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Rhystic Scrying Portfolio – 2017 Q2 Update

Title

Rhystic Scrying Portfolio – 2017 Q2 Update

Summary

  • My second quarterly update!
  • Transaction play-by-play.
  • Dividend changes.
  • State of the portfolio.
  • Calculate the returns.
  • Win!

Introduction

I have introduced the Rhystic Scrying Portfolio [RSP] here and have outlined its benchmark, the Rhystic Scrying Benchmark Index [RSBI] here.  Now it's time for my second quarterly update!  Similar to the previous quarter, Mr. Market mostly went up, only interrupted by a dip at the end of the quarter.

The RSP baseline for the beginning of 2017 Q1 had a cash value of $887,633.67.  For the beginning of 2017 Q2, the cash value stood at $968,022.79.  As of the end of June, the value stood at $1,052,497.44, which translates into a 7.70% YTD return (adjusted for cash inflows and outflows).  The RSBI managed a 6.03% increase, with (VTI) returning 8.89% and (VBMFX) returning 2.34%.

Many RSP stocks have made significant gains in 2017 and the dividend stream is improving, but the competition from the market has been relentless, narrowing my Q1 advantage of 236 basis points down to 167 basis points.  The ANTFANG stocks are responsible for over half of the market's return YTD and I hold none of them directly (although two of my mutual funds are overweight mega-tech stocks).

So, I will temper my bluster, knowing that this is only the second quarter of a 20-quarter contest.

Below is a transaction play-by-play of the quarter. 

2017 Q2 Transactions

Buys

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

4/17/2017

TGLS

AB

200

$10.7700

$6.95

$2,160.95

4/17/2017

CSCO

FR

1000

$32.6458

$0.00

$32,645.80

4/24/2017

DXC

AB

133

$75.5447

$6.95

$10,054.40

4/24/2017

HPE

AB

210

$18.4947

$6.95

$3,890.84

4/24/2017

BA

AB

100

$182.3547

$6.95

$18,242.42

4/24/2017

HPQ

AB

210

$18.5150

$6.95

$3,895.10

5/24/2017

TGLS

AB

200

$9.8947

$6.95

$1,985.89

5/29/2017

HEIO.AS

SB

250

€82.5400

€39.64

€20,674.64

5/30/2017

SIRI

AB

340

$5.2414

$6.95

$1,789.03

5/30/2017

COL

AB

100

$107.2401

$6.95

$10,730.96

5/30/2017

CCL

AB

100

$63.8050

$6.95

$6,387.45

6/5/2017

MSFT

FR

200

$72.8647

$4.95

$14,577.89

6/12/2017

VCSH

AR

25

$79.9500

$6.95

$2,005.70

6/14/2017

VCSH

AB

10

$80.1400

$0.00

$801.40

Sub Total:

$132,275.86

In April, I waited until tax season passed before committing to anything.  Then, I took a flyer on a recommendation for Tecnoglas (TGLS) from Ian Bezek on Seeking Alpha.  According to Yahoo! Finance, Tecnoglas is a Colombian company that sells architectural glass and windows for residential and commercial construction industries in North, Central, and South America and has fitted glass on several large buildings, including Trump Plaza in Panama City and UN Plaza in New York.  Deep value, promises of growth and it comes with a 5% dividend yield!  And, and, and another SA author has even claimed that owning the stock will help with my sex life.  What's not to love?

I bought back a slug of CSCO that I had lost to a previous option exercise and promptly sold another covered call on it.

I doubled down on Boeing (BA).  Holy crap!  BA is da beast!

All other April purchases were made to fill out odd lots of shares of my various HP-related holdings (HPQ, HPE, DXC).  I know, I know, I was planning to REDUCE my former employer's stock... 

In May, I doubled down on TGLS and spent the rest of the quarter watching it slide.  I opened a full position in Heineken Holding (HEIO.AS) because, you know, beer is good...  And Heineken's forward P/E ratio is lower than its competitors, the dividend growth rate is a robust 12%, the payout ratio is a healthy 50%, it's domiciled in the Netherlands where the dividend withholding rate is a sensible 15% (I'm looking at you, France and Germany) and I see the growing possibility of a monster buyout in the beverage industry.  I also bought 100 shares of Carnival Corporation (CCL) so I can receive cabin credits that will let me drink free Heineken on the open seas.  Wow, this investing thing is all finally becoming clear to me.

I also rounded out an odd lot of Sirius XM (SIRI) shares and started a small position in Rockwell Collins (COL).  Mrs. Scrying worked for Rockwell years ago and I have watched all of the spinoffs and daughter companies for years.

June included only one purchase: a pickup of 200 shares of Microsoft (MSFT) that was called out in May.  Oh, and 2 purchases of Vanguard Short-Term Corporate Bond (VCSH).  I'm getting tired of getting almost no return on my parked cash, so I am trying out a slightly riskier bet to pump up my yield.   I'll give it a chance for a few months.

Sells

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

5/16/2017

MSFT

AB

-200

$67.5000

$20.28

$-13,479.72

5/26/2017

INSY

FR

-900

$14.0747

$0.28

$-12,666.95

Sub Total:

-$26,146.67

Only 2 selling events this quarter: MSFT was called away (reset my cost basis) and took profits (IRR of 48%) on my most volatile holding (INSY).  I'll probably jump back in if/when the price dips below $10 a share again.

Buys To Close

Again, no transactions this quarter.  I've only actually closed a covered call position once or twice in the past 23 years.  I'm playing with the idea of buying back my CSCO and ROK covered calls (see below), but I haven't pulled the trigger.  Spend $10+ to buy back options worth pennies?  That's like a giant online retailer buying a bricks-and-mortar grocer with stagnant revenue growth and razor-thin margins for $13.5 billion: it would be just dumb.

Sells To Open

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

4/17/2017

MSFT

AB

-200

$0.7500

$8.50

$-141.50

4/26/2017

CSCO

FR

-1000

$0.7000

$0.45

$-699.55

6/1/2017

ROK

FR

-200

$1.5000

$6.35

$-293.65

6/7/2017

INTC

FR

-800

$0.5000

$10.50

$-389.50

Sub Total:

-$1,524.20

I did receive some nice income from the covered calls.  I plan on continuing to use around $200,000 of the RSP as call fodder for the next few months and see what happens.  My target is $500 a month in option premiums.  So far, so good.

Dividends in Spin-Off

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

4/3/2017

HPE

AB

-779.9404

$6.0726

$0.00

$-4,736.27

4/3/2017

HPE

DR

-325.9452

$6.0726

$0.00

$-1,979.33

4/3/2017

HPE

DR

-395.7907

$6.0726

$0.00

$-2,403.48

4/6/2017

HPE

FR

-1734.4943

$6.0726

$0.00

$-10,532.89

Sub Total:

-$19,651.97

This is a new category!  I have received spun-off shares in the past, but my software couldn't handle the transaction properly, so I always used Dividends in Cash and Security Deposit as offsetting transactions.  Now, I've reprogrammed the software to handle this properly.  The math for the HPE/DXC split was relatively complicated (even my broker got it wrong for a few days), but I'm reasonably confident that HPE spun off $6.0726 worth of value from its share price.

Originally, my plan was to lower my exposure to my former employer's stock, but I have been rewarded nicely in the past 19 months for being lazy (HPQ has returned a CAGR of 29.55%, HPE has returned a CAGR of 31.09% and DXC has returned a CAGR of 38.77%).  The new plan: let them run, baby!

Dividends Reinvested

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

4/4/2017

FHAIX

AT

28.116

$1.8900

$0.00

$53.14

4/5/2017

HPE

FR

4.728

$23.8117

$0.00

$112.58

4/5/2017

HPQ

FR

13.279

$17.8386

$0.00

$236.88

4/10/2017

HPQ

DR

2.434

$17.8850

$2.45

$45.98

4/10/2017

HPE

DR

1.141

$18.1144

$1.16

$21.83

4/10/2017

HPQ

DR

2.924

$17.8850

$2.93

$55.23

4/10/2017

HPE

DR

1.369

$18.1144

$1.39

$26.19

5/2/2017

FHAIX

AT

28.238

$1.8900

$0.00

$53.37

6/2/2017

FHAIX

AT

28.211

$1.9000

$0.00

$53.60

6/21/2017

BEQGX

AT

2.508

$31.8900

$0.00

$79.98

Sub Total:

$738.78

Drip, drip, drip...  It's like watching a leaky rain gutter.

The dollar amount is more than double last quarter.  I may or may not switch dripping off for some of these securities.  To laze or not to laze, that is the questiony.

Dividends in Cash

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

4/3/2017

HPE

DR

-5.8743

$5.9836

$0.00

$-35.15

4/3/2017

HPE

DR

-8.7748

$5.9808

$0.00

$-52.48

4/5/2017

HPE

AB

-790

$0.0650

$0.00

$-51.35

4/5/2017

HPQ

AB

-790

$0.1327

$0.00

$-104.83

4/6/2017

HPE

FR

-2.2337

$6.3975

$0.00

$-14.29

4/6/2017

FP.PA

SB

-450

0.6100

82.35

-192.15

4/12/2017

HPE

AB

-10.0596

$6.5470

$0.00

$-65.86

4/25/2017

GE

AT

-400

$0.2400

$0.00

$-96.00

4/25/2017

GE

FR

-1000

$0.2400

$0.00

$-240.00

4/28/2017

NLY

AB

-1700

$0.3000

$0.00

$-510.00

5/1/2017

VZ

FR

-600

$0.5775

$0.00

$-346.50

5/1/2017

VZ

AB

-600

$0.5775

$0.00

$-346.50

5/1/2017

GIS

FR

-500

$0.4800

$0.00

$-240.00

5/8/2017

ALV.DE

SB

-150

7.6000

300.67

-839.33

5/15/2017

SAP.DE

SB

-300

1.2500

98.91

-276.09

5/15/2017

HAS

FR

-100

$0.5700

$0.00

$-57.00

5/15/2017

HAS

AB

-200

$0.5700

$0.00

$-114.00

5/31/2017

SIRI

AB

-960

$0.0100

$0.00

$-9.60

6/1/2017

INTC

FR

-800

$0.2725

$0.00

$-218.00

6/1/2017

INTC

AT

-400

$0.2725

$0.00

$-109.00

6/2/2017

BA

AB

-200

$1.4200

$0.00

$-284.00

6/6/2017

MCHP

AB

-400

$0.3615

$0.00

$-144.60

6/7/2017

UNA.AS

SB

-500

0.3585

26.89

-152.36

6/9/2017

EXC

AB

-400

$0.3275

$0.00

$-131.00

6/12/2017

ROK

FR

-200

$0.7600

$0.00

$-152.00

6/12/2017

CVX

AT

-100

$1.0800

$0.00

$-108.00

6/16/2017

LB

AT

-200

$0.6000

$0.00

$-120.00

6/22/2017

FP.PA

SB

-450

0.6200

83.70

-195.30

6/27/2017

VTI

AB

-400

$0.5750

$0.00

$-230.00

6/27/2017

DTE.DE

SB

-1,300

0.6000

0.00

-780.00

6/30/2017

BAC

AT

-450

$0.0750

$0.00

$-33.75

Sub Total:

-$6,519.37

Nice incoming.  All 3 German stocks with annual dividends paid out this quarter.  The French Total paid out twice this quarter for some reason.

Capital Gains Reinvested

None.

Capital Gains in Cash

None.

Credits

None.

Debits

None.

Cash Deposits

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

4/19/2017

USD=X

AB

25000

$1.0000

$0.00

$25,000.00

4/28/2017

USD=X

SB

30000

$1.0000

$0.00

$30,000.00

5/25/2017

USD=X

AB

6000

$1.0000

$0.00

$6,000.00

5/25/2017

EUR=X

SB

26510.92

1.0000

0.00

26,510.92

5/30/2017

EUR=X

SB

8000

1.0000

0.00

8,000.00

Sub Total:

$99,662.99

Cash Withdrawals

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

5/9/2017

USD=X

DR

-87.63

$1.0000

$0.00

$-87.63

5/25/2017

USD=X

SB

-30000.11

$1.0000

$0.00

$-30,000.11

Sub Total:

-$30,087.74

I transferred some dollars into one account and euros into another account, received a cash dividend from HPE for fractional shares and exchanged dollars for euros.  All of this allowed me to purchase Heineken and other companies' stocks.  Nothing more to see here.  Move along.

Interest

Transaction

 

Acct

 

 

 

Cash

Date

Ticker

Name

Quantity

Price

Fee

Flow

4/6/2017

SPAXX

FR

14.29

$1.0000

$0.00

$14.29

4/28/2017

USD=X

AR

0.02

$1.0000

$0.00

$0.02

4/28/2017

USD=X

AB

0.15

$1.0000

$0.00

$0.15

4/28/2017

SPAXX

FR

6.61

$1.0000

$0.00

$6.61

5/15/2017

USD=X

SB

0.16

$1.0000

$0.00

$0.16

5/31/2017

USD=X

AB

0.08

$1.0000

$0.00

$0.08

5/31/2017

USD=X

AR

0.02

$1.0000

$0.00

$0.02

5/31/2017

SPAXX

FR

0.82

$1.0000

$0.00

$0.82

6/30/2017

USD=X

AB

0.01

$1.0000

$0.00

$0.01

6/30/2017

SPAXX

FR

1.81

$1.0000

$0.00

$1.81

6/30/2017

USD=X

AR

0.01

$1.0000

$0.00

$0.01

Sub Total:

23.98

Pathetic.  As I stated in the Buys section, I am experimenting with a new method of wringing some return out of parked cash: buy short-term positions in a Vanguard Short-Term Corporate Bond ETF (VCSH).  I am not dripping most of my positions, so I can store up some dry powder when I see a pullback on an existing position or find a new idea.  My brokerage accounts allow me to buy several ETF's commission-free; if I hold the ETF for more than 30 days, then the sale is also commission-free.  If I'm careful with the timing, then I should boost the yield from 0.01% on brokerage cash to 2.00%+.  I will book the proceeds as Interest and revisit in a quarter or two.

Currency Exchange Rates

Note that the individual transactions are reported in the native currency, but the sub totals are reported in US dollars converted at the end of quarter currency exchange rates.  These rates are:

Currency

Ticker

Rate

US Dollar

USD=X

1.0000

Euro

EURUSD=X

1.1406

GB Pound

GBPUSD=X

1.2973

The dollar has markedly weakened in the past month, giving the RSP a nice tailwind for its European investments.

Dividend Changes (YoY)

Several companies have increased their dividend payout, compared to a year earlier:

Dividend

Dividend

Dividend

2016 Q2

2017 Q2

Growth %

Allianz Versicherung

ALV.DE

7.3000

7.6000

4.11%

Annaly Capital

NLY

$0.3000

$0.3000

0.00%

Bank of America

BAC

$0.0500

$0.0750

50.00%

Boeing

BA

$1.0900

$1.4200

30.28%

Carnival Cruises

CCL

$0.3500

$0.4000

14.29%

Chevron

CVX

$1.0700

$1.0800

0.93%

Cisco

CSCO

$0.2600

$0.2900

11.54%

Deutsche Telekom

DTE.DE

0.5300

0.6000

13.21%

DXC Technology

DXC

$0.1400

$0.1800

28.57%

Exelon

EXC

$0.3180

$0.3275

2.99%

General Electric

GE

$0.2300

$0.2400

4.35%

General Mills

GIS

$0.4600

$0.4800

4.35%

Hasbro

HAS

$0.5100

$0.5700

11.76%

Heineken Holding

HEIO.AS

0.6000

€0.6700

11.67%

HP

HPQ

$0.1240

$0.1327

7.02%

HP Enterprise

HPE

$0.0550

$0.0650

18.18%

Intel

INTC

$0.2600

$0.2725

4.81%

L Brands

LB

$0.6000

$0.6000

0.00%

Microchip Technolgy

MCHP

$0.3595

$0.3605

0.28%

Microsoft

MSFT

$0.3600

$0.3900

8.33%

Rockwell Automation

ROK

$0.7250

$0.7600

4.83%

Rockwell Collins

COL

$0.3300

$0.3300

0.00%

SAP

SAP.DE

1.1500

1.2500

8.70%

Shire

SHP.L

£0.0901

£0.2064

129.08%

Sirius XM

SIRI

$0.0100

$0.0100

0.00%

Tecnoglass

TGLS

$0.1250

$0.1250

0.00%

Total Oil

FP.PA

0.6100

0.6200

1.64%

Unilever

UNA.AS

0.3201

0.3585

12.00%

Verizon

VZ

$0.5650

$0.5775

2.21%

Average

 

 

 

13.28%

Median

 

 

 

4.83%

No companies in the RSP decreased their YoY dividend payout.

State of the Portfolio

The following table shows my holdings in 6 different brokerage accounts as of 06/30/2017.

Rhystic Scrying Portfolio

As Of: 06/30/2017

Account AB

 

 

Market

Market

Investment Name

Ticker

Quantity

Price

Value

.Cash Flow

USD=X

258.18

$1.0000

$258.18

Annaly Capital

NLY

1700

$12.0500

$20,485.00

Boeing

BA

200

$197.7500

$39,550.00

Carnival Cruises

CCL

100

$65.5700

$6,557.00

DXC Technology

DXC

200

$76.7200

$15,344.00

Engility Holdings

EGL

33

$28.4000

$937.20

Exelon Corporation

EXC

400

$36.0700

$14,428.00

Hasbro

HAS

200

$111.5100

$22,302.00

HP

HPQ

1000

$17.4800

$17,480.00

HP Enterprise

HPE

1000

$16.5900

$16,590.00

Manhattan Scientifics

MHTX

2000

$0.0320

$64.00

Microchip Technology

MCHP

400

$77.1800

$30,872.00

Rockwell Collins

COL

100

$105.0800

$10,508.00

Short-Term Corporate

VCSH

10

$80.0400

$800.40

Sirius XM

SIRI

1300

$5.4700

$7,111.00

Tecnoglass

TGLS

400

$9.3200

$3,728.00

Total Stock Market

VTI

400

$124.4500

$49,780.00

Verizon

VZ

600

$44.6600

$26,796.00

Sub Total:

$283,590.78

Account AR

 

 

Market

Market

Investment Name

Ticker

Quantity

Price

Value

.Cash Flow

USD=X

6.21

$1.0000

$6.21

General Electric

GE

1000

$27.0100

$27,010.00

Short-Term Corporate

VCSH

25

$80.0400

$2,001.00

Sub Total:

$29,017.21

Account AT

 

 

Market

Market

Investment Name

Ticker

Quantity

Price

Value

.Cash Flow

USD=X

556.1

$1.0000

$556.10

AGE High Income

FHAIX

6486.555

$1.9000

$12,324.45

Bank of America

BAC

450

$24.2600

$10,917.00

Chevron

CVX

100

$104.3300

$10,433.00

Equity Growth

BEQGX

870.85

$31.7900

$27,684.32

General Electric

GE

400

$27.0100

$10,804.00

Intel

INTC

400

$33.7400

$13,496.00

L Brands

LB

200

$53.8900

$10,778.00

Ultra

TWCUX

1790.292

$40.5500

$72,596.34

Sub Total:

$169,589.22

Account DR

 

 

Market

Market

Investment Name

Ticker

Quantity

Price

Value

DXC Technology

DXC

28

$76.7200

$2,148.16

DXC Technology

DXC

34

$76.7200

$2,608.48

HP

HPQ

347.888

$17.4800

$6,081.08

HP

HPQ

417.747

$17.4800

$7,302.22

HP Enterprise

HPE

335.861

$16.5900

$5,571.93

HP Enterprise

HPE

403.034

$16.5900

$6,686.33

Sub Total:

$30,398.21

Account FR

 

 

Market

Market

Investment Name

Ticker

Quantity

Price

Value

.Cash Flow

SPAXX

1679.06

$1.0000

$1,679.06

Cisco

CSCO

1000

$31.3000

$31,300.00

DXC Technology

DXC

149

$76.7200

$11,431.28

General Electric

GE

1000

$27.0100

$27,010.00

General Mills

GIS

500

$55.4000

$27,700.00

Hasbro

HAS

100

$111.5100

$11,151.00

HP Enterprise

HPE

1736.728

$16.5900

$28,812.32

HP Inc.

HPQ

1798.279

$17.4800

$31,433.92

Intel

INTC

800

$33.7400

$26,992.00

Microsoft

MSFT

200

$68.9300

$13,786.00

Rockwell Automation

ROK

200

$161.9600

$32,392.00

Russell 2000 Value

VTWV

700

$102.6700

$71,869.00

Verizon

VZ

600

$44.6600

$26,796.00

Sub Total:

$342,352.57

Account SB

 

 

Market

Market

Investment Name

Ticker

Quantity

Price

Value

.Dollar Cash Flow

USD=X

0.16

$1.0000

$0.16

.Euro Cash Flow

EUR=X

16271.51

1.0000

16,271.51

.Pound Cash Flow

GBP=X

281.83

£1.0000

£281.83

Allianz Versicherung

ALV.DE

150

173.3500

26,002.50

Deutsche Telekom

DTE.DE

1300

15.7200

20,436.00

Heineken Holding

HEIO.AS

250

81.3400

20,335.00

SAP

SAP.DE

300

91.7800

27,534.00

Shire

SHP.L

380

£42.3800

£16,104.40

Total Oil

FP.PA

450

43.6250

19,631.25

Unilever

UNA.AS

500

48.7000

24,350.00

Sub Total:

$197,549.45

Total Market Value:

$1,052,497.44

Calculate the returns

Per the composition of the Rhystic Scrying Benchmark Index [RSBI], the Vanguard Total Stock Market Index (VTI) returned 8.89% in 2017 YTD:

Date

Price/Dividends

12-31-2016

$115.3200

03-14-2017

$0.5420

06-21-2017

$0.5750

09-13-2017

$0.0000

12-20-2017

$0.0000

06-30-2017

$124.4500

YTD Return

8.89%

The Vanguard Total Bond Market Index (VBMFX) returned 2.34% in 2017 YTD:

Date

Price/Dividends

12-31-2016

$10.6500

03-31-2017

$0.0640

06-30-2017

$0.0650

09-30-2017

$0.0000

12-31-2017

$0.0000

06-30-2017

$10.7700

YTD Return

2.34%

Per the allocation of the RSBI (60% VTI, 30% VBMFX, 10% USD=X), the combined RSBI return is 6.03%.

Since the Rhystic Scrying Portfolio is a controlled system*, only four numbers are needed to calculate the return:

Event

Value

Begin of Year

$887,633.67

Cash Inflow

$150,660.37

Cash Outflow

$54,108.13

Year to Date

$1,052,497.44

Return

7.70%

And the return calculation is:

(EOQ balance - cash inflow + cash outflow - BOQ balance) / BOQ balance.

*The security payouts (dividends, interest, option premiums, splits, etc.) are deposited into cash accounts that are also in the RSP; deposits and withdrawals from these cash accounts are specific transaction types (inflows and outflows) and are the only interfaces to the outside world.

Conclusion

So, it appears that I created alpha in 2017 YTD, $14,823.48 to be exact (7.70% - 6.03%) * $887,633.67.  Since I spend roughly 10 hours a week on this endeavor and there are 26 weeks in 2 quarters, this alpha works out to about $57.01 an hour.  Better than a fork in the eye, I guess.

Disclosure: I am long all securities listed above and have a fondness for USD=X and EURUSD=X.

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

Published July 2nd, 2017.