Trading Diary: Some portfolio perestroika as stocks catch a bid

Our portfolios have been pounded this week. Good inflation news helps stocks Friday, though the selling tsunami may not be over yet. (But Home Depot rules.)

Center aisle, Home Depot Massachusetts store. (Image via Wikipedia entry on Home Depot, CC 3.0 license)

WASHINGTON, August 11, 2017 – We haven’t updated our trading diary lately due to A.) being on travel last week, and B.) being forced to adjust to a monster selling wave largely triggered by a solid week of violent international political rhetoric, re: North Korea and friends.

Read also: Friday stocks: Tame consumer prices prompt a selling pause

Our portfolios took a tremendous beating this week, although we held relatively firm in our positions, attempting, as usual, to avoid the kind of panic-selling that engulfed large and small investor positions Thursday.

More specifically, here’s what we’ve been up to lately:

Trading Diary

We’ve bought and sold our usual gold and silver ETFs, symbols SGOL and SIVR, for a couple of mostly profitable round trips.

We’ve taken a brutal beating in two of our high-yielding, term-limited, exchange-traded notes (ETNs or “baby bonds”) – RAIT Financial 7.625% (RFT) and TravelCenters America 8% (TANNL) – due to some troubling, underlying financial weakness in the parent companies, though we continue to hold both issues.

After a terrific run in our large position in Allergan 5.5% convertible preferred “A” shares (AGN/PRA, your symbol may vary), we took a nasty haircut this week, again due to weakness in the parent company’s shares (AGN), plus a significant stock price adjustment today due to its ex-dividend date. (Note: On the ex-dividend date for any stock, its price is automatically reduced by the amount of the dividend at the opening trade. This shows up as an initial “loss,” although the price will seek its own level as trading continues.) Given this expensive stock’s (~$800 +) fat dividend ($13.75 per share quarterly), that cut its price this morning back by a similar amount, although the shares have traded well otherwise today.

We doubled down on our positions in mining giant Freeport MacMorAn (FCX), memory chip maker Micron (MU) and basic industry survivor U.S. Steel (X). Our thought: weakness in all three companies’ shares was due to market jitters and not fundamentals.

For some reason, our best performing positions during this week’s disaster have been in the beaten-down retail sector. In our portfolios, retail is represented by small positions in cut-price retailer Dollar Tree (DLTR) and hardware and lumber giant (and Dow component) Home Depot (HD).

Both retailers, like most others, took a tremendous hit a few weeks back due to overzealous selling on the news that Amazon (AMZN) would now begin to sell unpopular Sears’ (SHLD) well-regarded Kenmore appliance line via the Internet on Amazon’s own site.

We thought the selling was silly in the case of these two stocks. True, DLTR is suffering growing pains from its massive acquisition of former rival Family Dollar’s portfolio of troubled stores. And true, HD may get nicked a bit by appliance competition via the AMZN-Kenmore linkup.

But DLTR is still executing well in its own stores, and is slowly turning around (or occasionally shuttering) Family Dollar’s struggling locations; while HD’s appliance sales still only represent an estimated 7-8 percent of total sales, meaning that any competition from AMZN-Kenmore will minimally affect this highly-profitable major retail player in the short and long term.

We continue to hold both DLTR and HD, which are decently up Friday after getting hit in Thursday’s widespread selling tsunami. In fact, we almost added to our positions on the dip, but they didn’t drop quite low enough to tempt us.

Of the two positions, DLTR has proved the most unpredictable and volatile. So for that reason, if the Great Bear comes back prowling on Monday, we’ll likely dump these shares to retain the profit and buy them back later when the volatility seems to have run its course.

Have a great weekend, and be on the lookout for a revival in international headline risk.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17