Saturday, February 19, 2022

Week in Review

I've been doing some research lately into macro investing and really like the appeal. Kuppy & Doomberg generate some thought provoking content, and I've also been spending some time on Hedgeye. One of the books that Kuppy recommends that I'm working through is Tomorrow's Gold: Asia's Age of Discovery.  The book (so far) introduces the concept of capital pouring into parts of the economy or sectors that are already awash with capital. Basically investing where the gains are. 

For example, we've seen oil climb to ~$95 a barrel lately. Brent crude was at $70 a barrel in December. As the price of oil climbs up, more investors start piling into equities such as $CVX. This pushes the prices up and everybody wins, no?  Everybody thinks the price of oil will continue to rise, money continues to pour in and at some point the price plateaus. Smart money takes the profits as more people pile into an already overvalued asset. 

So the goal is to anticipate where these sector changes will occur before they happen. Easier said than done, but I think it's important to keep these things in mind before chasing after the new hot stock.

So how do we incorporate some macro investing with dividend growth investing? 
  • Monthly / Quarterly rebalancing sector weightings based on macro trends
  • Risk adjusting the overall portfolio beta by both asset allocation and equity selections
  • Taking some profits where sectors get too hot too quick
This week I shifted the portfolio beta from ~0.80 to 0.65. Time to pump the breaks a bit. The market is pricing in seven rate hikes into what I believe is a slowing economy. In Q4/early Q1 we've seen record profits, mainly based off pandemic comps and huge price hikes to counter inflation. Where do we go from here?  Will consumers continue to accept price increases from flattish wages?  Or do we see companies absorbing the increases price pressures with lower margin?  Hardly.  I'm not sure where we're going, but I see big headwinds ahead, and I wanted to put the portfolio in a defensive position.

So what did we do this week?

Dividend Increases
  • Allstate increases dividend by 4.9%, extending growth streak to 12th consecutive year

    Allstate announced its next dividend of $0.85 per share, a 4.9% increase over the company's previous payout of $0.81.

    The insurance powerhouse has aggressively reduced shares outstanding by over 20% in the last five years while also growing the dividend. The company's conservative payout ratio and strong balance sheet will help Allstate continue returning cash to shareholders.

Dividends & Income Received

A monster week, $384 in dividends.

  • APD - $18
  • ADC - $13.62
  • MMP - $127.61
  • O - $24.65
  • KMI - $87.21
  • ABBV - $56.40
  • MAIN - $26.88
  • O - $4.93
  • PG - $19.14
  • COST - $5.53


Way too many to list due to rebalancing. Check out the Weekly Progress Tracker for a detailed breakdown of what's in and out. Big picture the trades have focused around trading out the sector rotation below. I've changed asset allocation as well, shifting more into some treasuries, bonds and even gold. 

Options Activity

Good opportunity in rebalancing to acquire stocks using cash-secured puts. Selling cash-secured puts gives you the obligation to purchase a stock at a strike price if the underlying price goes below strike. You collect a premium for selling the put. If the strike price is under the price at time of expiration, you keep the premium, so it's a nice way to make a few bucks on a stock you were going to buy anyways.

  • Bumping up my real estate so sold an $O 02/18 $67.50 put for $84. This was exercised on 02/18. 
  • Closed my $WLK covered call on 02/15 netting $30 on the entire trade.
  • Rolled my Kroger $44 covered call from 02/18 to 03/18.  
  • Sold a $STOR put at $206 for $32.50 strike.  This was exercised on 02/18.
  • Sold 3 $CTRE puts for $193 at $20 strike. This was exercised on 02/18.
Other Activity
  • Added an additional $3,000 to the portfolio in savings.
What's Next
  • Continue to take time to learn more about macro investing. Given the volatility lately, I think there's some educated bets to be placed.
    • I think I can integrate into the portfolio via asset & sector allocation management. I'm not a fan of day trading, but I like the concept of smart swing trading when highs and lows are involved. 
  • Evaluate covered call opportunities. 
    • The portfolio rebalance introduced a lot more positions of 100 shares or more, so I can take better advantage of covered callss.
  • Slowly shrink number of positions to ~40 while maintaining a strategic sector breakdown focused on macro trends. 
    • Big progress this week as I shifted down to 53 positions from ~63. 
Hope everyone has a great weekend!

No comments:

Post a Comment