Trading Diary: Restructuring our stock portfolio in confusing times

Sector rotation, headline risk will dominate trading action in Q4 2017. Here’s what we’re exploring: Financials, transports, oil companies and target ETFs.

The Yellow Kid's take on the Fed's latest threat. Mebbe he owns bank stocks. (Public domain image, creatively updated by T. L. Ponick)

WASHINGTON, September 27, 2017 – As we’ve noted several times in these columns, the game we’ve successfully played since Election 2016 has pretty much run out of steam, given the unending nonsense in a left-wing oligarch-led Washington and the constant media antagonism meant to drive any meaningful reform of the Federal government out of mind if not out of the country.

Thus, stock plays that once made sense – and profits – early in this game are either under fire or have left the building. Other, less obvious plays, have been winners.

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Our problem lately is that we’ve had far too few of the latter. As a result, the once exciting 2017 trajectory of our various portfolios has stalled, or, in some cases, gone completely into reverse.

Trading diary

We’ve reluctantly let go of a few losers for losses, while retaining others we’re convinced will head into green ink territory once again before 2017 concludes.

Currently hurting positions include:

  • Our massive bet on Allergan’s convertible preferred “A” shares (symbol: AGN/PRA, your brokerage’s symbol may vary), currently off 5.5 percent;
  • Our modest position in Apple (AAPL), which is trying to recover from a quick, post-product announcement loss, aided and abetted by the usual Apple bears who’ve been busily talking the stock down and, no doubt, shorting it on the way;
  • Our already-reduced position in Ohio-based major utility First Energy (FE), a once robust but relatively hapless, still quite coal-dependent utility that can’t quite dig itself out of the hole it’s been in for at least a decade;
  • And our smacked around but recovering position in Travel Centers of America’s 8 percent term preferred shares (TANNL) that mature in 2029.

On the other hand, looking-good or profitably sold positions include or have included the following:

  • Our modest position in Home Depot (HD) shares, off just a touch today on likely profit taking, but still up 8.9 percent for us to date. We bought most of these shares on the ridiculous selling wave that hit all retailers when Amazon (AMZN) announced its acquisition of Whole Foods.
  • We picked up some shares of Lowe’s (LOW) around the same time we bought HD. Our Lowe’s shares are up, too, but not nearly as much as HD. While continually profitable, Lowe’s often misses its numbers, so investors favor it notably less than HD.
  • We’ve been holding a modest position in Marathon Oil and, at this point, wish we’d bought more. Somehow we picked a bottom in this one, buying in at about $10.50 per share plus commission. Shares currently stand at $13.54, giving us a paper gain of nearly 24 percent. This one’s been perking along as oil prices have finally begun to firm. We expect more from the oil patch in 2017.
  • We’d already sold shares in big refiner Valero (VLO) although they’ve gone up a bit since then.
  • We also dumped our decent-sized position in Calumet (CLMT), a onetime high dividend paying MLP that nearly went bankrupt by investing in that rarest of American birds, a brand new oil refinery positioned near the Bakken Shale formation. With last year’s big oil price drop, Bakken Oil slowed to a trickle at exactly the wrong time for Calumet’s new refinery. A new CEO waded in and began to trim badly unprofitable facilities like that refinery, leading to surprisingly positive figures last quarter that boosted the stock. As some of the buying interest flagged, we decided to jettison the shares. After all, we netted a nearly 50% profit on this one, and when you get greedy in this business, you always lose.

Current new bets include or will hopefully include:

  • Bank of America (BAC). We made a profit on this one earlier this year and got back in again. After languishing for a month or two, these shares got new life Tuesday as interest-rate hawkishness has apparently re-emerged at the Fed. Rising interest rates make banks (and their shareholders) very happy, and BAC seems ready to resume its upward march.
  • As a result of recent Fed policy, or at least investor perception of that policy, we’re looking to get into the shares of two regional banks, Alabama-based Regions Financial (RF), and Cleveland-based KeyCorp (KEY). They’ve been running away from us, however, on the latest news, so we’ll likely wait until a pullback before buying in.
  • We’ve picked up relatively tiny positions in the defense industry, namely shares of United Technologies (UTX) and General Dynamics (GD). We’ve been lacking in big cap holdings for quite some time, so we thought that it would be good to get into the defense arena, given current international developments and the Trump Administration’s policy of rebuilding our Obama-decimated armed forces. We bought both on declines. Both are nicely up from our purchase price, but we wouldn’t mind if they got hit at least one more time so we could pick up a few more of these expensive shares.
  • Elsewhere, we’re looking to get – perhaps belatedly – into a couple of transport stocks, TBD. This sector has been languishing until recently, but has suddenly attracted interest, including from us. TBD.
  • Aside from our Apple shares, we’ve also been sneaking into a general tech position via the Guggenheim S&P 500 equal weight Tech sector ETF, symbol RYT. This is another one of many ETFs we can trade without commission at our discount brokerage, so it’s easy to buy these expensive shares in tiny increments as the market goes up and down.

That’s it for today, but we thought we’d give you a brief recap as to what we’ve been doing recently. For us, as for many, it’s been a rotten August-September, as more or less usual on Wall Street.

“Favorable seasonality” looms in October, so perhaps it’s time to start rebuilding our portfolios and investing some of our cash for (hopefully) significantly better returns.


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