Green Dot Portfolio: April 2019 Update

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Includes: ACLS, AWF, BIT, CMA, FAX, FEO, FRA, HBAN, KEY, LDP, MC, MSD, NIO, PFG, SCO, SOXS, SPY, UCO, VSLR, VXXB, X
by: Green Dot Investor
Summary

Total cash income on portfolio investment for April from dividends and swing trades was +1.53% and has totaled +7.77% for the past 6 months, 55% above my 10% annual goal.

Dividend income for April was $693, slightly below average. Closed-end funds contributed 84% of dividends. Dividends contributed 33% of total portfolio income.

Swing trade income for April was $1,403. I closed 8 profitable swing trades for a total net gain of +8.3% (average 28 days). I have 17 open swing trades.

At the end of April, the SPY finally fully retraced the fall 2018 bear market decline of 20%. However, financials and, especially, small caps are still lagging.

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

April was the sixth 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 some option premiums.

1. Market Action and Pattern for April 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. At the end of April, the SPY fully retraced the 20% 3-month bear market selloff that occurred in fall of 2018. A 9-month weekly chart of the SPY is presented below, including a Fibonacci retracement sequence for the bear market rebound. The chart shows that in April the SPY moved on lower volume above the .786 retrace level that provided resistance throughout March.

(Source: Chart created by author from the TD Ameritrade 'thinkorswim' platform; download date 5/1/19.)

The retrace of the fall decline is a mixed story for other major indexes and components. While the Nasdaq 100 Index (NDX) and Nasdaq Composite Index (COMP) have more than retraced the bear market, the SPDR Dow Jones Industrial Average ETF (DIA) is still shy of a new high.

However, financials, as represented by the Financial Select Sector SPDR Fund (XLF), left below, and "small caps", as represented by the iShares Russell 2000 ETF (IWM), right below, have still not fully retraced the bear market. The XLF is only now just above the .786 retrace and the IWM is struggling to gain ground above the .618 retrace. These are important because, as I have been taught, bull markets do not progress without the participation of these components.

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

Elliott Wave Pattern

For some time now I have also referred to the quantitative Elliott Wave pattern for the SPX 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 market pattern. The most recent update (posted April 27) indicates that the 2018 bear market was a Major 2 wave (down) within a larger Primary III bull market and that the Major 3 wave (up) is underway. So far, Minor waves 1 and 2 within Major 3 have completed. Their daily chart for the SPX is presented below.

(Source: StockCharts.com)

If this pattern is correct, Major 3 is closer to completion than not with the Minor 4 wave down perhaps imminent, and (after Minor 5 up completes) a larger pullback (Major 4) should then occur. My timing has not been perfect since fall, but overall I have taken fairly good advantage of the larger component waves by making swing trades of stocks and sector/index ETFs. As readers know, I believe that traders can fare better than those who simply buy and hold through these market gyrations.

2. Portfolio Strategy and Asset Allocation for April

In April, I continued to open and close swing trades as the market rebounded from the late December 2018 low. As for February and March, 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. I'm looking selectively for pullbacks to increase my fixed income positions.

Portfolio Allocation

By the close of April, my overall portfolio was reduced from 43 to 37 holdings. I sold a few smaller and weaker CEFs, and I didn't add as many new swings as last month. The pie chart below shows the percentage of the portfolio investment allocated to these assets at the close of April. The biggest change is that I actually am sitting on more cash now than I typically end up with each month. The holdings are listed by these categories in Section 8 below.

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

3. Portfolio Adjustments in April

In April I moved out of 3 of my smaller and weaker Closed-End Funds and added to 4 better-performing CEFs. As with other portfolio adjustments for income positions, 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 provided more details about the initial purchases, distributions collected, and reasons for the adjustments in my weekly blogs.

  • On 4/2, I sold my 100 shares of First Trust/Aberdeen Emerging Markets Fund (FEO) at $13.79/share for a very small net gain, after distributions, of $23.78 (+1.6%).
  • On 4/2, I sold my 400 shares of MS (Morgan Stanley) Emerging Markets Debt Fund (MSD) at $9.03/share for a small net gain, after distributions, of $57.70 (+1.5%).
  • On 4/5, I sold my 240 shares of BlackRock Floating Rate Strategy Fund (FRA) at $12.75/share for a net loss, after distributions, of -$163.76 (-4.8%).

With the cash from these CEF sales, I added to some CEFs that have better prospects for growth.

  • On 4/5, I added 150 shares of the AllianceBernstein Global High Income Fund (AWF) at $11.61/share.

At the time of purchase, this bond fund CEF paid a monthly income-only distribution of $0.0699/share (7.24%) and was trading at a -10.51% discount to NAV. Distributions have been stable for 2 years, its average portfolio coupon value is 7.93%, and it's NAV has increased 4.5% so far this year. This purchase brings my total position to 1,050 shares and lowers my average unit cost to $11.9055/share.

  • On 4/8, I added 500 shares of Aberdeen Asia-Pacific Income Fund (FAX) at $4.25/share.

At the time of purchase, FAX was paying 9.86% and was trading at a -11.80 discount to NAV. The current annualized distribution on NAV was +8.70%. Unfortunately, the day after I bought these shares the price dropped when a cut in the distribution was announced. FAX had paid the same $0.035/share/month distribution since 2002.

  • On 4/25, I added 100 shares of BlackRock Multi-Sector Income Fund (BIT) at $16.68.

At the time of purchase, BIT was paying an income-only distribution of 8.31% and trading at a -9.89% discount to NAV. This purchase brings my total position to 302.774 shares at an average unit cost of $16.4969/share.

  • On 4/25, I added 50 shares of Cohen & Steers Limited Duration Preferred & Income Fund (LDP) at $24.15.

As of 5/1, LDP is paying an income-only distribution of $0.156/share/month (7.75%) and is trading at a -3.78% discount to NAV. This purchase brings my total position to 191.8 shares and reduced my average unit cost to $24.4274/share.

In April I enrolled the following 12 CEFs in my broker's automatic dividend re-investment program (DRIP): AOD, BGX, BIT, DSL, EMD, FAX, HYT, JPS, KIO, LDP, RA, and RNP.

4. Dividend Income

In April, I collected $693 in dividends, all from income positions (none from swing trades closed in April). The 6-month average for this second year is $702. Dividends in April comprised 33% of total income compared to the 6-month average of 39.5%. This reflects another month of income dominated from swing trades.

Dividends from CEFs were $582 and comprised 84% of dividends this month, and they were close to the 6-month average of $590. Average income from CEFs to date is also 84%, 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 $4,210 and is $4,428 when including dividends on swing trades.

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

5. Swing Trades

For those new to my monthly updates, I provide some 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 April, I closed 8 swing trades for a total net gain of $1,403. These trades included 7 stocks and 1 commodity ETF. The average investment was $2,114, and the average net gain was $178. The total return on the swings averaged +8.3% for an average of 28 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
4/12 HBAN Huntington Bancshares Inc. 150 13.75 12.24% 16
4/12 KEY KeyCorp 115 16.90 11.15% 16
4/12 CMA Comerica Inc. 25 80.50 10.38% 16
4/12 PFG Principal Financial Group Inc. 30 54.77 9.21% 27
4/12 ACLS Axcelis Technologies Inc. 88 21.35 6.48% 27
4/12 UCO ProShares Ultra Bloomberg Crude Oil 225 24.65 4.88% 108
4/23 MC Moelis & Co. 50 40.75 8.66% 7
4/24 VSLR Vivint Solar Inc. 200 5.95 11.32% 10

Two of these closed trades were also only opened in April: MC and VSLR.

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 April I added to 2 existing positions and opened 3 new swing trades. 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 new trades. Please be advised that leveraged index funds carry high risk.

Buy Date Symbol Security Name Quantity Unit Buy Price
4/15 NIO Nio Inc. add 200 $4.74
4/12 VXXB iPath® Series B S&P 500® VIX Short-Term Futures™ ETN 65 $26.23
4/12 X United States Steel Corp. 120 $16.73
4/23 SCO ProShares UltraShort Bloomberg Crude Oil 135 $13.815
4/24 SOXS Direxion Daily Semiconductor 3x Bear add 352 $4.3447

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 6 months of my second year, I have been fortunate to close 50 profitable non-option swing trades for a net gain of $6,469 including $218 in dividends on those trades. This represents an average weighted gain of +7.53% for an average of 33 trading days (+57.3% annualized). The chart below shows the percentage gains for these non-option swing trades for the second year of my portfolio. Trades closed in April are in blue.

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

The trades closed in April resulted in a continuing increase in the cumulative average investment cost and gains. The average investment cost was $1,717 for all 50 closed trades compared to $2,114 for the 8 trades closed in April, and the average net gain for all 50 trades was $129 compared to $175 for those in April.

Option Premium Swing Trades

I did not close any option premium swing trades in April, and my activity for option trades remains slow so far this year. I find that I have to spend more time watching the option trades and I recently do not have the time to do that.

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 cash return for the past 18 months is now +20.53% with a monthly average of +1.14%. The monthly cash average for my first year was $1,063 and for this second year is $1,771. Total cash returns for April were +1.53%, which was my second highest monthly return since inception of the portfolio in October 2017.

The total gain for this past 6 months is now +7.77%, and the monthly average is +1.30%. 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.

Looking over the progress of my portfolio since inception, two trends are clear. One is that I am growing the monthly cash balance and the other is that the growth is due primarily to increased swing trading. The chart below depicts the monthly cash income and the proportion from dividends and from swing trades. The first year results are shown in green and the second year results are shown in blue. Detailed data for the first year are provided in my October monthly update article.

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

Unrealized Gains/Losses

The total current value of all the positions in my portfolio at the end of April was -8.35%, about the same as for February and March. 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 8.3% for my 13 CEFs and 5.4% for the 2 REITs and 5 dividend growth stocks.

8. Current Portfolio

At the close of March, my portfolio consisted of 37 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. 4/30 % Div. Yield % of Portfolio
REITs
CLNY 345.00 11.785 5.14 8.38% 3.0%
SKT 125.00 26.052 18.06 7.70% 2.4%
CEFs
AOD 201.38 8.221 8.52 8.12% 1.2%
AWF 1,050.00 11.906 11.75 6.71% 9.1%
BGX 402.99 14.915 15.69 8.97% 4.4%
BIT 301.40 16.494 17.03 8.34% 3.6%
DSL 750.55 19.836 20.16 8.98% 10.9%
EMD 100.00 14.135 13.91 8.64% 1.0%
FAX 1,508.24 4.718 4.12 8.07% 5.2%
HYT 518.60 10.345 10.58 8.21% 3.9%
JPS 1,100.00 9.351 9.41 7.16% 7.5%
KIO 254.02 15.342 15.94 9.49% 2.8%
LDP 190.91 24.428 24.15 7.78% 3.4%
RA 316.85 22.968 22.14 10.82% 5.3%
RNP 50.00 19.990 20.8 7.22% 0.7%
Income & Dividend Growth
D 15.00 80.194 77.87 4.82% 0.9%
FDX 8.00 188.113 189.46 1.39% 1.1%
FRME 115.00 39.404 36.67 2.32% 3.3%
MIC 33.00 69.741 40.51 9.93% 1.7%
SNV 75.00 38.699 36.86 3.24% 2.1%
Swing Trades
ABBV 20.00 78.280 79.39 5.33% 1.1%
CI 10.00 163.350 158.84 0.02% 1.2%
CVS 55.00 58.123 54.38 3.70% 2.3%
OTCPK:ERBB 1,670,000.00 0.000 0.0003 -- 0.4%
OTCPK:FUTL 5,000,000.00 0.000 0.0001 -- 0.4%
GE 103.00 23.922 10.17 0.41% 1.8%
KHC 50.00 43.238 33.24 4.81% 1.6%
NIO 500.00 5.805 4.85 -- 2.1%
SCO 135.00 13.815 14.77 -- 1.4%
SOXS 528.00 5.730 4.67 2.17% 2.2%
SPXS 250.00 24.127 18.63 1.13% 4.4%
SQQQ 350.00 11.237 8.7 2.82% 2.9%
VXXB 65.00 26.230 25.68 -- 1.2%
WLK 25.00 74.750 69.75 1.40% 1.4%
X 120.00 16.730 15.6 1.27% 1.5%
XRX July 19, 2019 26 Put 3.00 1.335 0.15 -- 0.3%
MSFT June 21, 2019 100 Put 6.00 0.783 0.06 -- 0.3%

Final Thoughts

Now that the SPY has fully retraced the fall 2018 bear market, I'll need to begin to consider how long new highs can be made before the next "Major" wave level pullback. In mid-April I added cash to the portfolio for my annual Roth contribution, although it has yet to be invested. Sometime in the next few months I am also likely to add another distribution from my 457 account. Going forward, I'll need to deploy more funds to fixed income CEFs and perhaps more REITs and dividend growth stocks (on pullbacks), and I'll be busy continuing to find new swing trade opportunities. I'll continue to scale up my average investment while still maintaining allocation rules so as to manage risk. Overall, I expect that managing a larger portfolio will take more time.

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, AOD, AWF, BGX, BIT, CI, CLNY, CVS, D, DSL, EMD, ERBB, FAX, FDX, FRME, FUTL, GE, HYT, JPS, KHC, KIO, LDP, MIC, MSFT, NIO, RA, RNP, SKT, SNV, SCO, SOXS, SPXS, SQQQ, VXXB, WLK, X, 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.