What a recovery!
Last month I was frustrated as we had bought Macy’s (M), Foot Locker (FL), VF Corp (VFC) and Levi’s (LEVI) and they had yet to catch on and our portfolio stood at $39,723, with $15,401 in CASH!!! Fortunately, we had our SQQQ hedge, which was up $1,850 or things would have been much worse and here’s how we looked on April 5th:
At the time I said: “We lost another $1,735 and the market may drop 10% or rise 5% on Monday and, since we have no idea which – let’s just keep our remaining $15,401 in CASH!!! on the sidelines and wait for some clarity. As to the positions however – let’s make sure we still like them enough to ride out the storm with and add to if necessary.“
That’s right, the $700/Month Portfolio started with just $700 33 months ago (Aug 25th, 2022) with a goal of teaching our beginner traders the kind of slow, steady, VALUE investing favored by Warren Buffett and I and we traded it with NO MARGIN – like an IRA or 401K – to make sure it was suitable for all who participated.
If you missed out on our first 93.5% worth of gains, don’t worry, you can still start now with $43,350 and we still plan to make another $956,650 (2,206%) over the next 9 years – that will still be fun, right?
The way this portfolio works is every month, we add another $700 and, so far, in 32 months, we have put in $22,400. Whether you put in $700, $70 or $7,000 – the idea is to CONSISTENTLY invest your money – in good times and bad. Tempting though it was, we did not want to over-extend ourselves last month – we expected to be happy enough if the markets bounced and that’s where we are now so let’s look over our current positions:
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- HPE – We bought back the short calls last month as they were up 79.6% ($1,790) and had served their purpose as we felt $12.79 was a good bottom and we nailed it! The key to value investing is KNOWING the VALUE of the stocks in your portfolio – not just pretty words… The Jan $15 calls were down $995 and now they are up $1,300 and, guess what? We’re going to cover them again by selling 10 Aug $17 calls for $1.45 ($1,450) which adds 10% to our CASH!!! While the spread is tight, we are essentially taking $1,450 off the table by selling 101 days worth of premium and the Jan (255 days) $20 calls are $1.25 and I’m confident we can roll to the $5 spread if HPE goes higher so there’s no reason not to take $1,450 now for better protection in what is still an uncertain market.
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- TROX – This has been painful – even with the profits on the short call we bought back and they are too low to sell calls against so we are just waiting for longer-term options to come out so we can hopefully roll these out in time.
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- BXMT – They paid a nice $94 dividend on March 31st so the next one is June. The net of the spread is $3,377 and 4x $94 is $376 so we’re collecting 11.13% while we wait to get called away at $3,600 (up $223 – 6.66%) in January.
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- LEVI – We liked this one so much we bought it twice! We are right on track at net $4,650 on the $10,500 spread so we have $5,850 (125%) more to gain if LEVI hits our $20 goal in Jan of 2027. That’s still great for a new trade! It’s especially nice that earnings saved us – a very positive indication.
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- SQQQ – We dropped from +$1,850 to -$290 and that’s a -$2,140 swing but that’s what hedges do and the important thing is that your longs more than make up for what the hedges lose in a recovery – and they did! Last month, the $25 calls were $26.25 and now they are $8.40 and the short $40 calls were $17.85 and now $5.35 so, if we were to buy back 1 of the short $40 calls for $5.25, we would have $1,230 more protection. Since LEVI alone will make $5,850 in a good market – I think it’s worth spending some money but, rather than buy back a short call, let’s spend net $2.20 ($880) to roll our 4 2026 $25 calls at $8.40 to 4 2027 $25 calls at $10.60. That gives us another year of protection and another year to sell short calls (so we’re very likely to get that $880 back!).
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- VFC – Earnings are on the 21st so fingers crossed. It will be more about guidance.
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- NAK – Benefitting from deregulation and we’re at net $445 on the $1,500 spread so we have a potential $1,055 (237%) left to gain at $1.50.
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- FL – Not moving much for us so far but earnings are May 29th and they beat last Q by 20% so I think expectations are way too low on this one. It seems like it would be wasteful to buy back the short June $17.50 calls – even at $30 – so we’ll just wait and see.
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- M – Earnings are on the 19th and last Q was a 17% beat but tariff uncertainty spooked traders out of the stock. We sold June $14 calls for $315 (13.3%) for the quarter – as long as we can do that, what’s not to like?
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- SOFI – This stock is WILD! Just had good earnings and I feel good about our targets.
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- VALE – Another one that is hurting us and earnings were NOT good but $9 is holding so yes, I think there is hope we get back to $12 by Jan, 2027.
I’m certainly not going to jump on new trades ahead of the Fed. In the April 5th review, we calculated $40,844 of upside potential and we realized $3,627 of that in the past 30 days so we still have a solid $37,000 (85%) upside potential over the next 2 years and that’s BETTER than we’ve been doing (34% per year) so we’re going to hold on to our CASH!!! for the moment and see how earnings season plays out.
This is not a gambling portfolio, this is a VALUE portfolio and we like to be sure of the soil before we plant our seeds.
Our 5 Members Only Portfolios will be reviewed the week of the 14th – Become a Member now and we will help guide you through the chaos!
