TIB - An Investors Journal #640 - Europe Banks, Oil, Oil Services, US Small Caps, Emerging Markets, Europe Industrials, ASX Stocks (Mixed) + more
The week after options expiry is a chance to reset parts of the portfolio to replace stocks assigned - European banks and Emerging Markets were the main threads of the week
Portfolio News
In a week where S&P 500 rose 2.48% and Europe rose 0.36%, my pension portfolio rose a more modest 1.83%. Australia was flat with drop in De Grey (DEG.AX) matched by rise in Pilbara Minerals (PLS.AX) and silver dragged as the markets looked a little happier
Big movers of the week were Tesla (TSLA) (+33.3%), Simplify Volt RoboCar Disruption and Tech ETF (VCAR) (+19.7%), 88 Energy (88E.AX) (+18.2%), Elmore (ELE.AX) (+17.6%), Airbnb (ABNB) (+14.5%), 3D Systems Corporation (DDD) (+13.9%), QuantumScape Corporation (QS) (+12.8%), Canopy Growth Corporation (WEED.TO) (+12.1%), Solid Power (SLDP) (+12%), Heidelberger Druckmaschinen (HDD.DE) +(11.8%), Panther Metals (PNT.AX) (+11.4%), AdAlta (1AD.AX) (+10%)
Clear theme winner is EV's on the back of the Tesla earnings reaction dragging along a few of the battery technology companies.
The market wants to be nervous and is bouncing around a bit. Headlines from 4 days back about relative underperformance, a bounce on a better inflation read and on a solid GDP report and Tesla earning
The nerves are all about inflation and the chances of recession given the Federal Reserve tightening of rates
And then along comes American Express with some data - spending is holding up well. Data always wins over fear especially when it is earnings related
Crypto Bounce Moves Along
Bitcoin price edged higher the week 4% higher than the open with a trough to peak range of only 7%
Ethereum chart looks a little different with price drifting first with a trough to peak range of 9% - of note is price has not made a higher high on a 4 hour chart unlike Bitcoin
COTI got a pump and dup with a surge of 73% vs BTC - too bad my entry is higher
After a long time languishing, games token, GALA has found support with a surge during the week of 33% matching that of the week before. I did have a liquidity pool running on Binance but it looks like they closed those down - back to trading it will be
Injective Protocol is becoming an enigma for me - it pops up on the buy list and I have not yet bought - another INJ 55% pump and dump.
One last chart to show how altcoins are turning over - Harmony (ONEBTC) chart shows a 73% move from the December 30 lows - note the moving averages swap over with 20 day (blue line) moving through the 50 (red line) from below about the time price makes the first higher low off the bottom.
Bought
BNP Paribas SA (BNP.PA): French Bank. Ran the comparative charts for European banks and picked the ones lagging below a banking ETF (Jan 23). Dividend yield 6.10%. Wrote covered call for 1.08% premium with 4.7% price coverage.
The chart shows the banks that are lagging the Amundi Banking ETF (CB5.PA). As I am already holding shares in Banco Santander (SAN.MC) and Intesa Sanpaolo (ISP.MI), I did not add to those holdings.
Deutsche Bank AG (DBK.DE): German Bank. Replaced stock assigned at 12.5% premium to assigned price - bought only half the stock assigned. Dividend yield 1.68%. Wrote covered call for 1.34% premium with 5.7% price coverage.
Barclays PLC (BARC.L): UK Bank. Replaced stock assigned at 8.7% premium to assigned price - bought only one third the stock assigned. Dividend yield 3.5%. Wrote covered call for 0.84% premium with 5.9% price coverage.
Plexus Holdings plc (POS.L): Oil Services. With Plexus rocketing into the top movers last week on no new news, I added a large parcel to average down entry price - there is never smoke without a fire. Maybe the fire will come under its earnings
iShares Russell 2000 EF (IWM): US Small Caps Index. Rounded up holding to be able to write covered calls. Wrote covered call for 0.11% premium with 9.4% price coverage. I kept the coverage wide so that I can exit the whole tranche at a profit.
United Parcel Service (UPS): Logistics Services. Added another small parcel - not yet got to 100 shares
PayPal Holdings (PYPL): Payment Services. Rounded up holding in one portfolio to average down and to write covered calls. Wrote covered call for 1.57% premium with 15.6% price coverage.
Credit Suisse X-Links Silver Shares Covered Call ETN (SLVO): Silver. With the assignments of a bunch of silver mining stocks last week, chose to replace with this ETN that writes covered calls on Silver. It gives exposure to capital value of silver and does the covered call work. Yield 14.37% - did just miss the last ex-dividend date.
With all the assignments of European stocks, ran the stock screens again to look for undervalued stocks. Quick reminder of the criterie - 3 value screens: Price to Book < 1, Price to Sales < 2, Price Earnings < 10 and 2 techncial screens: price makes a one month high; 20 day EMA above 50 day EMA and below 200 day EMA. Went through all European markets and found candidates in Germany and France
Derichebourg SA (DBG.PA): Waste Management. Dividend yield 5.00%.
Evonik Industries AG (EVK.DE): Specialty Chemicals. Dividend yield 5.81%. Wrote covered call for 0.79% premium with 3.96% price coverage.
This is who owns Evonik - Ruhr Coal Mining foundation. RAG-Stiftung: Our roots lie in the coal mining industry. Accordingly, we bear responsibility for financing the perpetual obligations that the German hard coal mining industry has left behind, and we are generating the funds that are needed to fulfil these obligations. In addition, we promote projects in the areas of education, science and culture in order to support the transformation of the former mining regions. https://www.rag-stiftung.de/en/
Heidelberger Druckmaschinen AG (HDD.DE): Printing Equipment. Wrote covered call for 2.97% premium with 4.39% price coverage - makes up for the lack of dividend.
KION GROUP AG (KGX.DE) Agricultural Equipment. Dividend yield 4.03%. Wrote covered call for 1.66% premium with 10.53% price coverage.
SES S.A. (SESG.PA): Satellite Communication. Dividend yield 7.02%
Air France KLM (AF.PA): Europe Airline. Appeared on stock screens and is underperforming Deutsche Lufthansa (LHA.DE). Wrote covered call for 1.8% premium with 6.25% price coverage.
Aegon NV (AGN.AS): Dutch/US Insurance. Last assignment left a parcel less than 100 shares. Rounded up to be able to write covered calls on a down day at 4.25% premium to assigned price. Dividend yield 4.37%
Atos SE (ATO.PA): Europe IT Services. Averaged down entry price on stock bought last week. Wrote covered call for 1.73% premium with 17.4% price coverage.
I read an article in the week about growing tourist numbers in Thailand. With China reopening, we should expect to see improvements in GDP across a wide range of countries - having a go at Emerging Markets and India first.
https://www.bangkokpost.com/business/2492014/high-hopes-for-tourism-boom-as-thailand-cheers-chinese-return
iShares MSCI Emerging Markets ETF (EEM): Emerging Markets. Expiry of LEAPs last week got me looking at the chart again and reviewing approach to long dated options. For this one set up a 45/50/38 call spread risk reversal. Bought a September expiry (as far out as I could get for India) 45/50 bull call spread for a net premium of $1.25 offering maximum profit potential of 300% if price moves 19.5% from $41.84 (Jan 25) opening price. I funded this partly by selling a May expiry 38 strike put option. This brings the net premium down to $0.72 which ramps up maximum profit potential to 594% with price risk of 9.2%.
Let's look at the chart which shows the bought call (45) as a blue ray and the sold call (50) as a red ray and the sold put (38) as a dotted red ray with the expiry dates the dotted vertical lines. Price has to move as strongly as the 2nd phase of the recovery from the Covid-19 lows to get close to the maximum but that level is well within the 2021 highs. The sold put (38) is around the lows of the last higher low. Trade plan will be to roll the sold put to fully fund the call spread.
iShares MSCI India ETF (INDA): India Index. Set up a fully funded 45/50/39 call spread risk reversal. Bought a September expiry (as far out as I can get) 45/50 bull call spread for a net premium of $1.16 offering maximum profit potential of 331% if price moves 20% from $41.65 (Jan 25) opening price. I funded this fully by selling a September expiry 38 strike put option - that price risk is 6.4%.
Let's look at the chart which shows the bought call (45) as a blue ray and the sold call (50) as a red ray and the sold put (39) as a dotted red ray with the expiry date the dotted vertical line on the right margin. Price has to move as strongly as the 2nd phase of the recovery from the Covid-19 lows to get to the maximum. The sold call strike is level with the 2021 highs. Liquidity in these options is low - my calls are the open interest
You will have noticed that the charts between Emerging Markets and India are quite different - the explanation is the EEM ETF is over 30% invested in China and only 13% invested in India.
I put a bunch of charts against the India chart to draw comparisons since the March 2020 lows.
The laggard is China (FXI) which is what was holding back EEM. The emerging markets ETF excluding China (EXMC) shows 63 percentage points difference. Small caps have recovered strongly (EEMS) but part of that is there are only 7% China holdings.
Following this first cut analysis I made a few additions - I found a SE Asia ETF with the mix of country holdings below
https://etfdb.com/etf/ASEA/#charts
The comparative chart going back to March 2020 shows the +55% performance is driven by Indonesia at 75% and Thailand at 55%. The other countries are lagging - the notable shift has been Vietnam which was the star in late 2021 to the lowest in 2023.
Global X FTSE Southeast Asia ETF (ASEA): SE Asian Index. I really wanted to add in Thailand ETF (THD) but did not want to fork out $8600 for 100 shares - bought this ETF which has 23% exposure to Thailand - largest holding is Singapore and 63% in Finance = a bit higher than I like.
iShares MSCI Philippines (EPHE): Philippines Index. Performance is almost in line but wanted to average down entry price in one portfolio.
iShares MSCI Malaysia (EWM): Malaysia Index. Lagging and averaging down entry price.
VanEck Vietnam ETF (VNM): Vietnam Index. Added new holding at 34% discount to last covered call assignment in October 2021. I must have seen the fall coming when I sold last time.
Alerian MLP ETF (AMLP): US Oil. Replaced stock assigned at 2.3% premium to assigned price. As covered call premiums were poor added also a 40/38 credit spread offering 33% ROI with 2.3% price coverage. This got me looking at other ETF's covering the oil MLP patch - found one with better options - will go there InfraCap MLP ETF (AMZA)
Note from my broker
US imposed new withholding charges that will be applied to sales proceeds from certain Publicly Traded Partnerships ("PTPs”) held by investors who are not U.S. taxpayers. The withholding is 10% of proceeds (not profits).
There is uncertainty as to the list but there are many oil patch limited partners on the list - not sure of this ETF is on the list. Options are not included in the withholding unless they are delivered as stock.
https://ibkr.info/node/4706#the_list
Baker Hughes Company (BKR): Oil Services. With oil prices rising on the back of China reopening added back one oil services stock at 9.5% premium to assigned price. Will do more detailed analysis of the main holdings in the oil services ETF (OIH) to do this more analytically.
Posco (PKX): Korean Steel. Replaced stock assigned on covered call at 4.7% premium to assigned price.
Sold
See below
ASX Portfolio
Continue to develop the approach for the new ASX Portfolio on the Sharesies platform. Two things I like about the platform - one can buy small lots down to fractions of a share and trading costs are low compared to a mainline ASX broker. Disappointed to see trading costs increased from the super low 0.5% to 1.9%. My main broker has a minimum of $10 for all trades under $1000 so I am still a whole lot better off as I am investing in lots of $200 or $100 buying. If I keep scaling the sizes as the portfolio grows trading costs come back into the frame. When that happens I will close it down and transfer to my main broker.
Main development of the approach for this week's cycle is I did decide to run a stop loss process - any stock losing 15% or more will be exited. First such was executed this week. This does bring a new factor into play - one of the stocks bought this week had a pump and dump event and I bought in the pump - do I dump or average down and hold?
New Buys $200 a time
Aeris Resources (AIS): Copper/Gold Mining.
Pepper Money Ltd (PPM.AX): Financial Services
Zip Co Ltd (ZIP): Payment Services - hit with a pump and dump ahead of results. Results were solid and did not warrant a 20% drop in price.
Adbri Ltd (ABC): Building Materials
Top Ups - one only of $100
KMD Brands Limited (KMD.AX): Retail. Summerset Group Holdings Ltd (SNZ): Aged Healthcare
Sold
Webjet Limited (WEB.AX): Travel Services. 22.3% blended profit since April/November 2022. Nice trade as receieved the first $25 worth of shares from Webjet as promotion for starting the Sharesies portfolio.
29Metals Limited (29M.AX): Base Metals. 23% loss since November 2022- my spreadsheet calculation is working the wrong way up - trigger was set for 20%. Fixed now.
Cryptocurrency
Fantom (FTMETH): Locked in 50% profit on parcel of coins bought in November 2022. Note: chart shows computed values in BTC - trade done in ETH - in that time ETH g=has dropped by 8.6% relative to Bitcoin.
Income Trades
64 covered calls written across the portfolio = a little lower than normal as I am not chasing any premium I can get (UK 3, Europe 18, US 43).
Credit Spreads
In pension portfolio added credit spreads in Europe - somehow the brain was a bit fried - ROI's were 11% and 9% and trading costs wiped out almost all the premium.
In US picked stocks mostly from AAPlus buy list, I would be happy to own at lower price
AAPlus ideas Clear Secure (YOU) ROI 13.6% 16.2% Vulcan Materials (VMC) ROI 12.4% 4.9% CBOE Global Markets (CBOE) ROI 31.6% 1.3% American Water Works Company (AWK) ROI 14.9% 4.7%
My ideas QuantumScape Corporation (QS) ROI 51.5% 9.0% Alerian MLP ETF (AMLP) ROI 39.4% 2.3% Wynn Resorts (WYNN) ROI 28.2% 8.4%
New cycle of spread trades shows solid ROI target of 23% and limited exercise risk on the sold puts - some expiring in February. There is plenty margin in the accounts after all the assignments last week
Resources
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers. Crypto tickers come from TradingView
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
Investing: Interactive Brokers provides comprehensive global markets coverage with very competitive commissions. Open an account to earn up to USD 1,000 in IBKR stock. https://mclnks.com/ibkr
Crypto Trading: Binance offers a wide range of coins to trade, tight spreads and low fees if you use BNB to pay https://mymark.mx/Binance
Kucoin offers a wider range of altcoins than many of the other exchanges. I do like to diversify my holdings in case an exchange gets knocked over. Grab 15% discount on your trades when you open an account on this link https://mclnks.com/kucoin15
Tracking: Keeping track of your crypto trades is a whole lot easier with CoinTracking.info. Get 10% off all your account upgrades https://mymark.mx/CoinTracking
Aus/NZ Investing Sharesies provides low cost, fractional share investing for Australian and New Zealand residents covering stocks in those countries and US. Start investing with as little as $20 https://mclnks.com/shares
January 23-27, 2023
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