{"id":12239350,"date":"2020-04-07T08:35:03","date_gmt":"2020-04-07T12:35:03","guid":{"rendered":"https:\/\/www.philstockworld.com\/?p=12239350"},"modified":"2020-04-07T09:57:17","modified_gmt":"2020-04-07T13:57:17","slug":"tuesday-market-workshop-portfolio-protection-part-5-dont-get-excited","status":"publish","type":"post","link":"https:\/\/www.philstockworld.com\/2020\/04\/07\/tuesday-market-workshop-portfolio-protection-part-5-dont-get-excited\/","title":{"rendered":"Tuesday Market Workshop – Portfolio Protection Part 5 – Don’t Get Excited"},"content":{"rendered":"

\n\tDon't get excited<\/a>!<\/strong>  \n<\/p>\n

\n\tThe Futures are up another 3.5% this morning, pre-market as China reports NO new cases of the virus and Trump touts his "miracle cure<\/em><\/a>" that people have already died from taking<\/a>.  Day after day, the salesman turned president has encouraged coronavirus patients<\/a> to try hydroxychloroquine with all of the enthusiasm of a real estate developer. The passing reference he makes to the possible dangers is usually overwhelmed by the full-throated endorsement. “What do you have to lose?<\/em>” he asked five times on Sunday.<\/strong> \n<\/p>\n

\n\tAs it turns out, the real question is "What does Donald Trump have to gain?"  If hydroxychloroquine becomes an accepted treatment, several pharmaceutical companies stand to profit, including shareholders and senior executives with connections to the President.  Trump himself has a small personal financial interest in Sanofi (SNY)<\/a>, the French drugmaker that makes Plaquenil, the brand-name version of hydroxychloroquine.   \n<\/p>\n

\n

\n\t\t"Some associates of Mr. Trump's have financial interests in the issue. Sanofi's largest shareholders include Fisher Asset Management, the mutual fund company run by Ken Fisher, a major donor to Republicans, including Mr. Trump," said the report. "Another investor in both Sanofi and Mylan, another pharmaceutical firm, is Invesco, the fund previously run by Wilbur Ross, the commerce secretary. As of last year, Mr. Trump reported that his three family trusts each had investments in a Dodge & Cox mutual fund, whose largest holding was in Sanofi."\n\t<\/p>\n<\/blockquote>\n

\n\tWhile China may have gone a day with no new cases of COVID-19, the US blasted up from 337,933 cases yesterday morning (4 times more than China, which has 5 times more people than the US does) to 368,449 (up 9%) this morning and we now have 10,943 deaths<\/a> – the third highest count in the World behind Italy (16,523) and Spain (13,798), which are both openly considered disasters (and they got hit hard with infections 3 weeks before we did – so we may just be lagging on deaths as we have double their infections).  \n<\/p>\n

\n\t\"\"\n<\/p>\n

\n\tHow does America have 4 times more virus cases than China (1.44Bn people) and India (1.4Bn people) combined with 1\/10th the combined population?  According to Donald Trump, it is Obama's fault.  Italy and Spain say it's Obama's fault too and Putin is blaming Obama as well since it seems to work for the Republicans – so why not?<\/strong>  \n<\/p>\n

\n\tWhile I don't trust SNY and it's already popped a lot, 3M (MMM) is interesting as it's still around $140 and they have just agreed to sell 165M masks to the US right away<\/a> and the company expects to double their capacity to 2Bn masks\/year by the end of 2020, producing 100M masks a month (world-wide) right away with 50M masks a month earmarked for the US, 40% more than they currently produce.   \n<\/p>\n

\n\tThe masks are only $1 each and MMM is an $80Bn company with $32Bn in revenues and $5Bn in income so it's not actually very cheap at $140 but it is great publicity for them and they will be getting their foot in the door with pretty much every Government on the planet – so perhaps they will be able to sell some Scotch Tape and Post-It notes as well?\n<\/p>\n\n\n\t<\/tbody>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t<\/colgroup>\n\n\n\t\t<\/tr>\n\n\n\n\n\n\n\n\n\n
\n\t\t\t\tYear End 31st Dec\n\t\t\t<\/th>\n\n\t\t\t\t2014\n\t\t\t<\/th>\n\n\t\t\t\t2015\n\t\t\t<\/th>\n\n\t\t\t\t2016\n\t\t\t<\/th>\n\n\t\t\t\t2017\n\t\t\t<\/th>\n\n\t\t\t\t2018\n\t\t\t<\/th>\n\n\t\t\t\t2019\n\t\t\t<\/th>\n\n\t\t\t\t2020E\n\t\t\t<\/th>\n\n\t\t\t\t2021E\n\t\t\t<\/th>\n\n\t\t\t\tCAGR \/ Avg\n\t\t\t<\/th>\n<\/tr>\n<\/thead>\n
\n
\n
\n\t\t\t\t\t\tTotal Revenue<\/span><\/ratio>\n\t\t\t\t\t<\/div>\n
\n\t\t\t\t\t\t$<\/span>m<\/span>\n\t\t\t\t\t<\/div>\n<\/p><\/div>\n<\/td>\n
\n\t\t\t\t31,821<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t30,274<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t30,109<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t31,657<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t32,765<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t32,136<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t32,199<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t33,322<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t0.197%<\/span>\n\t\t\t<\/td>\n<\/tr>\n
\n
\n
\n\t\t\t\t\t\tOperating Profit<\/span><\/ratio>\n\t\t\t\t\t<\/div>\n
\n\t\t\t\t\t\t$<\/span>m<\/span>\n\t\t\t\t\t<\/div>\n<\/p><\/div>\n<\/td>\n
\n\t\t\t\t7,135<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t6,946<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t7,027<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t7,788<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t7,207<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t6,102<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t-3.08%<\/span><\/span>\n\t\t\t<\/td>\n<\/tr>\n
\n
\n
\n\t\t\t\t\t\tNet Profit<\/span><\/ratio>\n\t\t\t\t\t<\/div>\n
\n\t\t\t\t\t\t$<\/span>m<\/span>\n\t\t\t\t\t<\/div>\n<\/p><\/div>\n<\/td>\n
\n\t\t\t\t4,956<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t4,833<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t5,050<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t4,858<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t5,349<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t4,570<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t5,042<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t5,437<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t-1.61%<\/span><\/span>\n\t\t\t<\/td>\n<\/tr>\n
\n
\n
\n\t\t\t\t\t\tEPS Reported<\/span><\/ratio>\n\t\t\t\t\t<\/div>\n
\n\t\t\t\t\t\t$<\/span>\n\t\t\t\t\t<\/div>\n<\/p><\/div>\n<\/td>\n
\n\t\t\t\t7.49<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t7.58<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t8.16<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t9.17<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t9.18<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t7.81<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t0.852%<\/span>\n\t\t\t<\/td>\n<\/tr>\n
\n
\n
\n\t\t\t\t\t\tEPS Normalised<\/span><\/ratio>\n\t\t\t\t\t<\/div>\n
\n\t\t\t\t\t\t$<\/span>\n\t\t\t\t\t<\/div>\n<\/p><\/div>\n<\/td>\n
\n\t\t\t\t7.49<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t7.71<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t8.03<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t8.34<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t8.46<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t9.38<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t8.71<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t9.45<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t4.60%<\/span>\n\t\t\t<\/td>\n<\/tr>\n
\n
\n
\n\t\t\t\t\t\tEPS Growth<\/span><\/ratio>\n\t\t\t\t\t<\/div>\n
\n\t\t\t\t\t\t%<\/span>\n\t\t\t\t\t<\/div>\n<\/p><\/div>\n<\/td>\n
\n\t\t\t\t+11.5<\/span><\/span>\n\t\t\t<\/td>\n\n\t\t\t\t+3.01<\/span><\/span>\n\t\t\t<\/td>\n\n\t\t\t\t+4.17<\/span><\/span>\n\t\t\t<\/td>\n\n\t\t\t\t+3.84<\/span><\/span>\n\t\t\t<\/td>\n\n\t\t\t\t+1.40<\/span><\/span>\n\t\t\t<\/td>\n\n\t\t\t\t+10.8<\/span><\/span>\n\t\t\t<\/td>\n\n\t\t\t\t-7.11<\/span><\/span>\n\t\t\t<\/td>\n\n\t\t\t\t+8.46<\/span><\/span>\n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n<\/tr>\n
\n
\n
\n\t\t\t\t\t\tPE Ratio<\/span><\/ratio>\n\t\t\t\t\t<\/div>\n
\n\t\t\t\t\t\tx<\/span>\n\t\t\t\t\t<\/div>\n<\/p><\/div>\n<\/td>\n
\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t15.0<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t16.2<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t14.9<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n<\/tr>\n
\n
\n
\n\t\t\t\t\t\tPEG<\/span><\/ratio>\n\t\t\t\t\t<\/div>\n
\n\t\t\t\t\t\t \n\t\t\t\t\t<\/div>\n<\/p><\/div>\n<\/td>\n
\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n\n\t\t\t\t1.91<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t2.69<\/span>\n\t\t\t<\/td>\n\n\t\t\t\t \n\t\t\t<\/td>\n<\/tr>\n
\n\t\t\t\t \n\t\t\t<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
\n

\n\t\tWe can collect $12 for promising to buy 500 shares of MMM for $100 by selling 5 2022 $100 puts for $12 ($6,000)<\/span><\/strong> and that would net us in for $88 ($44,000) if assigned and that would use up $22,000 worth of ordinary margin so make sure you REALLY want to own MMM before selling puts but we have room in our Long-Term Portfolio so let's add that play as we also know that we can roll the short puts or, if assigned, we can sell 2022 calls (the $140s are $22) to further lower the basis so we're very confident we could end up with MMM below net $70 – a 50% discount to the current price.  \n\t<\/p>\n<\/blockquote>\n

\n\t\n<\/p>\n

\n\tLooking at this morning's action – I think traders are getting ahead of themselves as the only reason the virus is under control in China is because they were locked down for 2 months and this has been only two weeks in the US and Earnings Reports come out next week and those will be ugly.  On Friday we made bullish adjustments to our Income Portfolio<\/a> and that's gone from $132,078 on Friday morning to $155,148 at yesterday's close – up $23,070 <\/strong>(17.5%) in just two sessions and it should be up further this morning but that means it's time to lock in some of our gains – just in case we pull back again<\/strong>.\n<\/p>\n

\n\t\"\"\n<\/p>\n

\n\tSmart Portfolio Management is all about BALANCE and we need to be aware of when we are making too much money as acutely as when we are losing too much money.  We did not expect a V-shaped recovery but we're getting the start of one with the S&P 500 back over 2,700 already this morning.  We are generally expecting 2,850 to be the top of our range so we need to now look at each of our positions and make sure we are comfortable and for sure we will be adjusting our SQQQ hedges to lock in these gains.\n<\/p>\n

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