Green Dot Portfolio: May 2019 Update

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Includes: ACLS, AMGN, AWF, BGX, BIT, CMA, CSQ, ETG, HYT, INTC, KIO, LDP, MC, MMM, NHTC, OSTK, RA, RVT, SCO, SOXS, SPXS, SPY, SQQQ, VXX, WLK, X
by: Green Dot Investor
Summary

Total cash income on portfolio investment for May from dividends and swing trades was +0.95% and has totaled +8.72% for the past 7 months, 50% above my 10% annual goal.

Dividend income for May was $760, (monthly average is $710). Closed-end funds contributed 83% of dividends. Dividends contributed 51% of total portfolio income.

Swing trade income for May was $740. I closed 4 swing trades for a net gain of +7.8% (average 27 days), and 2 for a total loss of -5%.

In May, the SPY pulled back -6.4% following 4 months of gains.  Financials and small caps are now far from retracing the 2018 bear market.

I am considering making changes to my portfolio reporting.

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

May was the seventh month of my second year for my portfolio, and it was another month of cash income above that needed to make my annual goal. 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 May 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. But in May the SPY gave back two and a half months of those gains. A daily chart of the SPY is presented below for this past year, including a Fibonacci retracement sequence for the bear market rebound. The chart shows that in May the SPY moved lower on higher volume, and closed below the 20, 50, 100, and 200 day major moving averages. Importantly, the SPY closed the month well below the .786 retrace level that provided resistance during both the bear market and the 2019 rebound.

(Source: Chart created by author from the TD Ameritrade 'thinkorswim' platform; download date 5/31/19.)

As I noted last month, the Nasdaq indexes fully retraced the 2018 bear market. 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. As these weekly charts since September show, the XLF is now roughly midway between the .50 and .618 retrace levels, and the IWM is now only just above the .382 level. These are important because, as I have been taught, bull markets do not progress without the participation of these components. That said, the only favorable characteristic of this weakness is that volumes have generally declined each week as these indexes have fallen.

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

Elliott Wave Pattern

Since last year I have 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 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 wave 1 has completed. A zig-zag (down-up-down) of Minute level waves is unfolding, and it appears that Minor 2 is near completion. The OEW Group daily chart for the SPX is presented below.

(Source: StockCharts.com)

The OEW Group presents this commentary about the smaller waves within this pullback and the SPX support and resistance levels:

The current downtrend, Minor 2 has been ongoing for nearly the entire month of May. This Minor wave has subdivided into three Minute waves. Minute waves a and b ended around mid-month at 2801 and 2892 respectively, and Minute c has been underway since then. Using our short term technique, Minute a appears to have subdivided into 3 smaller waves and we’re expecting Minute c to do the same. The next Fibonacci target is 2739 where Minute c equal a. Medium term support is at the 2731 pivot and the 2722 March low, with resistance at the 2780 and 2798 pivots.

In all the years that I have followed the Caldaro site, I am constantly reminded that these patterns can take longer to play out than I would think. I entered some leveraged inverse trades in early 2019 for what I expected was a more imminent Minor 2 decline, but my timing was off some. Once the Minor 3 wave up is clearly underway, I expect my open long swing trades to start moving again.

2. Portfolio Strategy and Asset Allocation for May

With the pullback in May deepening for much of the month, I looked for opportunities to take some of the swing trade profits from previous months to add to income positions as well as enter new swings. While many REITs continued to hold up well, some higher-yielding closed-end funds began to trade at a widening discount to their Net Asset Value.

Portfolio Allocation

By the close of April, my overall portfolio was reduced to 37 holdings, but it rose to 42 by the end of May. The pie chart below shows the percentage of the portfolio investment allocated to these assets at the close of May. The holdings are listed by these categories in Section 8 below.

(Source: Chart created by author from portfolio data as of May 31.)

3. Portfolio Adjustments in May

In April I moved out of 3 of my smaller and weaker Closed-End Funds and added to 4 better-performing CEFs. I continued to make adjustments in May as prices dropped lower with the market pullback, closing out of 1 CEF, adding to 6 existing CEFs, and starting positions in 3 CEFs.

  • On May 28, I sold all 319.742 shares of Brookfield Real Assets Income Fund (RA) at $21.81/share. I had been in this CEF since inception of my portfolio and had added to shares numerous times over the past 18 months. I decided to exit this fund after reading concerns about the sustainability of the distribution. At this time RA (a managed distribution fund) has maintained its $0.199/share/month distribution. My average unit cost was $22.93, but I collected >$900 in income, resulting in a total net gain of +9.7%.
  • As presented in the table below, I added 900 shares to 6 CEF positions. The total cost for this investment in monthly income was over $12,360. At the current rate of distribution, and not including any special distributions that might be paid, or the compounding effects from dividend re-investment, these purchases will add $1,055/year in income, a +8.53% yield.
Dates Purchased Symb. Fund Name Qty. Avg. Price
5/13 AWF AllianceBernstein Global High Income 100 $11.545
5/9 BGX Blackstone/GSO LS Credit Income 100 $15.50
5/13 BIT BlackRock Multi-Sector Income 100 $16.75
5/9, 5/13, 5/30 HYT BlackRock Corp High Yield 350 $10.447
5/9, 5/13 KIO KKR Income Opportunities Fund 200 $15.64
5/13 LDP Cohen & Steers Ltd Dur Preferred & Income 50 $23.99
  • As presented in the table below, I started positions in 3 new CEFs for my portfolio, at a total cost of >$12,450. Under the same conditions as for the funds above, these additions will return $1,021 in income per year, or +8.2% on investment.
Dates Symb Fund Name Qty. Avg. Price
5/9, 5/13 CSQ Calamos Strategic Total Return 300 $ 12.37
5/17, 5/24, 5/29, 5/30 ETG EV Tax Advantaged Global Dividend Income 400 $ 15.19
30-May RVT Royce Value Trust 200 $ 13.27

I made these three fund purchases to further diversify my high yield income portfolio. CSQ is a $3.6 Billion fund that holds >600 stocks including leading large caps such as Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Johnson & Johnson (NYSE:JNJ), Google (NASDAQ:GOOGL), Chevron (NYSE:CVX), Pfizer (NYSE:PFE), and Bank of America (NYSE:BAC). ETG is smaller ($2.1 Billion fund of 200 stocks) with a smaller US concentration. And unlike my traditional acquisition of income-only, monthly distribution funds, RVT is a quarterly, managed distribution fund of mostly mid caps.

4. Dividend Income

In May, I collected $760 in dividends, none of which was from swing trades closed in May. My 7-month average for this second year is $710. Dividends in May comprised 50.7% of total income compared to the 7-month average of 41.1%, because I closed fewer swing trades compared especially to the past 4 months.

Dividends from CEFs were $634 and comprised 83.4% of dividends this month. The 7-month average for CEF income is $597, and CEFs comprise an average 84% of non-swing trade income. I've tended to hold CEFs more than REITs because the CEFs generally pay monthly and have higher yields.

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 $4,970 and is $5,188 when including dividends on closed swing trades.

(Source: Chart created by author from portfolio data as of May 31.)

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 May, I closed 4 swing trades for a total profit of $740. I also closed out of 2 leveraged index ETFs for a total loss of -$497, the first losses in this second year of the portfolio. These losses are an opportunity cost as the funds are no longer available for other trades or income. The average investment for the 4 profitable trades was $2,368, and the average net gain was +$185. The total return on the swings averaged +7.81% for an average of 27 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 the 6 trades closed in May.

Date Sold Symb. Security Name Qty. Sell Price % Gain/Loss # Days
5/2 SCO ProShares UltraShort Bloomberg Crude Oil 135 $15.80 +14.36% 8
5/3 X United States Steel Corp 180 $16.64 +4.13% 15
5/7 VXX iPath® Series B S&P 500® VIX Short-Term Futures™ ETN 65 $28.99 +10.52% 17
5/13 SOXS Direxion Daily Semiconductor Bear 3X Shares 528 $6.06 +5.76% 68
5/31 SQQQ ProShares UltraPro Short QQQ 87 $44.15 -2.90% n/a
5/31 SPXS Direxion Daily S&P 500 Bear 3x Shares 250 $22.55 -6.36% n/a

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.

Below is my trade log for the SOXS trade, which was not included in my weekly blogs.

New Swing Trades

In May I opened 9 new swing trades and added to 1 existing position (NYSE:WLK), for a total investment of $20,918. Some details about these trades were provided in my weekly blogs, and I present a summary table below showing the date, ticker symbol, name, quantity, and share price for each of these 10 trades.

Dates Symb Security Name Qty. Avg. Price
5/14 ACLS Axcelis Technologies Inc 120 $ 16.60
5/14 AMGN Amgen Inc 10 $ 168.20
5/23 CMA Comerica Inc 25 $ 72.10
5/14 INTC Intel Corp 45 $ 44.90
5/14 MC Moelis & Co 60 $ 33.25
5/14, 5/20 MMM 3M Co 20 $ 170.83
5/14 NHTC Natural Health Trends Corp 150 $ 10.68
5/20 OSTK Overstock.com Inc 200 $ 9.85
5/2 WLK Westlake Chemical Corp 25 $ 64.80
5/14, 5/29 X United States Steel Corp 200 $ 14.086

For readers who know my trading style, most of these stocks were generally very over-sold when purchased. I am looking for bounces in the 5-10% range, typically within about 30 or so trading days. However, I am content to wait longer if needed, and I can collect dividends on many of these stocks.

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 7 months of my second year, I have been fortunate to close 54 profitable non-option swing trades out of a total of 56 trades, for a net gain of $7,210 including $218 in dividends on those trades. This represents an average weighted gain of +7.56% for an average of 33 trading days (+57.5% annualized). The chart below shows the percentage gains for these non-option swing trades for the second year of my portfolio. Trades closed in May are in blue.

(Source: Chart created by author from portfolio data as of May 31.)

As I stated previously, a goal for this second year of my portfolio is to increase the investment cost of my swing trades. The average investment cost was $1,765 for all 54 profitable closed trades compared to $2,368 for the 4 trades closed in May, and the average net gain for those 54 trades was $134 compared to $185 for those closed in May.

Option Premium Swing Trades

I did not close any option premium swing trades in May, 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 19 months is now +21.48% with a monthly average of +1.13%. The monthly average cash earned for my first year was $1,063 and for this second year is $1,784. Total cash returns for May were +0.53%, which was lower than the past 4 months due to fewer closed swing trades.

The total gain for this past 7 months is now +8.72%, 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.

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 May 31.)

I also am now making a concerted effort to increase the fixed income stream for my portfolio. Although I sold my position in RA in May, I bought 1,800 shares in 9 other CEFs at a total cost of $24,820.

Unrealized Gains/Losses

The total current value of all the positions in my portfolio at the end of May was -9.6%, about a percent lower than that for March and April. Given the market pullback in May, I am not concerned. I still have some longer-standing losing positions such as General Electric (GE), Kraft Heinz (KHC), Macquarie Infrastructure (MIC), and Colony Capital (CLNY) that I will 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 15 CEFs. These CEFs account for 63% of portfolio investment.

8. Current Portfolio

At the close of May, my portfolio consisted of 42 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. 5/31 % Div. Yield % of Portfolio
REITs 4.65%
CLNY 345 11.785 5.19 8.64% 2.58%
SKT 125 26.052 16.96 8.42% 2.07%
CEFs 62.94%
AOD 202.741 8.223 7.82 8.71% 1.06%
AWF 1,155.883 11.873 11.51 6.72% 8.72%
BGX 505.944 15.035 15.15 8.90% 4.83%
BIT 402.774 16.560 16.58 8.38% 4.24%
CSQ 301.315 12.374 11.93 8.19% 2.37%
DSL 756.113 19.839 20.00 8.90% 9.53%
EMD 100.719 14.133 13.59 8.75% 0.90%
ETG 400.000 15.215 14.84 8.20% 3.87%
FAX 1,518.326 4.714 4.08 8.05% 4.55%
HYT 872.117 10.387 10.16 8.31% 5.75%
JPS 1,106.582 9.351 9.10 7.28% 6.57%
KIO 456.006 15.476 15.30 9.61% 4.48%
LDP 241.822 24.337 23.48 7.76% 3.74%
RNP 50.295 19.996 20.71 7.23% 0.64%
RVT 200.000 13.293 13.13 9.48% 1.69%
Income & Dividend Growth 7.90%
D 15 80.194 75.18 4.94% 0.76%
FDX 8 188.113 154.28 1.65% 0.96%
FRME 115 39.404 33.25 3.08% 2.88%
MIC 33 69.741 39.87 9.96% 1.46%
SNV 75 38.699 31.96 3.63% 1.84%
Swing Trades 24.51%
ABBV 20 78.280 76.71 5.51% 0.99%
ACLS 120 16.600 14.83 -- 1.27%
AMGN 10 168.200 166.70 3.43% 1.07%
CI 10 163.350 148.02 0.03% 1.04%
CMA 25 72.100 68.82 3.78% 1.14%
CVS 55 58.123 52.37 3.79% 2.03%
ERBB 1,670,000 0.000 0.00 -- 0.32%
FUTL 5,000,000 0.000 0.00 -- 0.32%
GE 103 23.922 9.44 0.42% 1.57%
INTC 45 44.900 44.04 2.82% 1.28%
KHC 50 43.238 27.65 5.84% 1.37%
MC 60 33.250 31.78 6.15% 1.27%
MMM 20 170.825 159.75 3.59% 2.17%
NHTC 150 10.680 10.18 6.06% 1.02%
NIO 500 5.805 3.05 -- 1.84%
OSTK 200 9.850 9.55 -- 1.25%
WLK 50 69.775 57.29 1.70% 2.22%
X 200 14.086 11.82 1.64% 1.79%
MSFT Jun 21 2019 100 Put 6.000 0.783 0.07 -- 0.30%
XRX Jul 19 2019 26 Put 3.000 1.335 0.15 -- 0.25%

Final Thoughts

While my gain this month was lower than for the past 4 months, I am still well on the way to meeting my annual goal of at least 10% cash income.

Over these past 19 months, I have presented my approach to managing a high-yield income portfolio with a swing trade boost. I think that I have demonstrated that many types of equities can be traded successfully, using primarily technical analysis of price patterns. At this point I don't think that I have any more tactics to share.

Over the past months, my readership has declined, with the April monthly update especially low, at almost half of the page views of previous months. I have gained fewer and fewer new followers each month it seems, and I receive very few comments and "likes" except from a few "regulars" (which I greatly appreciate!). Seeking Alpha has been testing a new "Reader Score" and my articles are apparently not judged to offer as much of value for readers as is expected. Compared to the base score of 1.0, I am getting scores averaging about 0.80. I thought that, by disclosing my swing trades as close to real time as possible, this might make a difference in readership, but it seems to have had limited impact.

Preparing updates takes more time than I comfortably have (setting up the charts, etc), especially during months when outdoor work is a priority. As well, I do other things with my time and I want to reduce my overall time for trading. I therefore need to limit my effort here if I am to continue at all. I should put the time into management of my portfolios, especially as I am scheduling additional transfers into my accounts.

I haven't made any final decisions. Perhaps I will write bi-monthly, or quarterly. I'd like to continue to post to the blog if that is of interest. I greatly appreciate the reader comments and will try to make time for that regardless. I honestly would probably have discontinued this earlier if it hadn't been for the interest from readers.

I wish readers well with their own endeavors!

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Best to your investing/trading!

Disclosure: I am/we are long ABBV, ACLS, AMGN, AOD, AWF, BGX, BIT, CI, CLNY, CMA, CSQ, CVS, D, DSL, EMD, ERBB, ETG, FAX, FDX, FRME, FUTL, GE, HYT, INTC, JPS, KHC, KIO, LDP, MC, MIC, MMM, MSFT, NHTC, NIO, OSTK, RNP, RVT, SKT, SNV, 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.