lowers my average unit cost to $28.389.
  • On 11/14, I added 40 shares of Synovus Financial Corp. (SNV) at $36.80/share. This brings my total position to 75 shares and lowers my average unit cost to $38.639.
  • On 11/14, I added 40 shares of First Merchants Corp. (FRME) at $40.55/share. This brings my total position to 75 shares and lowers my average unit cost to $40.993.

I have yet to re-enter some of the REITs that I sold before this month, as most did not correct with the October "tech wreck." REITs had their own "REIT rout" in early 2018, and many continue to motor higher this fall. So, I will have to wait for better entry opportunities for my favorite REITs, including Blackstone Mortgage Trust (BXMT), Hannon Armstrong Sustainable Infrastructure Capital (HASI), Ladder Capital Corp. (LADR), and Medical Properties Trust (MPW).

Realized Total Return

My Green Dot portfolio generates cash income each month through dividends and profits from swing trades. These are realized gains, or cash that is available for additional investment. I have raised my portfolio goal this year to a 10%+ annualized gain (average of 0.83%/month).

In November, my portfolio performance was about average for these 13 months. It returned a total of +0.78% on a much larger portfolio cost, the result of a distribution that was added to the portfolio. It trailed the average monthly return needed to meet by annual goal by a small amount. November was the 5th-highest month to date for total returns, the 8th-highest for percentage returns, the 5th-highest for swing trade profits, and the 6th-highest for dividend income. The table below shows the total investment and investment return in my portfolio each month, including total profits from swing trades (ex-dividends), dividends on swings, and other dividends collected. Dividends are reported for the month received in my account. Beginning in December I will stop including the data from the first year of the portfolio.

Month $ Cost $ Swing Profits $ Divs on Swings $ Other Dividends $ Total Income % Return on Investment
Nov17 79,154 509 71 235 814 1.03%
Dec17 79,587 445 48 353 846 1.06%
Jan18 94,560 548 37 509 1,094 1.16%
Feb18 98,637 160 - 473 632 0.64%
Mar18 95,878 154 5 497 656 0.68%
Apr18 100,656 64 - 598 662 0.66%
May18 104,638 1,026 - 612 1,638 1.57%
Jun18 105,394 1,068 44 542 1,654 1.57%
Jul18 111,532 753 - 707 1,460 1.31%
Aug18 108,951 134 14 597 746 0.68%
Sep18 109,258 332 - 486 818 0.75%
Oct18 105,036 999 4 729 1,732 1.65%
Nov18 154,374 640 - 567 1,207 0.78%
Total 6,830 222 6,906 13,958 13.54%

The 13-month total cash return is now +13.54%. The chart below shows total monthly percentage return on portfolio cost at the end of each month. The heavy blue line below is the moving average monthly percentage return, which at +0.96% is down a tenth of a percent from the moving average as of the end of October.

(Source: Chart created by author from portfolio data as of November 30)

The chart below depicts the monthly source of realized cash portfolio profits. Overall, the chart clearly shows that my portfolio cash returns have been achieved through both high-yield income investments and swing trading. Overall, performance is higher over the past 7 months compared to the first 6 months. Beginning in December, I will no longer show the data from the first year of the portfolio.

(Source: Chart created by author from portfolio data as of November 30)

Unrealized Gains/Losses

Total current value of all 46 positions in my portfolio at the end of November was -10.4% below costs, an improvement from October. But as the market is still far from recovered from the "October swoon," I am not overly concerned, especially given that the distribution/dividend yield of the 24 CEFs and REITs in the portfolio averages 8.04%.

Current Portfolio

In October, my portfolio consisted of 37 holdings, but there are now 46 at the end of November. The table below lists these holdings, including the current number of shares, average unit cost, dividend/distribution yield, and percentage of the overall portfolio.

Symbol Qty $ Unit Cost Cls. 11/30 % Div Yield % of Portfolio
Preferreds
PFXF 84 20.149 18.37 6.29% 1.1%
REITs
CLNY 345 11.785 6.18 7.31% 2.6%
COR 10 89.990 97.46 4.28% 0.6%
HASI 33 18.310 22.85 5.59% 0.4%
SKT 125 26.052 23.64 6.00% 2.1%
VTR 20 58.435 63.49 5.09% 0.8%
CEFs
AWF 900 11.930 10.81 7.73% 7.0%
BGX 200 15.098 14.89 8.25% 2.0%
DFP 450 22.636 21.29 8.37% 6.6%
DSL 645 19.867 18.34 9.85% 8.3%
EMD 100 14.090 12.29 9.80% 0.9%
FAX 1,000 4.956 4.01 10.58% 3.2%
FEO 100 14.862 12.68 11.07% 1.0%
FLC 130 20.507 17.07 8.36% 1.7%
FRA 240 14.078 12.67 6.10% 2.2%
HPS 100 17.180 17.52 8.40% 1.1%
HYT 315 10.509 9.70 8.93% 2.1%
JPS 1,100 9.335 8.36 8.20% 6.7%
KIO 200 15.534 15.20 9.78% 2.0%
LDP 80 25.215 22.04 8.51% 1.3%
MSD 400 9.523 8.27 6.27% 2.5%
NVG 249 15.236 13.69 5.79% 2.5%
PCI 250 22.240 22.85 8.68% 3.6%
RA 314 22.934 20.19 11.88% 4.7%
RNP 50 19.900 18.60 8.05% 0.6%
Income Stocks
D 15 80.194 74.50 4.56% 0.8%
FRME 75 40.993 42.04 2.09% 2.0%
MIC 33 69.741 41.70 9.94% 1.5%
SNV 75 38.639 37.81 2.66% 1.9%
SYF 130 28.388 25.98 3.18% 2.4%
Swing Trade Holdings
AAPL 16 183.755 178.58 1.61% 1.9%
C 30 62.020 64.79 2.74% 1.2%
DGAZ 30 79.800 49.31 0.00% 1.6%
GE 203 16.064 7.50 6.20% 2.1%
GS 16 196.847 190.69 1.61% 2.0%
KHC 9 80.994 51.12 4.88% 0.5%
MO 30 53.750 54.83 5.82% 1.0%
QCOM 20 55.150 58.26 4.38% 0.7%
SPXL 100 40.918 44.86 0.55% 2.7%
TNA 50 64.720 63.70 0.19% 2.1%
TQQQ 50 51.430 50.69 0.00% 1.7%
UCO 225 23.483 16.80 0.00% 3.4%
USLV 12 63.450 57.45 0.00% 0.6%
UGLD 16 85.790 83.29 0.00% 1.1%
VLO 15 78.600 79.90 4.03% 0.8%
C Mar 15 2019 70 Calls 4 1.41 1.62 0.00% 0.6%

Final Thoughts

My Green Dot portfolio is one of several that I manage and represents one of many possible approaches to investing and trading. My costs are relatively low, as I have an active trader discount, and I have no taxes on swing trading profits or dividend income, as this portfolio is in a Roth IRA. What I do here may or may not be appropriate for others, so please perform your own due diligence if you follow any of my ideas or trades. I wish readers well with their own endeavors!

I also wish everyone Peace and Blessings for this coming Holiday season.

Author's note: I appreciate the comments and questions from readers in the Seeking Alpha community, and I look forward to continuing to share my investing experience and to learn from others.

If you found this article of interest and want to receive my weekly blogs, please click the "Follow" button at the top of this page. And please share this with others who you think would be interested.

Best to your investing/trading!

=Green Dot Investor=

Disclosure: I am/we are long AAPL, AWF, BGX, CLNY, C, COR, D, DFP, DGAZ, DSL, EMD, FAX, FEO, FLC, FRA, FRME, GE, GS, HASI, HPS, HYT, JPS, KHC, KIO, LDP, MIC, MO, MSD, NVG, PCI, PFXF, QCOM, RA, RNP, SKT, SNV, SPXL, SYF, TNA, TQQQ, UCO, UGLD, USLV, VLO, VTR.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.