Month in Review – September 2018

The market continued to be pretty boring in September. Fortunately Elon Musk has fallen on the sword for all of us and is providing plenty of entertainment. I’ve never been so captivated by a stock that I have no position in.

We put a little bit of cash to work this month, but overall I remain cautious of diving into the froth.

Time to dig into the month that was.

Portfolio Summary

Metric

End of September 2018

End of August 2018

Total Invested

$479,516.69

$472,421.58

Market Value of Total Invested

$524,140.84

$516,353.71

Allocation % – Equity

58.25%

56.93%

Allocation % – Bonds

17.14%

17.59%

Allocation % – “Other”

2.74%

2.74%

Allocation % – Cash

21.88%

22.70%

Income Assets – Invested

$262,826.97

$257,512.73

Income Assets – Market Value

$279,471.32

$275,893.15

Projected Annual Income

$13,909.50

$10,154.27

Invested Yield

5.29%

3.94%

Market Yield

4.98%

3.68%

Stock Purchases

I made two stock purchases this month. Both are new positions. Total investment income is projected to increase by $90.02/year based on the current annual dividend distributions.

9/6/18 WBA – 18 Shares purchased at $68.25/share + $6.95 trade commission for a total investment of $1,235.44.

Back in August, I transferred my 401K from my previous employer, which was sitting in a bunch of index funds, to a self-directed traditional IRA account (Account #3 in the Portfolio). I’ve had a little over $14K sitting around in cash since then. This was the first of what I hope will be 11 purchases in that account. Why 11 purchases you ask?

I plan to create an active portfolio that owns one stock from each of the GICS sectors in roughly equal weights. WBA checks the box for “Consumer Staples”.

I forgot to twitter about this. Sorry.

I published an investment thesis for WBA back in December when I opened a short put position with a $68.50 strike. Not much has changed since then, although the company raised the dividend by 10%, so my fair value calculation is theoretically $88 now.

Projected investment income is increased by $31.68/year based on the current annual dividend of $1.76/share

9/14/18 O – 22 shares purchased at $57.50/share + $6.95 trade commission for a total investment of $1,271.95.

This would be purchase number two in the above mentioned portfolio experiment and O represents my pick for “Real Estate” sector.

I didn’t twitter this either, and I haven’t written up an investment thesis. And I’m not going to be writing one, which kind of violates the Catfishwizard code of ethics, but I can explain.

I’m not comfortable choosing individual REITs. Since nearly all of their cash goes to shareholders as a dividend, they can’t rely on internally generated cash flow for their growth capital. They have to get it from the capital markets through debt and/or equity issuance. If I don’t feel like I can confidently say “this company will be better at raising capital than this company,” then how can I evaluate the quality or potential growth of a REIT’s dividend? (I can’t).

So I’ve been struggling with this for a long time, and it’s not resolved by any means. But I need to buy a real estate stock for this portfolio experiment, and O has the reputation of being THE gold standard REIT.

So I bought O.

That is a horrible reason to pick an individual stock. If you haven’t done so in a while, now might be a good time to revisit my disclaimer and remind yourself that nothing on this website is advice of any kind. Do your research elsewhere.

Projected investment income is increased by $58.34/year based on the current annual dividend of $2.652/share.

Casino

In May I officially retired the UVXY trade. It was fun (and lucrative) while it lasted, but it’s time to move on to something else.

In June I started dabbling in sports betting as an alternative investment. Yeah I know. My wife rolled her eyes too.

This still deserves its own explanatory post at some point in the near future, and I promise I will get around to writing it eventually.

I lost money last month ($245.24 to be exact), and I lost more this month ($183.14) although half of that was subscription dues for three months worth of a data service. It’s a necessary cost based on the betting system I’m trying to follow.

I promise I’ll give more details than this at some point. Just not this month.

Pay Days

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

Total investment income of $855.69 with a taxable total of $-205.63. We’ll call it 11 “pay days” with 31 individual payments received.

Options premiums represent $353.52 of that total.

Capital gains made up $0.00.

Which leaves $707.80 of actual bona fide dividends (less $-22.49 of realized P2P lending losses less $-183.14 of sports betting losses).

I still haven’t been particularly active with my options trading, but it’s picked up a little bit with the recently elevated market volatility. It’s nice to see the options total closer to a “normal range”.

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.

Three loans were charged off this month. Boo!

I think that might be the most charge offs I’ve experienced in a single month. Things might be marginally turning around since we’re now only down to 4 late loans (plus 3 charge offs is only 7, so somebody got straightened out).

There could be more pain ahead though.

The number of bad (charged off) loans we’ve invested in so far comes in at 21 out of 261 or 8.00%.

Oh well.

Month

In Grace Period

Late (16 -30 days)

Late (31 – 120 days)

Charged Off (aggregate)

End of 2017

0

0

6

8

January 2018

1

0

4

9

February 2018

0

4

1

13

March 2018

0

2

3

13

April 2018

0

1

4

14

May 2018

2

1

6

14

June 2018

1

0

5

16

July 2018

0

0

5

18

August 2018

3

2

3

18

September 2018

1

1

2

21

I’m glad I started tracking this stuff last year. It should be fun to continue to follow it through 2018.

Lending club’s algorithm is suggesting I should write down $45.77 worth of principal for the five loans that are late, but as the eternal optimist, I’m going to continue to wait until the loans are actually charged off before I recognize the loss.

That is down significantly from what it suggested last month ($96.96), although after the purge of three loans, I would expect that.

Comparisons

Month over month, investment income was up 372% compared to $181.22 in August.

Month over month comparisons are kind of silly given the way that I count “income”. Options activity and capital gains are usually pretty erratic. But that’s how I count it, so it is what it is.

I now have over 4 years (!) of data on my income tracking sheet.

So I’ve been including this table in this segment to look at longer term trends:

SEPTEMBER – INVESTMENT INCOME HISTORY

Year

Dividends

Options

Capital Gains

P2P (Gambling)

Total

2015

$403.94

$0.00

$0.00

$0.00 ($0.00)

$403.94

2016

$306.74

$650.06

$0.00

$26.96 ($0.00)

$983.76

2017

$553.16

$204.74

$344.28

$30.91 ($0.00)

$1,133.09

2018

$707.80

$353.52

0.00

$(-22.49) (-$181.14)

$855.69

Pretty cool huh? Not too long and I will have 5 years of data!

Rather than totally recreate this table, I’m just lumping my new sports betting endeavors in with the Lending Club income. They’re both in taxable accounts. They’re both highly speculative and a little “unconventional”.

Raises

One of the regular dividends received in September represented an increase over the previous distribution.

TGT paid out a quarterly distribution of $0.64/share which represented an increase over the previous quarter of $0.02 or 3.23%.

I can’t say that I’m impressed. The share price has been flirting with all time highs recently and the current yield is well below the 5 year average. Meanwhile their cash cushion isn’t what it used to be.

I have to say that I’m seriously considering trimming my position here. Might be worth looking in the options market to see what I can fetch selling calls.

On the other hand, with a holiday season approaching where unemployment is at all-time lows and consumer confidence is soaring, I might regret going short a retail giant like Target.

What do you think? Is the valuation on Target too lofty? Should I shut up and just buy and hold?

Surely you have an opinion…let it be heard below.

 

3 thoughts on “Month in Review – September 2018

  1. Even though M/M is “silly”, you still have a good trend line. I have a similar issue with all my interim/finals and annuals. Perhaps Cramer channeled you when he came up with his “Power Rankings”? Hopefully you were able to fill some gaps with the pull back.

    1. Yup. The increased volatility is nice. October income will be much more “normal” thanks to selling more options premium.

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