Green Dot Portfolio: February 2019 Update

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Includes: ABBV, AOD, BGX, BIEL, BIT, C, CVS, D, DSL, FAX, FRA, IBKR, JPS, KHC, NVG, OIH, PFXF, QCOM, SHMP, SLB, SOXS, SPXL, SPXS, SPY, SQQQ, SYF, TNA, TQQQ, UGLD, VLO, WLK
by: Green Dot Investor
Summary

Total cash income on portfolio investment for February from dividends and swing trades was +1.74% (a new high) and has totaled +4.87% for the past 4 months.

Dividend income for February was $655, a decrease from January. Closed-end funds contributed 86.4% of dividends. Dividends contributed 27.6% of total portfolio income.

Swing trade income for February was $1,714. I closed 13 profitable swing trades for a total net gain of +6.69% (+32.9% annualized). I entered 12 new swing trades.

After gaining 8.16% in January, the SPY rose 3.16% in February.  The SPY has now retraced 78.6% of the overall market decline since the October high.

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

February was the fourth month of my second year for my portfolio, and it was overall my most profitable, not only for year two but also since portfolio inception. This year my goal is to achieve 10%+ in total cash income, using high-yield dividend investments (closed end funds, REITs, and dividend growth stocks), as well as swing- and position-trading of stocks, ETFs, and option premiums.

1. Market Action and Pattern for February 2019

Readers of my previous updates know that I use the broad-market index, the SPDR S&P 500 Trust ETF (SPY), to represent the overall price pattern and trend of the markets. In February, the market continued to recover from the bear market selloff in fall of 2018. But while the SPY advanced +8.2% in January, it slowed to only +3.2% in February.

The daily chart below for the SPY for the past six months shows the price pattern for the bear market and the subsequent rebound. The blue parallel lines, a Fibonacci retracement sequence for the bear market, provides one suggestion of levels where the SPY may find resistance on the rebound. In early February, the SPY pierced the .618 level and pulled back slightly before resuming the uptrend. At the close of February, the SPY seems to have stalled again, this time at the .786 retrace. This level, SPY 281, served as major resistance three times during the bear market, sending the index down in mid-October, early November, and early December.

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

With such a strong rebound in 2019, most analysts I follow suggest that the bear market has completed, but that there is certain to be resistance ahead at some point. I think that the weekly chart of the SPY below is useful to see that the 2019 advance has been challenged to overcome what is called "inside bar" action, those large drops for the weeks of 12/3 and 12/17.

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

February ended on a Thursday, and at that point the week looked to have broken the uptrend after 9 weeks. Also of note, in addition to the smaller percentage gain in February, weekly volumes have generally been declining. The two-months long rally seems to be losing some momentum.

For some time now I have also covered the quantitative Elliott Wave pattern for the SPY by Tony Caldaro (Objective Elliot Wave). Sadly, Caldaro passed away on 2/11, and there has yet to be a resumption of his work by his "team," as was announced would happen by his family. In his last post on 2/8, Caldaro considered that the 2018 bear market (Major 2 in a longer Primary III bull market) completed in late December, and that the 2019 rebound was the beginning of a Major 3 (up) wave. Below is his last chart of the pattern:

(Source: StockCharts.com - Note: See Caldaro's site for specific links; charts on the website may change.)

The Minute level waves that comprise the beginning of this uptrend were nearing completion, so the next move would be a moderate pullback, perhaps on the order of 5-7%. Until the EW pattern work is continued or I find another source, I'll have to suspend my use of Elliott Wave patterns.

2. Portfolio Strategy and Asset Allocation for February

In February, I continued to close swing trades as the market rebounded from the late December 2018 low. I also added nearly as many new swing trades as I closed. But climbing prices left me more hesitant to add aggressively to core income positions such as higher-yielding closed end funds or REITs, especially as many REITs have been overbought.

Portfolio Allocation

I initially described my Green Dot Portfolio as "dynamic." Readers have seen over time that I split my investment funds into two general parts:

  • high-yield income holdings - mostly CEFs, but also REITs, dividend growth stocks, and (previously) preferred stocks and preferred stock ETFs.
  • swing trade holdings - mostly common stocks but also index and sector ETFs, stock option premiums, and a few penny stocks.

This split is never equal on a dollar cost basis from month to month, and the mix within each group changes over time as well. My overall strategy is to generate a fairly high level of slowly-growing dividend income that will generate between 1/2 and 2/3 of my total annual return goal, with swing trades making up the remainder of the goal returns.

At the end of January, I held 1 preferred stock, 2 REITs, 17 CEFs, 7 income and dividend growth stocks, and 12 swing trades including 1 option premium swing. At the end of February, I held 2 REITs, 18 CEFs, 5 income and dividend growth stocks, and 16 swing trades including 1 option premium. The pie chart below shows the percentage of the portfolio investment allocated to these assets at the close of February. The biggest change from January to February in percentage terms is that the income & dividend growth stocks decreased from 12.66% to 7.96%, as I took some profits, and swing trades increased from 57.87% to 63.03%.

(Source: Chart created by author from portfolio data as of February 28.)

3. Portfolio Adjustments in February

I moved out of two of my long-standing income positions in February, one of my CEFs, and my only remaining preferred stock ETF. As with other portfolio adjustments, I do not consider that these are swing trades, and the net gains from any share price appreciation are not added as portfolio returns. I used proceeds from these sales and other funds to add to four existing CEFs and to start positions in two new CEFs.

  • On 2/6, I sold all 249 shares of Nuveen AMT-Free Municipal Credit Income Fund (NVG) at $14.45/share.

Over the past year and more, I made a half dozen purchases of this fund, mostly at higher prices. My average cost for these shares was $15.23. But with dividends collected, I had a small overall net gain of +0.75%. The reason that I decided to finally move out of this fund is that it pays me 5.5%, but in my Roth IRA I am not getting the advantage of its income tax-free provision. This fund would be more beneficial if in a taxable account.

  • On Friday (2/22), I sold my 84 shares of VanEck Vectors Preferred Securities ex Financials ETF (PFXF) at $19.2154/share, for a net gain of $61.05 (+3.61%) including $139.54 in dividends.

I bought this ETF early in the portfolio because of its above average distribution yield (6%+) from preferred stocks. PFXF pays a variable monthly dividend, but with higher distributions from CEFs, I decided to finally move out of PFXF.

Regarding the additions to four existing CEFs (BGX, DSL, HYT, LDP) and the two new CEFs (AOD, BIT), the table below presents the date added, name, number of shares, cost/share, and total shares now held:

Buy Date Symb. CEF Name Qty. $ Buy Price Total Shares Now Held
2/7, 2/8 HYT BlackRock Corporate High Yield Fund, Inc 200 10.020 515
2/7/2019 AOD Aberdeen Total Dynamic Dividend Fund 200 8.220 200
2/7, 2/8 BGX Blackstone/GSO Long-Short Credit Income Fund 300 14.933 400
2/7/2019 BIT BlackRock Multi-Sector Income Trust 200 16.400 200
2/8/2019 LDP Cohen & Steers Limited Duration Preferred and Income Fund, Inc 60 23.470 140
2/21/2019 DSL DoubleLine Income Solutions Fund 100 19.350 745

4. Dividend Income

Dividend Income in February

In February I collected $654 in dividends, in addition to $97 in dividends from swing trades. This was lower than for both December and January because I took profits on several income positions during those months. Dividends from CEFs comprised 86.4% of dividends this month (excluding dividends from swing trades), which was a bit higher than the average for this second year, at 84.8%. Income position dividends contributed 27.6% of total cash income for the month, far less than any month to date. This was because of the high level of swing trade profits in February.

Cumulative Dividend Income for this Second Year

Overall, average monthly dividend income this year from non-swing trade positions ($695) has increased over the average for the previous six months ($612). This is mostly because I added funds to the portfolio in November and added to my CEFs.

Total monthly income from dividends excluding dividends from swing trades for this second year is presented in the chart below. The average monthly dividend income (blue line on chart below) is currently $695, a slight decrease from the average of $709 in January. Overall, dividends have provided 40.5% of my total cash income so far this second year. If I include dividends from swing trades, dividends provided 42.5% of total returns.

(Source: Chart created by author from portfolio data as of February 28.)

CEF Contributions to Income

Readers of my portfolio articles and blogs know that I really like Closed End Funds for their high-yield distributions. At the close of February, my portfolio included 18 CEFs. Despite that CEFs, to some, have a reputation of losing value over time, I am satisfied with their performance for the most part. Some have a lower value now compared to cost, which can be explained mostly by the continuing recovery from the 2018 bear market. And other factors will influence the price trends over time: for example, preferred stock CEFs will generally trend lower with the financial sector.

I conducted an analysis of the total returns to date for the 18 CEFs currently in my portfolio. The chart below presents the CEF ticker symbols, total distributions received to date, current market value gain or loss, total return, and the total return as a percentage of total distributions received to date. The data show that:

  • 5 of the CEFs (BIT, BGX, AOD, HPS, KIO) have gained in market value to date over cost, in addition to providing distributions.
  • 7 of the CEFs (DSL, EMD, HYT, RNP, AWF, JPS, RA) have a current loss of market value that is less than the total value of distributions received.
  • 6 of the CEFs (MSD, FLC, FEO, LDP, FAX, FRA) have a market loss that exceeds the total value of distributions received. Current total loss for the first 4 of these is each less than $40. FAX and FRA are clearly the 2 real losers among these 18 CEFs.
  • Through February, the 18 CEFs have provided a total of $4,750 in distributions and the net loss in market value over costs is currently $2,295, resulting in a net total gain of $2,455.

(Source: Table created by author from portfolio data as of February 28).

As longer-term readers know, I take profits on my CEFs occasionally when their price gains are high. Examples from this past year include PCI, UTF, and UTG. While the list above shows total distributions for KIO, BGX, and HPS, I have also swept some profits from these CEFs in past months and re-entered them on pullbacks. So the table does not really capture the total longer-term returns from all of the CEFs that have been in the portfolio. Total CEF distributions alone since portfolio inception are $6,375.

5. Swing Trades in January

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. Starting this past month, I also now provide what are in effect trade alerts as "updates" for followers of my weekly blogs. I post to the most current weekly blog any trades shortly after I place them.

Closed Option Premium Swing Trades

I dumped 1 option swing trade in February because it was clearly heading toward worthless at expiration:

  • On 2/25 I "sold to close" my 10 C Mar 15 2019 70.0 Calls at $0.09/contract. This trade had an average contract cost of $0.695 and returned net proceeds of $84.14, for a loss of -$624.33 (-88.04%).

I bought the first half of these contracts on Citigroup (C) on 12/4 at $1.02/contract and, unfortunately, the price of C dropped significantly the next day. I added the second half at $0.37/contract on 12/10, but C continued to drop along with the overall market until 12/24. Although C rebounded, it was "too little, too late" for the option price to recover significantly, even though it got as high as $0.35/contract on 1/25, as shown in this option price chart:

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

Closed Stock and ETF Swing Trades

In February, I sold 13 non-option swing trades as markets continued to rebound from the steep drop in December. Details about these trades were provided in my weekly blogs for followers. The average cost for these trades was $1,983. They added a total of $1,714 in cash profits including $97 in dividends. Based on total costs and net proceeds, they returned a gain of +6.6%, which was below my average of about 7% since portfolio inception. The lower gain was due largely to my UGLD and TNA trades.

The table below presents the dates, symbols, names, number of shares, sell prices, percentage gains, and number of days in the trade for these 13 trades.

Date Sold Symb. Security Name Qty. Sell Price % Gain # Days
2/7 OTCQB:SHMP NaturalShrimp Inc. 1,670 0.36 19.96% 1
2/7 SQQQ ProShares UltraPro Short QQQ 126 12.70 5.88% 3
2/7 OTCPK:CBBT Cerebain Biotech Corp 33,300 0.02 32.54% 1
2/12 OTCPK:BIEL BioElectronics Corp 714,300 0.0008 13.09% 4
2/20 TNA Direxion Daily Small Cap Bull 3X Shares 50 66.30 2.65% 68
2/20 SPXL Direxion Daily S&P500® Bull 3X Shares 100 44.40 9.02% 65
2/20 TQQQ ProShares UltraPro QQQ 75 50.80 3.55% 68
2/20 IBKR Interactive Brokers Group Inc 50 55.10 10.20% 9
2/20 UGLD VelocityShares 3x Long Gold ETN 16 108.22 0.28% 185
2/20 SLB Schlumberger NV 40 46.08 4.22% 53
2/20 OIH VanEck Vectors Oil Services ETF 75 17.94 7.41% 51
2/20 SYF Synchrony Financial 130 31.90 8.20% 144
2/20 VLO Valero Energy Corp 20 85.95 4.07% 6

Six of these closed trades had just been opened in February: BIEL, CCBT, IBKR, SHMP, SQQQ, and VLO. The trade for Synchrony Financial was more of a "position" trade as it was longer in duration and I sold only to capture the profits. I like this stock and plan to re-enter if I can get it on a pullback.

New Swing Trades

In February, I opened an additional 12 swing trades for a total cost of $15,919. These included 1 option premium, 3 index ETFs, 5 common stocks, and 3 penny stocks. Details about these trades were provided in my weekly blogs, and I present a summary table below showing the date, name, ticker symbol, quantity, and share price for each of these swing trades. Please be advised that leveraged ETFs and penny stocks carry high risk.

Buy Date Symbol Security Name Qty. $ Cost
2/1/2019 SPXS Direxion Daily S&P 500® Bear 3X Shares 75 24.10
2/4/2019 ABBV AbbVie Inc 20 78.28
2/5/2019 SOXS Direxion Daily Semiconductor Bear 3X Shares 176 8.50
2/5/2019 XRX Jul 19 2019 26.0 Put Xerox Corp 3 1.33
2/7/2019 OTCPK:ERBB American Green Inc 1,670,000 0.0003
2/7/2019 OTCPK:CCLX Cableclix USA Inc 77,000 0.007
2/8/2019 OTCPK:FUTL FutureLand Corp 5,000,000 0.0001
2/11/2019 QCOM Qualcomm Inc 30 51.10
2/11/2019 CVS CVS Health Corp 23 65.25
2/22/2019 KHC Kraft Heinz Co 41 34.95
2/25/2019 SQQQ ProShares UltraPro Short QQQ 250 11.25
2/25/2019 WLK Westlake Chemical Corp 25 74.75

6. Cumulative Swing Trade Results

Non-Option Swing Trades

I use swing trading to add profits and grow my portfolio balance more quickly than through collecting dividends alone.

For the 4 months of my second year, I closed 34 profitable non-option swing trades for a net gain of $3,819, including $139 in dividends on those trades. This represents an average gain of +7.0% for an average of 35 trading days (+50% annualized). The chart below shows the percentage gains for these non-option swing trades for the second year of my portfolio. Trades closed in February are in blue.

(Source: Chart created by author from portfolio data as of February 28.)

The average investment cost was $1,617 for all 34 trades and was $1,983 for the trades closed in February. The average net gain for all 34 trades was $112 and was $132 for the trades closed in February.

Option Premium Swing Trades

I have been less successful recently for my option premium swing trades. For my first year, I closed 16 consecutive option trades for profits from May to July. In the next 3 months I closed 8 of 14 option trades for profit. For my second year I have only closed 2 option premium trades, one for a gain in December and one for a loss in February. Both of the trades for this second year were the same March 15 2019 $70.00 Calls for Citigroup. The first trade was for a profit of $307 and the second trade was for a loss of $624. As I have said about all of my trade losses for this portfolio, this loss is an opportunity cost as those monies are not available for continuing to grow my account.

Total Swing Trade Profits

For the first 4 months of my second year, closed swing trades have added $6,501 in cash to my portfolio. The table below summarizes the contribution by month of cash income from option and non-option swing trades. Swing trades have provided 61% of my total cash income to date.

Month Option Swings Non-Option Swings Total Swings % of Income
Nov 18 0 640 640 53%
Dec 18 308 316 624 44%
Jan 19 0 1,108 1,108 57%
Feb 19 308 3,819 4,127

75%

Total 618 5,883 6,501 61%

(Source: Table created by author from portfolio data as of February 28).

7. 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. In October, I raised my portfolio goal for this second year to a 10%+ annualized gain (average of 0.83%/month). Total returns increased for February, at +1.74%, which is a new high for the portfolio. The total gain for this past four months is now +4.87%, and the monthly average is +1.22%. So, for now, I am comfortably ahead of my target for my new 10% goal. This provides a buffer as I do not expect to increase my returns every month, especially from swing trades. The January-February period was one of very strong price growth that is unlikely to continue for the coming months.

The table below shows the cash income returns by source: swing trades, dividends on swing trades, and dividends from non-swing trade holdings (preferred ETFs, REITs, CEFs, and other stocks).

Month $ Cost $ Swing Profits $ Divs on Swings $ Other Dividends $ Total Income % Return on Investment
Nov18 154,374 640 - 567 1,207 0.78%
Dec18 155,571 624 - 779 1,403 0.88%
Jan19 131,400 1,108 42 780 1,930 1.47%
Feb19 136,260 1,616 97 655 2,369 1.74%
Total 3,988 139 2,781 6,908 4.87%

The chart below of the monthly source of realized cash portfolio profits depicts the data graphically. This compares favorably to the first year of my portfolio, for which only 5 of the 12 months had total cash income >$1,000. The monthly average for that period was $1,063 and for now is $1,727. Data for the first year are provided in my October monthly update article.

(Source: Chart created by author from portfolio data as of February 28.)

Unrealized Gains/Losses

The total current value of all 41 positions in my portfolio at the end of February was -8.22%, an improvement from January (-9.63%) and December (-17.99%). The SPY has recovered about 79% of the late 2018 bear market, so I expect that some losses will continue to be reduced. I have some longer-standing losing positions such as GE that I can continue to hold for now. While I wait, I'm receiving decent dividends from most of the portfolio, at an average of 7.4% for the 25 non-swing trade holdings.

8. Current Portfolio

At the close of February, my portfolio consisted of 41 holdings, including 1 option premium swing trade. The table below lists these holdings, including the current number of shares, average unit cost, dividend/distribution yield, and the percentage that they comprise of the overall portfolio investment.

Symbol Qty. $ Unit Cost Price Cls. 2/28 % Div. Yield % of Portfolio
REITs 5.3%
CLNY 345 11.785 5.56 7.47% 2.9%
SKT 125 26.052 21.59 6.60% 2.4%
CEFs 63.0%
AOD 200 8.220 8.3 8.30% 1.2%
AWF 900 11.955 11.67 7.27% 7.8%
BGX 400 14.911 15.64 8.98% 4.3%
BIT 200 16.400 16.75 8.43% 2.4%
DSL 745 19.834 19.76 9.07% 10.7%
EMD 100 14.135 13.9 8.63% 1.0%
FAX 1,000 4.956 4.26 9.81% 3.6%
FEO 100 14.907 13.47 10.37% 1.1%
FLC 130 20.542 18.96 7.24% 1.9%
FRA 240 14.096 12.93 5.97% 2.5%
HPS 100 17.225 18.52 7.97% 1.2%
HYT 515 10.346 10.25 8.45% 3.9%
JPS 1,100 9.351 9.06 7.49% 7.5%
KIO 252 15.340 15.78 9.55% 2.8%
LDP 140 24.531 23.55 7.99% 2.5%
MSD 400 9.523 8.97 5.78% 2.8%
RA 314 22.977 21.35 11.20% 5.2%
RNP 50 19.990 19.72 7.54% 0.7%
Income & Div Growth 8.0%
D 15 80.194 74.09 4.97% 0.9%
FDX 8 188.113 181 1.43% 1.1%
FRME 75 41.053 40.39 2.19% 2.2%
MIC 33 69.741 40.89 9.77% 1.7%
SNV 75 38.699 39.68 2.54% 2.1%
Swing Trades 23.7%
ABBV 20 78.280 79.24 5.32% 1.1%
AAPL 16 183.755 173.15 1.67% 2.1%
CCLX 77,000 0.007 0.005 -- 0.4%
CVS 23 65.250 57.83 3.30% 1.1%
ERBB 1,670,000 0.0003 0.0003 -- 0.4%
FUTL 5,000,000 0.0001 0.0001 -- 0.4%
GE 103 23.922 10.39 0.38% 1.8%
KHC 50 43.238 33.19 4.83% 1.6%
MO 30 53.750 52.41 6.14% 1.2%
QCOM 30 51.100 53.39 4.68% 1.1%
SOXS 176 8.50 7.5 1.38% 2.4%
SPXS 150 25.355 22.16 0.81% 2.8%
SQQQ 250 11.250 11.5 2.16% 2.0%
UCO 225 23.503 19.78 -- 3.8%
WLK 25 74.750 69.87 1.38% 1.4%
XRX Jul 19 2019 26 Put 3 1.335 0.76 -- 0.3%

Final Thoughts

As I said in January, 2018 was a losing year for the markets overall, as the SPY paid 1.9% in dividends but dropped -6.7% in price from open to close. I was fortunate to earn +12.76% in cash income with no tax obligations. As roughly half of my income is from swing trading, there is a lot of trading activity - that's what swing trading is all about.

With high yield dividend stocks and short-term swing trade profits, I feel confident that I will continue to consistently outperform the markets. So I really don't care that it takes some effort to stay well ahead of the game. It keeps me on my toes, and I enjoy the challenge. This is what I do and others can use their own investing and trading approaches. All's good if it works.

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 often receive many free trades, 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!

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 and trading 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, ABBV, AOD, AWF, BGX, BIT, CCLX, CLNY, CVS, D, DSL, EMD, ERBB, FAX, FDX, FEO, FLC, FRA, FRME, FUTL, GE, HPS, HYT, JPS, KHC, KIO, LDP, MIC, MO, MSD, QCOM, RA, RNP, SKT, SNV, SOXS, SPXS, SQQQ, UCO, WLK, XRX (PUTS). 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.