Tag Archives: position

The V20 Portfolio Week #7: Outperformance

Summary The V20 Portfolio appreciated by 5% against S&P 500’s increase of 1%. Don’t celebrate my “win” on MagicJack. Spirit Airlines was pitched by a hedge fund manager. Conn’s boosted overall performance, likely as the result of buybacks. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! It was another great week for the markets, and an even greater one for the V20 Portfolio. The S&P 500 was up 3%, lagging behind the V20 Portfolio’s performance of 5%. Month to date, the index is up by less than 1% while the V20 Portfolio has appreciated by 5.3%. Portfolio Update MagicJack (NASDAQ: CALL ) continued to underperform this week, falling 6%. There were no news, so it would appear the investors have become bearish again. I was rather fortunate in that I reduced MagicJack’s stake by 50% last week after earnings. Since then, the stock has dropped by almost 20%. Did I foresee this sharp decline? The answer is no. My original rationale for the position reduction was that because the investment thesis has shifted to more of a growth story, the company no longer deserved the exposure that it had. If I had the foresight to realize that the market will again be pessimistic about MagicJack, I would’ve sold the entire stake and rebought at current prices (or whatever prices that I deem to be the “bottom”). The point is that there is no need to celebrate this “win” on MagicJack as you should not let price dictate the validity of your original decision. Had MagicJack shares appreciated significantly after I sold my stake, the mentality would’ve been the same. This reminds of Icahn’s sentiment on his Netflix exit: You’re never going to get the top. Once in a while you get the timing right, but that’s like Vegas. As MagicJack slides further, the odds tip more and more in my favor. Similar to Conn’s, at a certain point, I will add to the position once again. In other news, one of our major positions was brought into the limelight by Whitney Tilson , who coincidentally owns MagicJack as well. Spirit Airlines (NASDAQ: SAVE ) was one of the top performers this week, with its shares rising 7%. If Spirit Airlines was not the top performer, then what was? It is none other than Conn’s (NASDAQ: CONN ). The stock remains controversial for investors, just look at the comment section in my past articles ! With the buyback program in place, there will be more upward pressure in the near-term. This week, the position rose by 12%. I cannot determine how much of this increase can be attributed to higher demand caused by the buyback program (as opposed to market participants), but I do believe that this upward trend will likely continue until the buyback program is halted. Looking Ahead From a risk perspective, I continue to look for a cheap energy company to offset my commodity exposure stemming from Spirit Airlines. As for Dex Media (NASDAQ: DXM ), the forbearance agreement will expire on Monday, so I do expect news regarding the restructuring proceedings soon. Since the position is so small (

The V20 Portfolio Week #6: Shift In Portfolio Weights

Summary The V20 Portfolio declined 7.3% against S&P 500’s decline of 3.6%. The biggest position has been trimmed. No purchases were made for Conn’s as the stock has rebounded from its previous lows. Dex Media could be nearing the final verdict. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! The market has become bearish again. This week was one of the worst weeks for the averages in months, with the S&P 500 slipping 3.6%. Unfortunately, the V20 Portfolio followed suit with a decline of 7.3%. However, due to the strong performance in the previous week, the V20 Portfolio is still positive for the month while the index is down 2.6%. Portfolio Update As I mentioned in last week’s update, this week the V20 Portfolio had to endure its biggest test. Our largest position, MagicJack (NASDAQ: CALL ), reported earnings on Monday. Although initial reactions were positive, the stock has since declined 10% to $10.30. I have been talking about trimming the MagicJack position for a couple of weeks now. Third quarter results were the push that I needed. You can read my analysis of MagicJack’s current situation here . The bottom line is that the company has transitioned into a growth stock. Although I don’t like to admit it, core operation has deteriorated (i.e. lower renewal revenue), and if the trend continues, a significant amount of value will have to come from growth. Because third quarter results were not a “smash hit,” there was no reason to maintain a large position in MagicJack. After Q3 earnings, 50% of the position was sold, lowering the portfolio’s exposure from 39% to 19%. Although I trimmed the position, the company is still around 50% cash, so relatively speaking, the downside is limited. Furthermore, new developments (Hoteligent, Movistar partnership) added significant option value to the stock. If executed well, both partnerships could be highly profitable as there is minimal capital requirement. For that reason, I believe that a 19% weight on MagicJack is justified. Moving on to our now largest position, Conn’s (NASDAQ: CONN ). While I would be happy to add to the position if the stock was trading around $19 (as was the case two weeks ago), the fact that Conn’s has rebounded from its lows means that the stock has now become more expensive than before. For that reason, I’ve decided to stay put for now and wait for a better entry point. Although it is my hope that Conn’s will decline in the near future so I can pick up more shares at a cheaper price, the management is currently executing a share repurchase program, exerting upward pressure on the stock. This is probably the reason why the stock didn’t move much in comparison to its typical volatility (only declined by 4% this week). Looking Forward With earnings season now over, there won’t be as many decisions that we have to make in relation to our holdings’ fundamentals. Nevertheless, the stock market will continue to gyrate in absence of any news, so I will continue to monitor the portfolio and seek opportunities to trim or add as I have done with MagicJack this week. There is one thing that we can look forward to however. I haven’t talked too much about Dex Media (NASDAQ: DXM ) since the position is so small (0.4%). You can find a brief overview of the company in the portfolio introduction. The initial investment rationale was that there was a chance that restructuring could provide a favorable outcome for shareholders (e.g. extending maturity). Currently, the sentiment is very negative. Although there were no official news, the stock was down 50% on Friday on rumor that the company will be pushed into bankruptcy. I invested in Dex Media with the knowledge that there was a high risk of bankruptcy, hence I sized the position carefully, so I am not too concerned. Given current prices, it is clear that the market believes that equity holders will be completely wiped out in the resulting restructuring. Of course, if equity holders do get a stake or if maturities are extended, shares could appreciate significantly. With official filing expected in December (according to the rumor), this is definitely something that we should look out for. Given the portfolio’s current weight on Dex Media, this is really a situation where it’s heads I win, tails I lose very little. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Hedging For Disaster – Now, Are You Ready To Listen?

A follow-up to our September 4th post with new, actionable trade ideas. Our Options Opportunity Portfolio in now up 8.1% in week 7 – here’s how we did it. For those who can’t, or won’t, go to cash – we have some great hedging ideas. 3 weeks ago, we told you how to protect yourself from a market downturn . 21 days is not a lot of time to test an investing premise, but it’s good to take a look at our progress on this relatively small market dip (that we accurately predicted), so perhaps you’ll take the necessary precautions to avoid taking losses in the next leg of downturn. My biggest regret in 2008 was ” trying not to be so gloomy “, so now I’m going to keep reminding you to hedge (or better yet, get to cash!!!) – all the way down to the bottom. As you can see from Dave Fry’s S&P 500 chart, we’re barely down on the S&P from where we were on September 4th, so you’d think our bearish hedges wouldn’t pay off – but you’d be wrong! Why? Because, like our long market conditions, our bearish hedges follow our Be the House – Not the Gambler™ strategy, which allows you to make money in relatively flat markets too. Let’s take a look at the hedges we showed you that day (September 4th) from our Short-Term Portfolio: (click to enlarge) These are simple option trades called ” bull call spreads ” – something our PSW Members learn in their first week of trading stock options. This isn’t an educational post, so we’ll go right on to the results portion of the discussion: The ultra-short S&P (NYSEARCA: SDS ) September $21/24 bull call spread expired on 9/18 at $2.48 – up 50% from the $1.23 net we showed you on 9/4 (5th column from the right was that day’s prices). With 50 contracts, the position we showed you made $6,150 in 3 weeks. The ultra-short Nasdaq (NASDAQ: SQQQ ) September $21/24 bull call spread expired on 9/18 at $1.48 – up 169% from the 0.65 net we showed you on 9/4. With 50 contracts, the position we showed you made $4,150 in 3 weeks. The ultra-short Nasdaq January $18/30 bull call spread closed Friday at $4.50 – up 45% from the $3.10 net we showed you on 9/4. With 50 contracts, the position we showed you made $7,000 in 3 weeks. The ultra-short Russell (NYSEARCA: TZA ) October $11/14 bull call spread closed Friday at $1.28 – up 70% from the 0.75 net we showed you on 9/4. With 50 contracts, the position we showed you made $2,650 in 3 weeks. So that’s $50 less than $20,000 in gains from positions we showed you from our Short-Term Portfolio just 3 weeks ago (you’re welcome). At the time, our $100,000 portfolio was up 214.5% and $20%, added another 20% to bring us up to 234.5% all by itself; but we also wisely cashed in our longs right at the September highs, locking in gains on those positions as well (as noted in that post) – so our net is a bit better than that. I would tell you that you can learn all about hedging and options strategies at Philstockworld.com but wait, there’s more! That’s right, we also showed you our long trade ideas for our Option Opportunities Portfolio – a portfolio we have partnered with over at Seeking Alpha to help teach people basic option trading strategies following our virtual portfolio. At the time (same 9/4 post), the positions looked like this: With the full image, it’s easy to see what I meant by the current price. As with our Short-Term Portfolio at PSW, the Option Opportunities Portfolio practices a strategy of cashing in the winners and adjusting the losers (assuming we still like them) until they are also winners and we can profitably take them off the table. The performance of the above positions (and we detailed our logic for each one in the ” Hedging ” post) over the last 3 weeks has been: BID January $34 calls are now $1.95, down 28% for a loss of $1,500 in 3 weeks. We have rolled the position to the April $32 calls, now $3.80. DIA September $155/159 bull call spread expired at $4, up 207% for a gain of $5,400 in 3 weeks. RJET February $2.50/4 bull call spread is now net 0.45, up 350% for a gain of $350 in 3 weeks. IRBT January $25/Dec $32 bull call spread is now net $4.24, up 19% for a gain of $690 in 3 weeks. CCJ September $13 calls expired at 0.32, down 60% for a loss of $480 in 3 weeks. CCJ short December $14 calls are now 0.36, down 69% for a gain of $790 in 3 weeks (because we were short, not long). CCJ March $11/Jan $12 bull call spread is now net $1.05, down 58% for a loss of $1,450 in 3 weeks. TASR 2017 3-legged spread is now net $1, up 222% for a gain of $1,800 in 3 weeks. USO April/January 3-legged spread is now net $1.73, up 5,766% for a gain of $3,400 in 3 weeks. They weren’t all winners (can’t be, as we bet against ourselves to hedge our positions) but, as a group, the trades we showed you as a free sample just 23 days ago are now up $9,000, which is 9% of our $100,000 Portfolio. Of course it’s a live portfolio and we’ve added and subtracted positions since then, but our net return of 8.1% roughly reflects the gains we’ve managed to take off the table and now, hopefully, our new round of trades can do just as well in the next 3 weeks (sorry, no more freebies!). Would now be a good time to sell you on looking into our service? But wait – there’s more! In that same free post, I also laid our 3 brand-new trade ideas to prevent your portfolio from losing money in the rough markets we forecast ahead. As I noted above, we haven’t had much of a correction (yet) but, since we used our patented ” Be the House “™ strategy to lay out our trades – we still did pretty good. Buying 10 SQQQ October $22 calls for $4.20 ($4,200) Selling 10 SQQQ October $28 calls for $1.90 ($1,900) As you can see, ProShares UltraPro Short QQQ ETF ( SQQQ) can be extremely volatile and that’s why we were comfortable with such a wide spread (all the logic is laid out in the original post, which was more instructional). Now those October $22/28 bull call spreads are net $2.60 – up just 13% ($130) and still very playable as a hedge. We also suggested paying for the spread by selling the TASR 2017 $20 puts, which are now $3.60 (up $200) and we still like that combination but remember – you are obligating yourself to own 1,000 shares of TASR at $20 (now $23.58) – keep that in mind. Our second big hedge of that day was far more aggressive: Buying 20 TZA Oct $10 calls at $2.20 ($4,400) Selling 20 TZA Oct $13 calls at $1.00 ($2,000) Selling 10 TZA Jan $10 puts for $1.00 ($1,000) (click to enlarge) Another really volatile one but, as you can see, it’s well on track to our $13 goal and already the net on this 3-legged spread is $1.24, up 77% from the net 0.70 start and good for a $1,080 gain. It’s well on the way to a full $4,600 gain, so it’s still good as a new trade – just not as good as it was when we told you about it 3 weeks ago! Our final hedge from that day was our most aggressive as far as commitment. We felt very strongly the S&P would not hold 1,950 and we wanted some nice portfolio protection but, since that’s expensive, we offset the cost by promising to buy more of our Stock of the Year, Apple (NASDAQ: AAPL ): Buying 30 SDS March $23 calls at $3 ($9,000) Selling 30 SDS March $28 calls at $2 ($6,000) Selling 5 AAPL 2017 $70 puts for $4.35 ($2,175) (click to enlarge) (click to enlarge) As you can see from the chart, SDS is well short of our goal, but does show the tendency to show dramatic gains on a sell-off. At the moment, the March $23/28 bull call spread is up slightly (+33%) at net $1.33 (+$990) but the short 2017 Apple calls have already dropped to $2.73 for a very nice $810 gain on 5 contracts. That means our net $825 spread is already $1,800 and up 121% ($975) in just 3 weeks. The maximum return on that spread is $15,000, so another $13,200 to go means you didn’t miss much if you are coming in late to the party – it just seems that way, if you didn’t catch the entries we published for our members (and for you) back on September 4th: “As I mentioned, we’ve gotten mainly to cash, but that doesn’t mean we don’t find new opportunities for trades almost every day and that’s all the commercial you’re going to get in this post because I’m sure the performance of the picks we publish speaks for itself and we assume you’re an intelligent man (or woman) and can make your own decision as to whether you want to invest in learning our investing techniques.” “Learning how to use options (and Futures – but that’s another article) to hedge your portfolio gives you BALANCE that can steer you through the roughest market waters – keep that in mind next time your portfolio is heading for the rocks!” Enjoy your weekend, – Phil