Month in Review – September 2017

The market value of our total investable assets blasted through the $400K mark this month, which was a combination of a strong market and a little more cash flow than usual. I’m not one to worry too much about setting a high score on this metric, since income is much more important to me than total net worth.

With that said, the projected income slipped, mainly because I don’t have as many options contracts in play this month compared to last month.

I started a new job at the end of August and it has kept me extremely busy (and away from my computer during market hours) throughout September.

I’ve tried to keep up my online presence on the blog and the twitter, and I’ve done some basic trades from my phone, but it’s been a month where I haven’t focused much on driving the portfolio. Fortunately, much of it drives itself!

So with the end of September, we mark the end of Q3. Let’s talk about that.

Portfolio Summary

Metric

End of September 2017

End of August 2017

Total Invested

$393,781.95

$381,168.69

Market Value of Total Invested

$413,582.62

$396,595.06

Allocation % – Equity

48.26%

48.58%

Allocation % – Bonds

13.81%

14.37%

Allocation % – “Other”

3.83%

4.14%

Allocation % – Cash

33.62%

32.41%

Income Assets – Invested

$206,731.09

$201,414.61

Income Assets – Market Value

$212,523.12

$204,026.05

Projected Annual Income

$8,874.50

$12,037.99

Invested Yield

4.29%

5.98%

Market Yield

4.18%

5.90%

Stock Purchases

3 stocks purchased. 2 are new positions, 1 is an addition to an existing position; projected annual income increased by roughly $261.40 based on current dividends.

09/01/17 – NKE: 100 shares purchased @ 57.00/share. This was the result of an option assignment, and represents a new position for the wizard family.

The put contract didn’t expire until 09/08/17, but this one was assigned early after NKE tanked on earnings. I’m not sure I could have profitably rolled this position forward since it was so deep in the money. 

Oh well.

Annual projected income is increased by $72.00/year based on the projected annual dividend of $0.72/share.

09/06/17 – VICEX: 66.070 shares purchased @ $30.30/share. This is a totally new position and something of a divergence from the dividend growth investing theme. Mrs. Wizard is very bullish on evil in 2017 and for the foreseeable future, so she wanted to invest in the Vice Fund for her ROTH IRA. The fees are a little high, but whatever.

Booze, porn, tobacco, gambling and weapons: there are worse strategies…

I have no idea how to project annual income for this investment since the dividend distributions appear to be totally random. I’ll say $33.040/year based on a wild-ass guess of $0.50/share annually.

09/21/17 – DIS: 100 shares purchased @ $102.00/share. This was also the result of a put option being assigned to me. An earlier contact was just barely in the money and about to expire at the beginning of the month, so I rolled it out for a bit: 

But the share price situation kept devolving, and by the time the rolled position was ready to expire on 09/21, I couldn’t get a 12% annualized net return for rolling it forward again.

Rather than languish in a rolling option position at mediocre returns with limited upside, I decided to just accept the shares at assignment and enjoy the unlimited upside of a pure long position.

Annual projected income is increased by $156/year based on the projected annual dividend of $1.56/share.

Choose the Form of the Destructor

There was no UVXY activity this month. My current open position is a LEAPS put with a $31 strike. 

The contract is deeply in the money and is finally showing a healthy gain in imaginary cost basis bucks. It is so deep in the money, in fact, that it is now suffering for lack of interest/liquidity.

I will probably close this position in October and recognize a capital gain.

All UVXY put trades are documented in the “UVXY” tab of the Dividend Income Tracker, and all future trades will also be documented on the twitter.

For the uninitiated, I am shorting UVXY because it is the worst ETF ever. I use long put positions so I can avoid the use of margin and do these trades in tax-advantaged accounts.

Additional exploits can be found here, here and here.

Pay Days

Dividend Income Tracker is published here at the mothership and has been updated.

Total investment income of $1,133.09 with a taxable total of $30.91. We’ll call it 12 “pay days” with 30 individual payments received.

Options premiums represent $204.74 of that total.

Capital gains made up $344.28.

Which leaves $553.16 of actual bona fide dividends (and $30.91 of P2P lending interest).

Lending Club

Lending club income is aggregated into a single income record for simplicity’s sake. It actually arrives as a lot of small payments over the course of the month.

No additional loans were charged off this month, leaving the number of bad loans we’ve invested in to a total of 7 out of 179 or ~3.9%.

Month over month the late note situation has definitely gone in the wrong direction. We’re now facing 4 loans that are “extremely” late, in addition to 2 loans in the grace period. October might get ugly if those 31-120 day loans don’t recover.

Month

In Grace Period

Late (16 -30 days)

Late (31 – 120 days)

Charged Off (aggregate)

January 2017

1

1

4

1

February 2017

4

0

2

2

March 2017

2

0

2

2

April 2017

1

0

2

4

May 2017

0

2

3

4

June 2017

1

0

3

5

July 2017

1

1

2

6

August

1

1

2

7

September

4

0

4

7

This should be fun to track. This table will grow with each monthly update.

Lending club’s algorithm is suggesting I should write down $86.11 worth of principal for the loans that are late or in the grace period, but as the eternal optimist, I’m going to continue to wait until the loans are actually charged off to recognize the loss.

That is up drastically from what it suggested last month ($47.08).

I started a new experiment buying late notes on the secondary market at a discount. I’m still figuring out the details of that strategy and how I’m even going to keep track of the successes/failures, so for now that’s left out of the monthly income summary. Stay tuned though. There is more to come from that.

Comparisons

Month over month, investment income was down -35% compared to $1,745.77 in August. Year over year however represented a nice improvement: up 15.2% from $983.76 in September of ‘16.

I mostly blame limited options activity for the month over month dip. Volatility remains at historical lows, although I managed to make it work last month. The new job is pretty distracting, which is fine.

Raises

One of the dividend distributions received represented a raise:

TGT paid $0.62/share compared to $0.60/share in the previous quarter which is good for a measly 3.33% raise. It’s better than a poke in the eye, sure, but TGT is yielding 4.2% right now, which is good for a Market Implied DGR of 5.8%.

3.3% dividend growth isn’t going to cut it at this valuation.

I’m going to hold out for a minimum of a 4.5% yield ($55.11 price point) before adding any more TGT. I’d really like to see 5%.

So that’s the month that was. How’d you do in September? Excited for October? Maybe we’ll finally get a little volatility…

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