Green Dot Portfolio: March 2019 Update

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Includes: AAPL, ACLS, AMGN, CCLX, CI, CMA, CVS, FLC, FRME, HBAN, HPS, KEY, LABD, MCK, MO, MSFT, NIO, PFG, QCOM, SOXS, SPXS, SPY, SQQQ, VXXB, WLK
by: Green Dot Investor
Summary

Total cash income on portfolio investment for March from dividends and swing trades was +1.37% and has totaled +6.24% for the past 5 months, 50% above my 10% annual goal.

Dividend income for March was $737, an increase from February. Closed-end funds contributed 81.4% of dividends. Dividends contributed 37.1% of total portfolio income.

Swing trade income for March was $1,247. I closed 8 profitable swing trades for a total net gain of +8.96% (average 30 days). I entered 13 new swing trades.

After recovering nearly 80% of the fall 2018 bear market decline, the SPY has stalled in March.  Work on the Caldaro Objective Elliott Wave pattern for the SPX has resumed.

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

March was the fifth month of my second year for my portfolio, and it was overall my second most profitable 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 March 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. Using a Fibonacci retracement sequence, the SPY had recovered about 78.6% of the 2018 bear. A month later, the SPY hasn't made much additional progress. As the weekly chart below shows, the SPY is still finding resistance at this important level despite being in an uptrend.

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

The daily chart for the SPY below shows that while the index is above the 20, 50, 100 and 200 day moving averages, the SPY is increasingly unable to advance above the 20 day MA (blue line). Also, volume has been weak.

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

I've been taught that bull markets typically occur with strong price action by the financial sector as well as small caps. However, both of these are lagging at this time. The chart below, left, is for the Financial Select Sector SPDR Fund (XLF) and the chart, right, is for the iShares Russell 2000 ETF (IWM). Both indexes have clearly retreated from the highs reached earlier in March.

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

I've heard commentary that the market has priced in expectations of a trade deal with China and an interest rate cut sometime in 2019. Should either of these not materalize, this uptrend could be quickly reversed with a change in sentiment.

Elliott Wave Pattern

For some time now I have also covered the quantitative Elliott Wave pattern for the SPY by Tony Caldaro (Objective Elliot Wave). Since the passing of Caldaro in February, the "OEW Group" has resumed the work of providing analysis of the SPX pattern using Caldaro's methodology. However, there is no update for the week that just ended on 3/29, but the Group has updated the major charts.

For some context, according to Caldaro the 2018 bear market (Major 2 in a longer Primary III bull market) completed in late December, and the 2019 rebound is the beginning of a Major 3 (up) wave. For weeks now, two possible patterns for the SPY have emerged within the Major 3. These are shown on the hourly chart below.

One scenario is that the pullback in early March completed Minor 2 down and that Minor 3 up has been underway since. But this decline is far shallower than Caldaro first suggested. The second alternative is that the early March pullback is but the first part of a 3-wave a-b-c (zig-zag) Minor 2 down, which overall would be a larger decline.

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

I have been expecting that the larger pullback would occur, and have placed several leveraged index ETF trades that would profit from a decline. These include those for the S&P 500 (SPXS), that Nasdaq 100 (SQQQ), and Semiconductors (SOXS).

2. Portfolio Strategy and Asset Allocation for March

In March, I continued to open and close swing trades as the market rebounded from the late December 2018 low. As in February, climbing prices left me hesitant to add aggressively to core income positions such as higher-yielding closed end funds or REITs, especially as many REITs are very 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. In recent months, I've been heavier on swing trades as the market is more favorable to long trades.

Compared to February, I reduced the number of CEFs from 18 to 16, and I increased the number of income and dividend growth stocks from 5 to 9. I still have 2 REITs and 16 open swing trades (but many of these are different). The pie chart below shows the percentage of the portfolio investment allocated to these assets at the close of March. The biggest change from February to March in percentage terms is that the income & dividend growth stocks increased from 7.96% to 13.39%, which is similar to the percentage held in January. Swing trades also decreased somewhat, from 63.03% in February to 57.16% in March.

(Source: Chart created by author from portfolio data as of March 29.)

3. Portfolio Adjustments in March

I moved out of two of my income positions in March, both closed-end funds. 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 (only the dividends). I typically use proceeds from these sales to add to other existing CEFs and/or to start positions in new income positions.

  • On 3/22, I sold my 100 shares of JH (John Hancock) Preferred Income III (HPS) at $18.73/share.

I most recently bought this CEF on 11/26 at $17.18/share. With distributions of $48.88 and the price appreciation, I realized a net gain of $194.85 or +11.3%, with the price gain alone equal to nearly a year of distributions. I like HPS and will add it back to the portfolio when the price comes in, but it was trading at a premium and it was time to take the profits.

  • On 3/25, I sold my 130 shares of Flaherty & Crumrine Total Return Fund (FLC) at $19.60/share.

I first bought this CEF in November 2017 and added twice, for an average unit cost of $20.54. While the underlying shares were sold for a loss of -$126.95, I collected distributions of $194.44, for a small net gain of $67.49 (+2.5%). I sold this CEF because it had cut distributions twice since my first purchase (most recent in January), for a total cut of 8.7%. In addition, FLC cut distributions twice before my purchase starting in late 2016, for a total cut of 15.4% in two and a half years. Overall, I felt that this CEF was under-performing.

In my Green Dot portfolio, all holdings are subject to review, and I do not by definition or arbitrarily hold any investment "forever."

4. Dividend Income

In March, I collected $737 in dividends, in addition to $78 in dividends from swing trades. The 5-month average for this second year is $704. Dividends in March comprised 37.1% of total income compared to the 5-month average of 40.8%. This reflects another month of income dominated from swing trades.

Dividends from CEFs was $600 and comprised 81.4% of dividends this month (excluding dividends from swing trades), which was a bit higher than the 5-month average of $592. Average income from CEFs to date is 84.1%, which is expected given my portfolio concentration in these high-yield investments.

Total monthly income from dividends excluding dividends from swing trades for this second year is presented in the chart below. The blue line on the chart is the average monthly dividend income. Total dividend income so far this year is $3,518 and is $3,735 when including dividends on swing trades.

(Source: Chart created by author from portfolio data as of March 29.)

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 and now includes 16 in March.

I repeated the analysis that I did in February of the total returns to date for the CEFs 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:

  • 6 of the CEFs (BIT, BGX, RNP, KIO, AOD, DSL) have gained in market value to date over cost, in addition to providing distributions.
  • 7 of the CEFs (HYT, EMD, AWF, RA, JPS, MSD, LDP) have a current loss of market value that is less than the total value of distributions received.
  • 3 of the CEFs (FEO, FAX, FRA) have a market loss that exceeds the total value of distributions received. Current total loss for FEO is less than $6, while FAX and FRA are clearly the 2 real losers among these 16 CEFs.
  • Through March, the 16 CEFs have provided a total of $4,750 in distributions and the net loss in market value over costs is currently $2,499, resulting in a net total gain of $2,335.

(Source: Table created by author from portfolio data as of March 29).

The net gain is only $120 less than for February, but there are now only 3 losing CEFs compared to 6 in February. As expected, with average market prices, the CEFs will continue to improve returns as monthly dividends accumulate. So far in this portfolio, I have not automatically re-invested dividends, preferring instead to "shop around" to deploy proceeds to lower unit cost funds. But given my larger fund balance, I will start to selectively DRIP some of my CEFs.

As I mentioned last month, I also take profits on some of my CEFs when they trade at premiums to their Net Asset Values. So overall, my income from CEFs since portfolio inception is much higher than shown above, also due to selling some for other reasons such as under-performance. I have collected $6,933 in total distributions from CEFs.

5. Swing Trades

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. I also have been posting what are, in effect, trade alerts as "updates" for readers of my weekly blogs. I post to the most current weekly blog any trades shortly after I place them. Readers are reminded to do their own due diligence when placing any trades.

Closed Swing Trades

In March, I closed 8 swing trades for a total net gain of $1,247. These trades included 2 leveraged index ETFs/ETNs and 6 stocks (including 1 penny stock). The average investment was smallish, at $1,740, and the average net gain was also small ($156). The total return including dividends on the swings averaged +8.96% for an average of 30 days in the trade.

The table below presents the dates, symbols, names, number of shares, sell prices, percentage gains, and number of days in the trade for these 8 trades.

Date Sold Symb. Security Name Qty. Sell Price % Gain # Days
3/6 LABD Direxion Daily S&P Biotech Bear 3X Shares 100 $21.20 11.58% 2
3/13 OTCPK:CCLX Cableclix USA Inc 77,000 $0.0078 17.91% 22
3/15 QCOM Qualcomm Inc. 30 $56.58 11.64% 24
3/19 MCK McKesson Corp. 17 $122.10 7.38% 9
3/21 AMGN Amgen Inc. 10 $192.04 5.08% 87
3/21 AAPL Apple Inc. 16 $192.65 5.85% 11
3/22 VXXB iPath® Series B S&P 500® VIX Short-Term Futures™ ETN 60 $32.06 12.98% 4
3/26 MO Altria Group Inc. 30 $57.00 8.74% 82

Four of these closed trades were also only opened in March: AMGN, LABD, MCK, and VXXB.

I provide details for most of my swing trades in my weekly blogs. Given that these are mostly intended as shorter-term trades, I typically use technical chart levels such as gap fills or potential resistance at moving averages as the basis for my decision to sell any particular stock. Many of the stocks that I sell continue to advance in time, but my objective is to realize frequent, consistent profits, which I deploy to new trades.

New Swing Trades

In March, I added to 3 existing positions (1 stock and 2 leveraged index ETFs) and opened 13 new swing trades, for a total cost of $15,093. These 13 included 1 option premium, 2 index ETF/ETNs, and 10 common 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 16 trades. Please be advised that leveraged index funds carry high risk.

Buy Date Symbol Security Name Quantity Unit Buy Price
3/5/2019 LABD Direxion Daily S&P Biotech Bear 3X Shares 100 $19.00
3/7/2019 CI Cigna Corp. 10 $162.90
3/7/2019 PFG Principal Financial Group Inc. 30 $50.00
3/7/2019 ACLS Axcelis Technologies Inc. 88 $20.00
3/7/2019 MCK McKesson Corp. 17 $113.20
3/7/2019 CVS CVS Health Corp 32 $53.00
3/7/2019 AMGN Amgen Inc. 10 $181.00
3/11/2019 SQQQ ProShares UltraPro Short QQQ 100 $11.16
3/11/2019 SPXS Direxion Daily S&P 500® Bear 3X Shares 100 $22.24
3/12/2019 NIO Nio Inc. 300 $6.50
3/15/2019 MSFT Jun 21 2019 100.0 Put Micosoft Corp. 6 $0.77
3/19/2019 VXXB iPath® Series B S&P 500® VIX Short-Term Futures™ ETN 60 $28.24
3/22/2019 KEY KeyCorp 115 $15.1653
3/22/2019 CMA Comerica Inc. 25 $72.75
3/22/2019 FRME First Merchants Corp. 40 $36.20
3/22/2019 HBAN Huntington Bancshares Inc. 150 $12.22

The following are some notations about the stock buys in the table above:

  • 3 of the new buys are positions for which I added shares: FRME, SPXS, and SQQQ.
  • 4 of the new buys were also sold in March: AMGN, LABD, MCK, and VXXB.
  • 6 of the new buys were based on research or are at lower entry levels in portfolios that I follow: ACLS, CI, CVS, MSFT, NIO, and PFG.
  • 3 of the new buys were bank stocks that dropped >11% in 3 days due to the recent interest rate inversion: CMA, HBAN, and KEY. I may hold these longer than a typical swing trade, because they generally have 5-year dividend growth rates that are out-pacing their 5-year share price growth rates.

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 5 months of my second year, I have been fortunate to close 42 profitable non-option swing trades for a net gain of $5,066, including $218 in dividends on those trades. This represents an average weighted gain of +7.35% for an average of 34 trading days (+54% annualized). The chart below shows the percentage gains for these non-option swing trades for the second year of my portfolio. Trades closed in March are in blue.

(Source: Chart created by author from portfolio data as of March 29.)

The trades closed in March resulted in an increase in the cumulative average investment cost and gains. The average investment cost was $1,642 for all 42 closed trades compared to $1,740 for the 8 trades closed in March, and the average net gain for all 42 trades was $121 compared to $156 for those in March.

Option Premium Swing Trades

I did not close any option premium swing trades in March, and my activity for option trades remains slow so far this year.

Total Swing Trade Income

For the first 5 months of my second year, closed swing trades have added $5,337 in cash to my portfolio. The table below (corrected from last month) summarizes the contribution by month of cash income from option and non-option swing trades. Swing trades have provided 60% of my total cash income to date.

Month Option Swings Non-Option Swings Total Swings % of Income
Nov 18 0 640 640 53%
Dec 18 308 278 586 43%
Jan 19 0 1,150 1,150 60%
Feb 19 0 1,714 1,714

72%

Mar 19 0 1,247 1,247

63%

Total 308 5,029 5,336 60%

(Source: Table created by author from portfolio data as of March 29).

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 March, at +1.37%, which was well above those for November and December but lower than for January and February. The total gain for this past 5 months is now +6.24%, and the monthly average is +1.25%. 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 may not continue as strongly 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%
Mar19 144,515 1,169 78 737 1,984 1.37%
Total 5,157 218 3,518 8,892 6.24%

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 $1,771. Data for the first year are provided in my October monthly update article.

(Source: Chart created by author from portfolio data as of March 29.)

Unrealized Gains/Losses

The total current value of all 43 positions in my portfolio at the end of March was -8.28%, a bit higher than for February but about the same as for January. The SPY has still only recovered about 80% of the late 2018 bear market, so I expect that some losses will continue to be reduced. And I still have some longer-standing losing positions such as General Electric (GE), Macquarie Infrastructure (MIC) , and Colony Capital (CLNY) 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 8.46% for the 16 CEFs and 4.86% for the 2 REITs and 9 dividend growth stocks.

8. Current Portfolio

At the close of March, my portfolio consisted of 43 holdings, including 2 option premium swing trades and 2 penny stocks. 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 Cls. 3/29 % Div. Yield % of Portfolio
REITs 5.1%
CLNY 345 11.785 $ 5.32 8.22% 2.8%
SKT 125 26.052 $ 20.98 6.70% 2.3%
CEFs 57.2%
AOD 200 8.220 $ 8.25 8.35% 1.1%
AWF 900 11.955 $ 11.59 7.24% 7.4%
BGX 400 14.911 $ 15.27 9.01% 4.1%
BIT 200 16.400 $ 16.59 8.43% 2.3%
DSL 745 19.834 $ 19.93 9.07% 10.2%
EMD 100 14.135 $ 13.64 8.71% 1.0%
FAX 1,000 4.956 $ 4.23 9.91% 3.4%
FEO 100 14.907 $ 13.45 10.41% 1.0%
FRA 240 14.096 $ 12.50 6.67% 2.3%
HYT 515 10.346 $ 10.26 8.43% 3.7%
JPS 1,100 9.351 $ 9.00 7.45% 7.1%
KIO 252 15.340 $ 15.48 9.60% 2.7%
LDP 140 24.531 $ 23.67 7.91% 2.4%
MSD 400 9.523 $ 8.99 5.80% 2.6%
RA 314 22.977 $ 21.62 11.05% 5.0%
RNP 50 19.990 $ 20.60 7.27% 0.7%
Income & Dividend Growth 13.4%
CMA 25 72.930 $ 73.32 3.67% 1.3%
D 15 80.194 $ 76.66 4.85% 0.8%
FDX 8 188.113 $ 181.41 1.46% 1.0%
FRME 115 39.404 $ 36.85 2.36% 3.1%
HBAN 150 12.250 $ 12.68 4.39% 1.3%
KEY 115 15.204 $ 15.75 4.33% 1.2%
MIC 33 69.741 $ 41.22 9.72% 1.6%
PFG 30 50.150 $ 50.19 4.32% 1.0%
SNV 75 38.699 $ 34.36 3.48% 2.0%
Swing Trades 24.4%
ABBV 20 78.280 $ 80.59 5.35% 1.1%
ACLS 88 20.051 $ 20.12 -- 1.2%
CI 10 163.350 $ 160.82 0.03% 1.1%
CVS 55 58.123 $ 53.93 3.75% 2.2%
ERBB 1,670,000 0.0003 $ 0.00 -- 0.3%
FUTL 5,000,000 0.0001 $ 0.00 -- 0.3%
GE 103 23.922 $ 9.99 0.40% 1.7%
KHC 50 43.238 $ 32.65 4.86% 1.5%
NIO 300 6.515 $ 5.10 -- 1.4%
SOXS 176 8.500 $ 6.57 1.50% 1.0%
SPXS 250 24.127 $ 20.86 1.12% 4.2%
SQQQ 350 11.237 $ 10.17 2.31% 2.7%
UCO 225 23.503 $ 21.53 -- 3.7%
WLK 25 74.750 $ 67.86 1.48% 1.3%
MSFT Jun 21 2019 100 Put 6 0.783 $ 0.76 -- 0.3%
XRX Jul 19 2019 26 Put 3 1.335 $ 0.27 -- 0.3%

Final Thoughts

At the end of March, the SPY has generally recovered about 80% of the fall bear market decline that resulted in 2018 being a losing year. I was fortunate to out-perform the market during the first year of my portfolio (ended in October), and at this time I am well ahead of my 10% annual cash return goal for my second year.

With 60% of my income from swing trading, my portfolio is constantly changing. This is what I do and others can use their own investing and trading approaches. All's good if it works. 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 trade 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 ABBV, ACLS, AOD, AWF, BGX, BIT, CI, CLNY, CMA, CVS, D, DSL, EMD, ERBB, FAX, FDX, FEO, FRA, FRME, FUTL, GE, HBAN, HYT, JPS, KEY, KHC, KIO, LDP, MIC, MSD, MSFT, NIO, PFG, RA, RNP, SKT, SNV, SOXS, SPXS, SQQQ, UCO, WLK, XRX. 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.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.