November 2011 Trading

November was very volatile, with no gains being realized until the last day of the month.  And even those were quite modest.  But the month ended on a significant up-note as did October, so the expectations for December are quite high.  As with October, I continue to be about 91% invested.

The only sale this month:

• Lockheed Martin Corporation - 7.4% gain - small gain, small holding, but not bad for a nine day holding.  Second month in a row to sell my LMT holdings. 

Current holdings and unrealized gains/losses are as follows.  Very similar to the end of October.
 

No dividends were collected during the month. 

October 2011 Trading

October represents another mixed month, but most of the news was good.  Although unrealized losses still exists, things moved in the right direction leading me to my highest ever market values and net worth in both absolute and adjusted terms.  I was also able to collect gains for a couple of small holdings.

Sales this month:

• Intel Corporation - 15% gain - nice run up on a four month holding.
• Lockheed Martin Corporation - 7% gain - small gain, small holding, but 7% is 7% on a three month holding. 

Current holdings and unrealized gains/losses are as follows.  All holdings moved in a positive direction and 3 holdings are actually in the black including IVV which is my largest holding.  ETR and EXC are also relatively large holdings.

The following dividends were collected. 

• Navios Maritime Holdings
• SPDR S&P 500

September 2011 Trading

It was the best of months....

........it was the worst of months.

September was the single highest revenue month that I've experienced to date.  I had the single largest percentage gain on a stock (85%!) and the largest revenue associated with dividends in a month.  

September was a horrible month for the market, my unrealized losses have approached, but not surpassed the absolute and percentage highs experienced in September.  And given the fact that I've been nearly 100% invested (95% at month end), I' was limited in my ability to use my remaining cash to buy in at the low prices.  

Sale this month:

• Harleysville Group Inc. - 85% gain!  I bought into this stock in a small ways about 6 months ago.   At the time, I expressed concern that I was putting too much money into small caps, so I did not double-down as the stock price dropped after my initial buy-in.  Although my holding was small, I was very happy to hear the buyout rumors, then the actual announcement of a buyout tender from Nationwide at a very lucrative price.  As I noted above, this pushed my realized gain above the previous monthly high.

Current holdings and unrealized gains/losses are as follows.  Another challenging month with lots of ground to make up.  Several stocks poked their head above water during the course of the month, but most sank again just as quickly.

The following dividends were collected.  Best dividend month to date.

• Entergy Corporation
• Intel Corporation
• Harte-Hanks, Inc.
• Exelon Corporation
• Life Partners Holding, Inc 
• Harris, Corporation
• Lockheed Martin Corporation
• Harleysville Group Inc.
• iShares S&P 500 Index Fund

August 2011 Trading

August was a rough month, but it had some interesting moments.  Despite the generally downward direction of the market,  Life Partners staged a very nice rally pulling out of a deep, deep trough.  In fact, it rallied to the point where I was 10% up.  Alas, I did not sell, so I'm back in the red for that holding at month end. 

The depressed market of early August had me buying into the market very heavily.  At one point I was nearly 100% invested.  By the end of the month, I was down to about 91.5% invested because of new funds that I brought in as well as a single sale late in the month.  Realized gains were modest and unrealized losses remain high at the end of the month, but are up from mid-month losses.

Sale this month:

• Universal Corp - 9% gain for three month holding.
  

Current holdings and unrealized gains/losses are as follows.  Definitely took a step backwards, but the market seems to be rebounding in the last week of the month.  I'm still a bit overbought in small caps for my taste.

The following dividends were collected.  September stands to be a strong dividend month.

• Universal Corp

July 2011 Trading

July brought lots of excitement.  The political situation with the debt ceiling led to lots of political volatility.  At one point, the value of my holdings skyrocketed to a new all-time high only to dive again after a change in the political winds.  However, the end of the month found me advancing over June levels.

I sold a few holdings and decreased unrealized losses from June levels.  I also increased my percent invested from 80% to 82.5%, so those percentage losses are smaller still in terms of percentage loss.  So things are turning in a positive direction although the markets continue to be troubled by the debt ceiling issue.

Sales this month:

• iShares S&P 500 Index Fund - Sold more than half of my holdings in this index fund gaining 5% in the process, then bought back in to most of this position as the price dropped later in the month.
• SPDR S&P 500 Index Fund - I sold out of a small percentage of these shares.  I had a sell order at a certain prices, but only a few shares sold as the price peaked at this level leaving much of the order unsold. 
• Turkcell Iletisim Hizmetleri A.S. - I flipped a small position in this stock over three days late in the month.  As noted in earlier posts, I'm trying to back off of small-caps, but this stock presented a very attractive price and I had to jump on it in a small way.  Three days later it had gained 5%, so I liquidated.  Small potatoes, but it yielded a few bucks.
  
  
  
  

Current holdings and unrealized gains/losses are as follows.  This currently looks quite negative, but it looked much better at several points during the month. I'm very excited to see Exelon in the black for the first time in over a year. Note new holdings of Harris and Navios Maritime.  Navios is another relatively small cap that I might normally avoid, but it is a small holding. 

The following dividends were collected.

• SPDR S&P 500 Index Fund

June 2011 Trading

June was another interesting month that confirms that old adage "sell in May and go away."   I realized no gains through stock sales and turned slightly more negative for unrealized gain.  However, I had the most substantial dividend month to date. 

I've continued to buy-in to the downward trend which might be good as thing have potentially bottomed out with Greece and the EU seeming to have put their house in order.  This is evidenced by the four session bull run over the last week.  But I remain only 80% invested, so I can buy in more if things continue their downward slide.

Sales this month:

• None.

Current holdings and unrealized gains/losses are as follows. Note new holdings of Universal Corporation and Intel Corporation.

The following dividends were collected.  In dollar terms, this is the biggest dividend month to date.

• Entergy Corporation
• Intel Corporation (from previously sold holdings, not from new purchase)
• Harte-Hanks, Inc.
• Exelon Corporation
• Life Partners Holding, Inc 
• Harleysville Group Inc.
• iShares S&P 500 Index Fund

The Swoon Continues

June has been no better than late May.  Unrealized losses continue to pile up, as the market finished the sixth down week in a row.  But there is a ray of sunshine.  I've been able to buy in on a few stocks at good prices.  While these shares have continued to drop, I still feel good about my buy-in prices and am hopeful that I'll be able to profit from these in the near future.  Another positive note is that June is a good dividend month for most of my holdings, so I should have something to show at the end of the month.

May 2011 Trading

May has been the best month ever!  I established several new high water marks, best gains for a month, best gains for a quarter and highest rolling 6 month average gain.  And I also passed 6% earnings for the 2011 calendar year.  So even if I don't earn another penny this year, I cleared the bar at over 6%.

May has been the worst month ever!  Unrealized losses have reach near record heights and for a long period of time, seven of my nine holdings were in the hole.  While I have been this far underwater before, this seems a bit more dire than in the past.  Most of the losses are attributed to a single stock (Life Partner Holdings, Inc.) and it seems quite possible that it could go to zero and I could lose my entire investment.  Realizing such losses could put a significant dent in my 2011 gains. 

After selling some stocks, I'm now down to about 59% invested.  I only collected one dividend this month although several holdings went ex-div.

Sales this month:

• FirstEnergy - 13% gain, some shares have been held for over a year, so it's nice to finally close out this position with a nice profit.  In fact, In absolute term, this was one of my largest gains to date.
•  Intel Corp - 15% gain,  rather large holding acquired over two months, dipped on bad news allowing multiple buy ins, then nice run-up based on improving analyst reports culminating with announcement about new 3-D chip and I sold the next day.
• SYSCO Corp, 12% gain, sold on good earnings news.  Held for only two months but also collected on dividend.

Current holdings and unrealized gains/losses are as follows.  As noted above, LPHI represents a significant risk to the portfolio.  Nokia also delivered a bad earnings report, so this is perhaps also a bit risky.  Although there are other stocks in the red, I'm general confident that they will recover and/or hold their dividend payout.

The following dividends were collected:

• General Mills, Inc - went ex-div immediately before I sold near the end of April.

Two Years of Trading

I've been actively trading for two years as of today. As noted in previous posts, the trend has been upward in recent months with the 6 month moving average being at an all time high.  I'll be very happy if I can maintain this pace.

Another Best!

Sale of my remaining Intel holdings make May the best month ever in terms of realized gains. Two record months in a row! However, all this recent profit taking make it unlikely that this trend will continue. I'm now 53% invested, so I feel pretty good, still plenty of profits to take if the market rises and I have plenty of money to invest if the market goes down. So I feel pretty good about the current position.

Best Quarter to Date!

A sale for FirstEnergy today makes Q2 2011 the best quarter to date in terms of realized gain surpassing Q4 2010 with Q3 2009 holding a close third. 

Nice accomplishment considering the quarter is just over a month old.  Hope this bodes well for the rest of the quarter and year!

Overinvested in Small Cap?

Although it was not premeditated, I find myself more heavily invested in small cap stocks that usual.  I've held two stocks (TSYS-Telecommunications Systems and LPHI-Life Partners Holdings) for a while and have about 6% of my funds in each of these.  I've also recently purchased HHS-Harte-Hanks (6% of funds) and HGIC-Harleysville Group (2% of funds). 

Each of these individual purchases were sound and met my standard criteria.  However, I'm not sure that I'm comfortable with about 20% of my funds in small cap.  I've already had experience with TSYS and LPHI being underwater for long period of time.

I've always had the normal resistance to small cap stocks as they presumably have greater risk than large cap by virtue of their size.  But I've discovered a more practical concern in recent years.  There is simply less trading activity and it's sometimes challenging to buy/sell at your desired price due to this low volume.  But even this has a positive side as there is sometimes a quick run-up during periods of high demand and low supply. 

So I think it's time to be even more diligent in early profit taking should the opportunity avail itself.  Also, I think I'll avoid taking the plunge into additional small caps until I liquidate some of these holdings. 

April 2011 Trading

April has proven to be a rather exceptional month...best to date!  I was able to take profit on a rather large long term holding (NGG) with a large gain as well as several smaller, short term holdings of primarily "premium" purchases with more modest 5-6-7% gains.   As a result, I've turned over the most holdings since mid-2009 as well as being the number one month in terms of realized gain.  I've also seen my unrealized losses eliminated.  I stand poised to match or surpass the April realized gains in May.

I remain at about 65% invested down from a high of over 80%.  I'm happy with this, but have mixed emotions.  On one hand, the market has been moving upward, and I wish to continue to benefit from this.  However, I'm also concerned that the timing is right for a correction.  I'm especially pleased that I was able to liquidate part of my index holdings before such a correction takes place. 

Dividends were modest this month and will be so in May.  If I continue to retain most of my current holdings, June will be the next large dividend month.  But as noted above, there are several holdings that are nearly due for liquidation.  But I'm always happy to trade large capital gains for small dividends.

Sales this month. 

• Colgate Palmolive Corporation - 5.5% gain, "premium" purchase held for a month.
• National Grid plc (ADR) - 12% gain.  Finally, after holding some of these shares for almost a year, I was able to make a sale for a nice gain.
•  Nokia Corp (ADR) - 5.5% gain, bought on bad news at very low price for very small quantity.  Since this purchase was based on bad news, I was pretty quick to get my 5% and get out which took a little more than 1 month.
• Merck & Company, Inc. - 5.5% gain, another "premium" stock held for less than a month.  I actually planned to hold this for a higher gain, but sold on the day before a likely government shutdown when most of the market was dropping like a stone.  Thought other purchase opportunities would be on the horizon, so opted to make my profit, sell out, then hopefully buy into something else in the coming days/weeks.
•  Johnson & Johnson - 7.5% gain, yet another "premium" stock held for about a month and a half.  Received big bump after earning announcement.
• General Mills, Inc - 6.5% gain, "premium" stock held for almost 3 months.
• iShares S&P 500 Index Fund - 5% gain.  First turnover of Index fund holding.  As a small bonus, Firstrade ceased charging a commission of this fund and a few other ETFs just before this sale.  That's another $6.95 in my pocket!
• Intel Corp - 15% gain, sold about 20% of my Intel holdings for nice gain.  These were held within my Roth account and I still have other shares in traditional IRA.  Although I only held for 15 days, this sale generated more income than I would have received if I had the whole account in CDs for over a year.

Current holdings and unrealized gains/losses are as follows. As you can see, there are several holdings at or near the 5% sell threshold.  And Intel is over 14%, so I expect to make several sales in May if this trend holds.  I also added two new holdings in the last few days of April.

The following dividends were collected. 

• SPDR S&P 500 Index Fund
• Sysco Corporation

Psychology of Round Numbers

I suppose it's human nature, but I've always set my limit amounts at round numbers.  For example, I've always bought at $14.00 or sold at $35.75.  Recent events have told me that this is not necessarily a good idea.

Last week I set a buy price for Nokia at $8.25. Unfortunately, the price bottomed out at $8.26 and I lost out on the run-up that occurred since then.  I've also noticed on several occasions that I hit a sell/buy price, but the order did not execute.  I suspect that this is because there were so many other orders set on the same price.  My transaction didn't fire because my order was in line after others.

Yesterday I had a a vivid demonstration of this effect.  I had a buy order for Harte-Hanks set for $9.70.  I carefully watched the Bid/Ask quantities as the price drifted downward.  The batch sizes were consistently under 10 until the bid reached $9.70.  At that point, the bid quantity was about 90.  Since my order was placed yesterday, my order did not execute until the price was hit many times and many other orders executed at that price.  If my price had been set at $9.71, my order would have fired much earlier with minimal additional cost.

Of course this lesson has mixed impact.  In the case of Nokia, I missed out on a nice gain.  But in the case of Harte-Hanks, the price continued to drop later in the day, so I would have paid extra for no benefit.

So, what's the practical benefit of this knowledge?  If I'm keen to execute an order immediately, I should set my limit price at non-round numbers.  One cent higher for buy orders and one cent lower for sell orders.  The exceptions are orders that are placed well in advance since I would be at the front of the queue for that price. 

Addendum:

Intel passed the $23 threshold today and demonstrated the same behavior described on the sell side.  The number of shares for sale at $23 exactly was an order of magnitude above those offered at $22.98 and $22.99. But this is another case where the number of shares was not an impediment as the price quickly passed through this threshold to close at a higher price. 

Full Time Investing?

The last few months of investing has been quite successful.  In fact, my periods of unemployment or underemployment have been among my best.  During these periods, I've had my four best gains and eight of my best tenmonths.

This has caused me to give a lot of thought to how I might continue this success.  And the fact that I was unemployed or under-employed during these periods really jumps off the page.

Based on these results,  it would be easy to try to justify continued unemployment as a sound investment strategy, but I don't think I can honestly do this.  Although I am able to make some marginal gains by watching the market carefully on a near full time basis, I don't think this can account for all difference.  The fact is that I spent more time formulating and reformulating my trading strategy during these periods.  I believe this accounts for these enhanced gains.  So it's important to continue to do this whether I'm working or not.

Report Card

At the end of 2010, I reviewed my performance and identified some areas for adjustments.  I've reported on my progress several times, so it's time for another look.

1. Take profits sooner (B+) - I've been doing better with new acquisitions, but am still holding on to the stocks that I've had for a while.  NGG is over 10%, but I'm still holding out for 11%.  Clearly this could burn me, so I've given myself a lower grade than on the prior reports.
2. Reduce or cap investment pool (C) - I've effectively done this by moving a significant investment into index ETFs.  Although I'm still considering these holdings part of the trading pool.  It's resulting in me being over 80% invested since mid-March.
3. Quit bottom feeding (B+) - I'm still holding my own here.  I've turned over several more premium stocks, but have not compromised my ability to pick up bargains when available.
4. Dabble in Index Funds (B) -  I've finally bought in and reduced some of the money that was sitting in a money market.  However, I'm still not sure how I will use these funds.  I'm leaning toward profit taking when available instead of buy and hold.  This is detailed in other posts.
5. Don't sweat employment (A) - I've been on the bench since February 19th.  Although trading has been good, I'm starting to get a little anxious.  I'm not worried about finances, but it's just getting boring. 

Overall Grade (B+) - I'm quite pleased with what I learned during this year end assessment and how I've improved my strategy as a result.  I'm going to have to repeat this evaluation at the middle or end of 2011.

March 2011 Trading

March was another decent month.  Gains were above average, but alas, the streak is over.  For the last six months, I was able to improve on the previous years monthly gain, but I did not extend this streak into March.  I could have artificially extended the streak by doing some profit taking on NGG which is a relatively large holding and currently has unrealized gains exceeding 10%.  But I thought there were a few more dollars to squeezed out, so I elected to continue holding this stock.  We'll see if this proved to be a wise decision.

This month was also notable because of the significant increase in percent invested.  During the terrible tragedy in Japan, I made significant efforts to buy into the down market.  I bought into several individual stocks and finally bought into the oft-discussed index EFTs.  So I sit at 81.3% invested at the end of the month.

Sales this month.  The "premium" purchases continue to add to the gains:

• Abbott Laboratories - 7% gain, "premium" purchase only held for a month.
• Harris Corporation - 8.5% gain, "premium" stock turned around in only 12 days. 

Current holdings and unrealized gains/losses are as follows. Note six new holdings. Also note that National Grid, Entergy, Colgate Palmolive and Merck all were over the 5% threshold at some point in March.  So I'm not always aggressive about profit taking.  I think all were wise decisions except perhaps Entergy which has nuclear exposure which was obviously impacted by the situation in Japan.

The following dividends were collected.  In dollar terms, this is the biggest dividend month to date.

• Entergy Corporation
• FirstEnergy Corp
• Exelon Corporation
• Life Partners Holding, Inc
• iShares S&P 500 Index Fund

Index ETF Trading Strategy - Test Results

Well, it appears that I've not found the holy grail of technical trading that I'd hoped.  I tested four one year scenarios and one four year scenario and I've learned several things:

• I'm able to slightly out gain the market during a bear period
• I'm unable to match market performance during a bull period
• I'm unable to make modifications to the strategy that improved performance.
• I'm less enamoured with an all index strategy than I was this time last week.

Here are the raw results of my testing.  Note that in all cases, the period tested began on March 1st.  And for the first four scenarios, lasted one year.  In the last scenario, the period was four years.

As noted in the graph, I out gained the market in 2007 and 2008, but I was behind the market in 2009, 2010 and four the four year test.  And during 2009 when the opportunity for gains was greatest, I lagged the market by a significant margin.

So what usable knowledge did I gain from this?  

First, the proposed strategy seems to share the same characteristics of my current stock strategy in terms of lagging the market during bull periods.  But the lag seems to be much more significant and my ability to outpace the market during bear markets seems less, so my current strategy seems superior. 

Perhaps more surprising was the overall market results for the four year test.  A 100% index would have left me with very, very poor results had I utilized this approach.  I've been reading a lot of pro-index propaganda lately and was really starting to believe it.  So I guess this was a real set-back in my willingness to take such an approach.  I believe I'll continue my current dabbling in index ETFs, but I'm not ready to jump in with both feet.

Index ETF Trading Strategy

The traditional strategy for index funds is simply to buy and hold, reinvesting all dividends.  My concern is that such an approach is a roller coaster where you are 100% at risk 100% of the time and there is no opportunity to recognize gains. 

 

I’d like to try and leverage my existing trading strategy and utilize one or more index funds (ETFs).  I want to continue to maintain and pool of funds that will allow me to buy in incrementally when the price is low, but still maximize realized gain and minimize risk by holding cash whenever practical.

I’ve established a pool of rules/triggers below that I think will yield the desired results.  I will next test these triggers using historical date ranges of known bear, bull and stagnant markets.  After reviewing results, I’ll modify the triggers accordingly. 

Initial Set up:

First determine the funds that you have set aside for this purpose.  For purposes of this exercise, I’ll assume $200,000 as this is sufficient for buying round lots, but is also not enough to allow for an extreme number of buy-ins.  The initial buy-in should be 20% of the available funds at the current market price.  Of course, you can wait for a dip, but there’s a chance that the dip will never come and you’ve lost an opportunity, so I’d recommend immediate buy-in.

Triggers:

There are several items that are considered for the triggers.  Current percent invested level, what was the last transaction (buy or sell), last transaction price, number of consecutive buys/sales.

Buys triggers would be set whenever the price drops from the last transaction.  If the previous transaction was a sale, then the new buy price should be 5% less than the last sale price.  If the last transaction was a buy, then the buy price drops by 1% for each transaction.  So if the initial buy in is $100 (100%), then the second buy in is at $99 (99% or $100), the third is $97.02 (98% or $99), the fourth is $94.11 (97% or 97.03).

Buy amounts will be 20% or the total funds until the percentage invested is over 50%.  After that, buy-ins are 10% of total funds up to 90%.  After 90% invested, further buy-in should be done at your own discretion.

Sell triggers will increment at 6%.  However, the sell trigger should be based on the average buy-in price, not the last buy-in price.  If there are multiple consecutive sales and the average price is 100, then the first sell price is $106, the second is $112 and the third is $118.  If the last transaction was a buy, then the sale price reverts back to 106%.

Sale amounts will 30% of the held shares for the first two consecutive sales and 10% of held shares for subsequent sales.

Next step is to test and refine the strategy.  I’ve targeted the following date ranges for testing and will use the SPY ETF:

• 3/1/2007-3/1/2008 for bull market
• 3/1/2008-3/1/2009 for bear market
• 3/1/2010-3/1/2011 for stagnant market

Index Funds

Well, I finally did it.  On March 1st, I bought into my first index funds (SPY & IVV).  And since that time, I've doubled down to the point where almost 25% of my investable funds are in two S&P 500 ETF's. 

Although I've bought in, I'm not entirely sure what my strategy will be for these investments.  My original intent was to simply buy and hold.  But, I'm not sure if I'm happy with that approach.  In fact, the stock market correction from the recent earthquake/tsunami/nuclear crisis has made me quite skeptical of a buy and hold strategy because this strategy becomes a victim of a bear market, and does not allow you to take advantage of it.  As you might guess, the share I bought on March 1st have dropped significantly.

So I'm thinking that I should simply use these shares in the same way that I've I've used individual company stocks in the past.  So the strategy would look something like this.

• Funds would be invested with 40% of the index funds bought at a premium, 20% bought at a fair value and 40% bought at a discount...or some other similar breakdown.
• Profits will be taken as I see fit.  I will probably revert back to my greedy model and try to squeeze 10% out. 
• Sell in stages, do not sell out of entire position at once.  TO allow profits to be tracked, it would make sense to use multiple ETFs and/or multiple accounts.
• Maintain a lot of cash in preparation of a correction.  This will leave a lot of money uninvested during a bull run, impacting overall percentage return.  But this would carry less risk that investing 100% in an index with a buy and hold strategy.

I'd love to completely eliminate the individual stork portion of my portfolio in favor of this approach as it would improve diversity and eliminate the risk that an individual company might have a catastrophic event.  But I'm not sure that I could stay invested enough to earn the returns I'm used to.  As with my current strategy, only market volatility can drive my desired results.

February 2011 Trading

February was a pretty mediocre month.  I was able to maintain the streak of months where realized gains improved over the previous year.  February is the 6th straight month.  Also holding period was reduced by the quick turnover of a couple of "premium" holdings.  And I hover around 50% invested as I had another small CD called.

I'm in the red for unrealized positions, but a couple of holdings are near their sales price, so February should be a good month for realized gains too.  Alas, I'm not so sure that my percent invested will improve unless there is a significant correction.

Sales this month:

• Kellogg Company - 6% gain, held for a couple of dividend cycles.
• Universal Corporation - 6% gain, "premium" stock held for less than 30 days.
• Lorillard, Inc - 5% gain, "premium" stock held for less than 30 days.

Current holdings and unrealized gains/losses are as follows.

• Exelon Corporation - Down 4.2% (-2.5% in Jan, -4.5% in Dec, -9.7% in Nov, -9.3% in Oct, -5.4% in Sept, -9.6% in Aug, -7.1 in July and -15.7 in June).
• FirstEnergy Corp. - Up 3.8% (+6.0 in Jan, +0.3% in Dec, -4.8% in Nov, -2.7% in Oct, +1.8% in Sept, -3.5% in Aug, -0.4 in July and -6.9 in June).  Looks like I missed a great selling opportunity in January, because it did not reach the same prices in February.
• TeleCommunications Systems, Inc. - Down 4.0% (-8.0 in Jan, +5.0% in Dec, +4.1% in Nov, +21.9% in Oct, -12.1% in Sept, -30.7% in Aug, -26.4 in July and -31.5 in June).
• National Grid plc (ADR) - Up 7.2% (+3.3 in Jan, -0.5% in Dec, -1.4% in Nov, +6.4% in Oct, -4.2% in Sept, -5.5% in Aug, -9.0 in July and -17.4 in June). Has maintained a good price throughout February.  Have given serious consideration to selling, but have not yet.
• Colgate Palmolive Company - Up 1.8% (-1.9% in Jan)
• Life Partners Holding, Inc - Down 23.9% (-9.9% in Jan) - Seems to have found bottom of about $7.50 during February.  I've doubled up twice after my initial purchase but have fought the urge to throw more money in until some modest stability is demonstrated.  We may now be at this point.
• General Mills, Inc - Up 4.0% (-2.6% in Jan)
• Abbott Laboratories - Up 4.8% (-1.6% in Jan) - Missed opportunity to sell at 7% profit at end of month.  Hopefully the same opportunity will occur in early March.
• Intel Corporation - Up 0.2% - Only net new purchase of the month

The following dividends were collected:

• Colgate Palmolive Company
• Life Partners Holding, Inc - small dividend.  Only for the first small batch of shares purchased.

Report Card

At the end of 2010, I reviewed my performance and identified some areas for adjustments.  In January, I gave myself an overall D in improving my performance in these key areas.  So it's time to take another critical look at how I'm doing.

1. Take profits sooner (A-) - I made three sales in January and three so far this month.  Although the margins have not been great, the turnover has been nice.  I've even turned one purchase over after only three days!
2. Reduce or cap investment pool (F) - Still no change.  Other investments simply have not been attractive enough.  But by investment in some premium stocks, I'm now about 50% invested.
3. Quit bottom feeding (B+) - Great improvements in this area.  I've bought into five stocks at a premium and have doubled down where appropriate.  I've also taken reasonable profits of 5% and 7% on two of these holdings (see #1 above).  Of the remaining three "premium" holdings, two are in the black!
4. Dabble in Index Funds (D) - I've picked a couple of ETFs (SPY, IVV), but have not taken the plunge.
5. Don't sweat employment (A) - "What, me worry?".

Overall Grade (B-) - I've made the best of the market and have continued to realize reasonable gains.  Although I have a lot of money on the sidelines, that gives me flexibility to move in on new opportunities.

January 2011 Results

2011 is off to a pretty good start.  As mentioned earlier, this is the 5th straight month where I've improved on my previous year's results.  And this month represented the 6th best month to date for realized gain.  And even though I had a CD mature during the month, I managed to increase my percent invested.  As a result of this aggressive push to invest, I'm in the red for my unrealized positions.

Sales this month:

• ConAgra Foods, Inc - 9% gain for 2 month holding
• EnCana Corporation (USA) - 12% for 4 month holding
• Lockheed Martin Corporation - 10% for 4 month holding

Current holdings and unrealized gains/losses are as follows. Note that I've made significant investments in new stocks this month with 6 new holdings.  As noted above, most of these are temporary losers.  However, five of six of the new holdings were bought at a premium and it's reasonable to expect that there might be follow-up opportunities to double down on these holdings and increase eventual gains. 

• Exelon Corporation - Down 2.5% (-4.5% in Dec, -9.7% in Nov, -9.3% in Oct, -5.4% in Sept, -9.6% in Aug, -7.1 in July and -15.7 in June).
• FirstEnergy Corp. - Up 6.0% (+0.3% in Dec, -4.8% in Nov, -2.7% in Oct, +1.8% in Sept, -3.5% in Aug, -0.4 in July and -6.9 in June).
• TeleCommunications Systems, Inc. - Down 8.0% (+5.0% in Dec, +4.1% in Nov, +21.9% in Oct, -12.1% in Sept, -30.7% in Aug, -26.4 in July and -31.5 in June). 
• National Grid plc (ADR) - Up 3.3% (-0.5% in Dec, -1.4% in Nov, +6.4% in Oct, -4.2% in Sept, -5.5% in Aug, -9.0 in July and -17.4 in June).
• Kellogg Company - Up 2.1% (+3.7% in Dec, Even in Nov, +2.0% in Oct).
• Universal Corporation - Down 2.3%
• Colgate Palmolive Company - Down 1.9%
• Life Partners Holding, Inc - Down 9.9% - Bought on bad news.  Stock continued to drop. 
• Lorillard, Inc - Up 2.3%
• General Mills, Inc - Down 2.6%
• Abbott Laboratories - Down 1.6%

The following dividends were collected:

• National Grid plc (ADR)  - Annual dividend

Index Exchange Traded Funds

I'm becoming more and more interested in exchange traded funds (ETFs) as a way to capture the movement of the market without having to actively manage my account.  As mentioned in earlier posts, I'd hoped to dabble in Index mutual funds and/or ETFs as part of my evolving strategy.

While I continue to think these have a place in my strategy, I remain mystified about how I would actually do this.  In fact, this morning, I got quite a shock to my assumption about the behavior of these funds. 

As an experiment, I compared the yields of four ETFs which as based on the S&P 500.  My first experiment supported this.  When I compared the yields between SPY, IVV and the S&P Index itself, I found them almost indistinguishable. 

Then I compared some other ETFs and found quite a surprise.  When I compared, SPY, SSO and UPRO, I found that that there was some kind of multiplier effect at work where the yields of some ETFs are doubled and tripled.  So clearly all S&P 500 ETFs are not the same and there are some very deliberate actions afoot to provoke this multiplier.

Next steps, I need to figure out why the yields are different and which (if any) of these funds will best complement my current strategy.  It's easy to see that a very bullish or very bearish investor could benefit from one of the multiplied funds, but I'm not sure how this fits into my balancing act where I hope to be cope with market upturns or downturns.

hmmmmmm.

This Week's Trading

Last week I assessed the adjustments that I made at the start of the year and found myself lacking in some areas.  This week had a couple of down days, so I was able to take advantage of these in light of my revised strategy.

Take profits sooner - I made another sale that put me ahead of January 2009 gains.  I'm pleased to say that the last five months have represented higher realized gains than their previous year counterparts.   Last March was a pretty impressive month (4th best ever), so it will be challenging to extend this streak for much longer.

Quit bottom feeding - I did much better on this jumping into two new holdings at a premium price.  One of the two are down at the end of the week, but that doesn't trouble me because I have plenty of funds to double-down if necessary as my strategy dictates. 

I also had buy orders on two other stocks that did not fire.  I was especially disappointed with GIS (General Mills).  I set my buy price at $35.70 and the price briefly bottomed out at $35.70.  Unfortunately my order didn't fire (I guess there were many other buyers at that price).  The stock then jumped up to $37.20 the next day.  It wouldn't have been enough to trigger a sale, but a 3-1/2% one day gain always feels good. 

Reduce or cap investment pool -  No real change here as my sales and purchases from the last week cancelled out each other.  But as long as I generate turnover, I generate realized gain.  So I'm happy with maximum turnover and good liquidity.

Dabble in Index Funds - Not yet, but if we have a string of down days, I'm ready to jump in.  I think I've also found a solution to my natural avoidance of mutual fund companies.  They have played a role in my hesitancy to jump in to index funds.  I've learned that there are ETFs that track indexes too.  I haven't done a lot of research yet, but it appears that there are some out there.  I would prefer to buy into these because you have better transparency.  Also, you're not constrained by holding periods.

The adventure continues!

New Toy/Tool

Well, I finally took the plunge into new technology for trading.  I've been struggling with the decision to buy a smartphone that would allow for easy monitoring and trading without being tied to the computer. 

The main question has been whether to go with iphone, Android or Blackberry. 

Blackberry was immediately out of the running because it seems to be more email focused with other apps taking a backseat.  Perhaps this is a false impression, but I didn't seriously consider this option.

iphone is clearly the leader and in fact, my broker (Firstrade) has a iphone specific app).  So this would have been the easy choice.

However, I elected to go with an Android.  I specifically selected the HTC G2 because I use Google Docs so prominently in my screening and tracking.  Also, Firstrade has promised to follow-up with an Android app. 

So far, I've made some changes to one of my spreadsheets to allow for easier viewing via the mobile platform.  But I'm sure this will result in many other changes to my trading approach in the coming months.

Telecom Tales - Part 3

Last April I contemplated three telecom plays. I eventually bought in to all three companies.

• Telecomunicacoes de Sao Paulo (TSP) - 6.5% realized gain
• Nokia (NOK) - 12% realized gain
• Telecommunications Systems (TSYS) - This continues to be a roller coaster ride, but I'm holding on because I believe there to be a large upside. I'm sitting with an 11% unrealized gain, but I've seen this rise to as much as 21% in October, and be as low as -30% in August. The good news is that I've been in the black since October on an overall basis.  But I am in the red with my Roth holdings.

I sure hope to close the book on this soon as I've not collected dividends on any of these holdings.  TSP and NOK paid annual dividends and I did not hold at time of payment.  But TSYS pays no dividend. 

Mid Month Report Card

At the end of 2010, I reviewed my performance and identified some areas for adjustments.

1. Take profits sooner (B) - I've made two sales in January and gained 9% and 12%.  Naturally, the stocks continued to rise after I sold, but not so much.  So I have recognized gains that I would not have otherwise had.
2. Reduce or cap investment pool (F) - This one is tough.  I had another CD called, so I've actually went in the wrong direction and the investment pool is now larger than ever leaving me only 43% invested. 
3. Quit bottom feeding (D) - I haven't bought anything at a premium price, but prices have been rising.  Nonetheless, I need to get more fully invested and overcome my cheapness.  This will also help me convert some excess cash into dividend or interest income.
4. Dabble in Index Funds (D) - I've identified a preferred fund (VFIAX - VANGUARD INDEX TRUST 500), but have not taken the plunge.  Mainly because I want to bottom feed on funds too.
5. Don't sweat employment (A) - My current project is NO FUN and has been dragging past the original launch date, so I'm looking forward to it wrapping up, even if it costs me a paycheck. 

Overall Grade (D) - The rising market has made it difficult to execute on many of these adjustments.  My overall strategy has assumed some volatility and there simply hasn't been any.  I hopeful that there is a correction of some sort in the next 3-6 months.  Otherwise, I will likely continue to get poor grades.