Showing posts with label Trading Journal. Show all posts
Showing posts with label Trading Journal. Show all posts

Tuesday, February 19, 2019

Systematic Trading: Week 1

This weekend the Russel 3000 index has been above its 200 MA for 3 days.


Who knows if it will continue?  It could be a false breakout.  Or it could be like 1998: a correction before a final 18 month melt-up.  I will trade the system regardless.

Value (The Acquirer's Multiple)

Yesterday, bought the top 3 stocks from The Acquirer's Multiple All Investable Stock Screener.

I will continue to buy and sell as the number of days the index is above the moving average. (N) changes.

After each stock has been held for 1 quarter, I'll rebalance.  i.e.: replace it with another stock if it is no longer within the top N rated stocks.

Momentum (Clenow)

Bought 3 stocks yesterday:
  • LIVX (Livexlive media Inc), bought 673 shares @ $5.95
  • LCI  (Lannet Company Inc), bought 389 shares @ $10.28
  • EHTH (EHealth Inc), bought 64 shares @ $62.66

Monday, November 5, 2018

Sold most of my stocks

Sold most of my stocks last week.  Just before the rebound : (

Reason was because both the S&P500 and Nasdaq Composite index fell convincingly below their 200 MA.

I still think there's a only a 1/3rd chance of a bear market - most likely this is a 10-20% correction.  But I don't want to take the chance.  If you think there's a 1/3rd chance of getting shot, you have to take action to prevent yourself getting shot.

The stocks I am holding now fall into three groups:
  • Stocks I am willing to hold for 10 years.  Buffet style.
  • Small speculative positions, where I don't mind losing the lot.  Small risk for big gains.
  • A market-neutral pair trade.

I'm spending my time developing a simple automated trading system.  I want to be able to trade the market without having a view.

Sunday, July 22, 2018

Uranium Again

A few weeks ago, I sold my URA ETF due to changes in its constituents.  Took a loss of USD 1650.

To replace this, I have bought directly into Cameco, and a bucket of small uranium companies.  This makes up around 3% of my portfolio.




Wednesday, May 30, 2018

Bought Offshore oil companies

Over the past few days, I bought a small amount of US-listed offshore oil companies.  Rig holders, OSVs and drilling.  Around 3.5% of my portfolio.  I believe that, barring a recession, both shallow and deep water exploration and development will return over the next few years.


I finished buying the day before the market dived on Italy worries. We'll see how it goes.

Friday, May 11, 2018

Bought Cardinal Health (CAH)

This week, bought 417 shares @ USD 53.55 at a total cost of USD 22,332.

CAH released bad earnings early this month, due to write offs in its newly acquired medical equipment distribution.  This drove the stock price down 20%, allowing me to buy at just below 12X FCF.



Thursday, May 3, 2018

Selling Kering. And Inner Peace.

Sold my Kering shares at Euro 477.50 on 31st April.  Profit was SGD 57K, or 180%.  Over 4 years.


Since I bought Kering in early 2014, its main brand Gucci has transformed from a bland, logo-driven luxury brand to a young, exciting one.  Unknown designer Alessandro Michele took over and revitalised the brand, making it younger, more colourful, and gender neutral.  I don't understand any of this fashion crap, but sales are up double digits for the last 7 consecutive quarters:

The brand's transformation is best captured in pictures.

Severed head at fashion show:


Collaboration with graffiti artist Gucci Ghost:



Handbags - the bread and butter of the industry - now with colourful prints:
Now Gucci is a trendy, hip brand, popular with millennials.  It is the hottest fashion brand in the world.


Hard to know if the decision to sell was correct.



At a PE of 30, Kering is now reasonably expensive.  But the trend is still up - both the stock price and fashion trends - and I cant see any sign of it stopping.  Its easy to see the stock doubling again from here due to increased sales combined with operating leverage.  OTOH, a lot of good news is already priced in.  Fashions come and go.  Trees don't grow to the sky.  Especially for a company that sells handbags - its not the next Google or Facebook.

I chose to sell because of:
  • Valuation
  • The chart was going parabolic.  Theres no real support to tell when the uptrend breaks.
  • I want to lighten up on stocks near the end of the business cycle.

Someone once told me, even when a stock shoots up after you sell it, you should be happy for the guy who brought it from you.  Because even if he makes money that you could've made, he's still taking a greater risk than you.

Inner peace.


Tuesday, April 24, 2018

Bought McKesson (MCK)

Bought 150 shares last night at USD 150.57 for a total of USD 22,590.44.

I'm wary of buying stocks this late business cycle.  But the drug distributors' revenues did not fall in the last recession.  Their profitability depends on the supply side, not demand. Their profits - and stock price - have fallen in the past few years due to generic drug price deflation.

The main long term risk is the consolidation of their customer base, which causes price competition.  But I think its already priced into the stock price.  I don't see a catalyst now for the stock or its earnings to go up, but by the time I do, so will everyone else.  I'm willing to hold this for a few years, through the next recession.  When a company is part of an oligopoly, has recurring revenue from an essential good, and is selling at 11X FCF, how can you not buy it?


I'm now 50% invested:


Looking to sell the banks in the next 6-12 months as we come to the end of the business cycle.

Gazprom

I entered a small position in Gazprom, the Russian gas company, last year.

Gazprom is an indispensable supplier of piped gas to Europe, trading at a single digit PE.  It (and its underlying currency) trade in accordance with crude oil prices.  It was a 1% speculative position, due to the risk of forced privatisation.

This was based on a previous recommendation from Capitalist Exploits.  They turned negative on it due to increasing geopolitical risk: US shareholders have been given a deadline to dispose of their Rusal stock/bonds, and Gazprom could be next.

Sold it last week.  Profit around USD 600.


Sunday, April 22, 2018

Covered FMG Short

Covered my FMG short at on 20th April at AUD 4.69.
It had closed above the 4.50-4.55 support level for several days.
Loss of AUD 2.8K.

Monday, April 2, 2018

Short Fortescue Metals Group

I am expecting Iron Ore to drop.  Most IO is used by China for building and infrastructure.

In the long run, China is trying to move away from infrastructure and manufacturing.  Over the years they brake, accelerate, brake, accelerate...as they try to slow down without causing a recession.

In the medium term, I think they are in the brake stage now.  They will be slowing down now, so they can stimulate in 2020 for Xi's election the year after.  China's growth credit (Total Social Financing plus Bonds) is slowing:


Source: MB Webinar - Nucleus Wealth Mgt (abt 30 mins in).

In the short term, there are record iron ore stocks at Chinese ports.   Most of it is low grade ore, unused because of China's pollution restrictions.

FMG is the 4th largest global iron ore supplier after Vale, BHP and Rio, and also 4th place on the cost curve.  It produces mostly lower quality 58% ore, versus high-quality 62% ore from the other three, and low quality 30+% from domestic Chinese producers.  Upgrading their mix will take time - meanwhile they have have to accept discounts.

FMG's stock price has recently broken support:

I am short 6,600 shares of FMG at AUD 4.27.  This is a short term trade, hoping to make 20-30%.

Main risks are:
  • In the short term, the market shoots upwards if the correction ends.
  • China may rescind their pollution curbs.
  • In the long term, steel may be used for OBOR.  Or for buildings/infrastructure for the booming US economy.  Including a big, beautiful wall.

Sold losing positions

Sometimes I take small speculative positions.  Either to bet a small amount for a possible large gain, or to begin investigating a company.  These 2 didn't work out, I don't have the confidence to hold them or the time to investigate further.

Bought 490 shares SECO at late Jan, sold them 29th Mar.  Loss of USD 850.

Sold 785 shares STNG  on 20th Feb at 2.34.  Loss of USD 1.1K.

Friday, February 9, 2018

Bought Boustead

I've followed Boustead for a while.  Also see TTI's blog for a more detailed look.

Here's my valuation for a stock price of 83c:

First, net cash is 28c/share.  This includes some cash required for working capital.  Gives a stock price of 55c.

Next, the segments with recurring earnings:

  • I estimate Geo Spatial earned 2.8c/share in the last 12 months.  After estimating taxes subtracting some HQ costs
  • (Boustead Singapore's share of) Boustead Project's Leasing Segment's after-tax earnings were 1c/share.
So 3.9c/share of recurring profits.  That gives an ex-cash PE of 14.

And we are getting the Engineering and Design&Build segments for free.  These should be coming off multi-year cyclical lows.

The risks are:
  • Long term: Much of Boustead's past success is from the old CEO's capital allocation skills.  Will this continue under the next generation?  The company has been looking to deploy cash for a long time, without success.  Hopefully they will remain conservative.
  • Short term: Geo-Spatial's revenues would drop if the AUD dropped.  Also if the Australian Government cut spending.

Bought 36000 shares at 82.5c on 6th Feb.  Thats half my position, will buy more if the stock price drops to 75-76c.  I'm content to hold them long term, and - at this stage in the business cycle - may end up holding them through the next crash/recession.

This stock does not seem to be affected much by the current correction.



Friday, January 5, 2018

Sold LBrands

2 days ago the stock dropped 15% on a bad sales report, breaking its uptrend:

This is not a Buffet-like stock that I want to hold for years, so I sold at $50.20.  Profit around USD 800.

I am now just under 60% in cash:


Monday, November 6, 2017

Bought L Brands (NYSE:LB)

Bought 304 shares of L Brands at $47.91 on 6/Nov/17.  Total cost USD 14659.59.

Busy now, will write more on the weekend.

Wednesday, August 16, 2017

Sold Snap Options

Sold at $3.19.  Profit USD 2182.43.

Q2 earnings were bad and SNAP shares fell.  But they haven't been falling in the past few days: staff were allowed to sell on Monday, and even allowing a few days for the paperwork with brokerage accounts, they are not selling now.  Maybe the big drop is already priced in.  Since my short-term options are up 45% on volatility, and most options expire worthless, take the small profit now.

At what price would I turn around and buy Snap?  The app and the user-base has value.  But since the common shares have no voting rights, they're probably worth zero.


Tuesday, July 11, 2017

Snap

Snapchat is an app that lets you send doodley pictures your friends.  Widely used by teens/millennials.  Its different from Facebook in that its private - you only send to your close friends, and pictures are removed after viewing.  Its a way to talk with around 20 or so of your friends, rather than to show off to the whole world.  70% of Snapchat users are female.


The Numbers

Snap has never been profitable:


  • Revenue has been smaller than COGS for the last 2 years.  Let alone all the other costs.
  • I've excluded stock compensation costs here.  Lets optimistically consider them "non-cash" or "one-off".

Snap is burning cash:



With 3.2bn cash on their balance sheet from their IPO, they can last another 4 years at their 2016 "burn rate".  The only good thing we can say is that cash burn remained steady in 1Q17.

The key for a company like this is to either:
  • Increase its user base to gain critical mass by the network effect, so that they become attractive to advertisers.
  • Or else, they may already have gained critical mass in the teen/millennial market, and look for a way to monetize it.
For the first way: their Daily Active Users (DAU) has risen spectacularly since 2014, but levelled out in 1Q17, sending the stock down 25%.

For the second, they have several ways of monetizing their experience (1) (2) (3) which look interesting:
  • For their normal app: ads, lenses and geofilters.
  • Stories: photos or short videos, with annotations, doodles and music.  Post them in your Stories section and they can be seen by all your friends for 24 hours.
  • Spectacles: spectacles which can take 10s videos uploaded to snapchat.  They are pretty cool looking, not geeky like google glass.
We have not seen any meaningful increase in revenue in 1Q17 due to these.  Maybe we will later.

Competitors

Snap's competitor is Facebook, who tried to buy the company for 3bn in 2013 but was rejected.  Since then FB has directly competed with them by trying to make Snapchat clones (which failed) and outright copying their Stories functionality into Instagram.  This succeeded: Instagram Stories now has 200m users, more than Snapchat's 166m.


(Source: Business Insider)

FB wants to continue to dominate social media, and prevent (or buy out) any startup taking off.  SnapChat has an entrenched position in the highly desired teen market, which FB can't attack - no matter what new functionality FB comes up with, people will stick with an existing social network because their friends are on it.  But FB is preventing Snap from expanding.  So Snap either needs to monetize its existing user base before it bleeds to death, or find some way to completely re-invent the market - something completely different, like what the iPhone did to the mobile phone market.

My Short Bet

The story is put very simply here: 80% of Snap's free float has been locked up, but becomes tradable at the end of July till end August:

I'm short: bought 22 SNAP Put options last night @ 2.18 each.  Strike $15, 19th Jan 2018 expiry.  Breakeven if Snap goes down to $12.82.  Total cost USD 4,815.75.  This trade has 100% downside (for me) and roughly 120% upside (if SNAP goes to $10).

Risks:
  • The Q2 earnings release is due between the end July lockup expiry and end August one.  Snap may pull a rabbit out of their hat, e.g.: make more advertising deals, recount DAUs, or recognise some revenue.  Its possible that, since they know about the lockup time, they planned this and put all their bad news in the previous 1Q results (kitchen sink).
  • This is a consensus trade - every man and his dog is short SNAP.  Any good news will cause a short squeeze.
This is a speculative trade, using 1% of my capital.  Might go to zero.

Overall, the best you could say about SNAP as a company is that its overvalued and theres a lot of growth built into the price.

References

Good look at Snap's strategy from Stratechery:

Sold UUP

Sold all my UUP at 24.875 for a total of USD 19890.29.  The trade wasn't working, and since currencies don't move much, its pointless to keep so much capital tied up in it. Total loss was USD 891.30.

Currently I have:



Some of my positions are included as 'Speculative Positions".  They are risky 1% positions that may go to zero, but have a potential 3X payoff.  Most of them are from newsletters paid for and are not described in blog posts.  So are any unnamed stocks.

Friday, June 30, 2017

Bought Mongolia Mining Corporation (HK:0975)

Bought 227000 shares on Wed 28th July, at HKD 0.169.  Total cost around USD 4875.

This is from the Capitalist Exploits blog in Sept.  The story is about the resurrection of a Mongolian coal mine, which together with a proposed railroad to China, can provide coking coal cheaper than Australian producers.  The risks are political and in execution.  This is a 1% position and the stock may go to zero.  A crash in HK small caps last week gave an opportunity to buy.

Friday, June 16, 2017

Sold Pacific Basin Shipping

Sold Pacific Basin Shipping (HK:2343) at HKD 1.60 on 8th June, for loss of SGD 1703.

I've changed my mind.  Not confident on this one, as new ships can be built in 18-24 months, limiting any sustained rise in prices.  We can't just look at a 10-year chart and say the BDI is gonna go back to 2008 levels. I think the time to buy shipping stocks is when even the best players have been losing money for 1 or 2 quarters - when things are so bad they can only get better.  At that point, you may get 50% upside.  It would be a small trade - trying to catch a falling knife - and I would be dribbling in slowly... maybe 1% after one bad quarter and another 1% after a second.

If I want to play at all.  Shipping is a tough sector.  There's no way to value a shipping company - earnings and vessel values are cyclical.




Tuesday, May 9, 2017

Resona Bank (TYO:8308)

Japanese banks are trading at single digit PE ratios and below book value.  After 20 years of near-zero interest rates they are still profitable.

I'm looking at Resona, the fifth largest bank in Japan, because its purely a domestic play and makes most of its money from deposits and loans.


Market Share

Japan is 'over banked'.  The top four banks have around half the market share, and theres a 'long tail' of smaller banks due to each province historically having their own bank.  
     (Source: Credit Suisse, Midtier banks, Jan 2015)

The Japanese banking market is more competitive than SingaporeAustralia or the UK, where the top 3-5 banks have 60-75% of market share.  Consolidation has been occurring for years, but still has a long way to go.

To escape the competition and ever lowering interest rates, the larger banks (MUFJ, Mizuho Financial Group, Sumitomo Mitsui Financial Group and Mitsumi Sumitomo Trust Holdings) have expanded overseas and have built up their investment banking.  For example, MUFJ owns 20% of Morgan Stanley, plus banks in the US and Thailand.  Resona is the largest Japanese bank that is still purely domestic.

Resona's market share in certain prefectures:



     (Source: Feb 2017 Company Investor Presentation)

Income Breakdown

The vast majority of their operating income is from interest:



Interest income seems to track interest rates, with a spike in 08/09, amidst a general downtrend (the time period in the red box below):


This 'single focus' on deposits and loans makes it easier to analyse than the other large Japanese banks:
  • They have no investment banking or overseas operations.
  • And very little trading.  Most of their trading profits are from derivatives.
  • Fee and commission income is the second largest contributor, and seems to track the economy1:


Losses

Loan losses2 are slightly favourable compared to other Japanese large banks:


Leverage

Resona's CET1 CAR is 8%, far lower than the other 4 big banks which are in the low teens.  This is because of their low capital base.  In 2015 they finished paying off public funds which were injected in 2003.  They now expect to increase their capital and aim for a 9% CET1 CAR in 2019.

As a domestic Japanese bank, their required CET1 CAR is only 4.5%. 


Returns

Resona's ROE is artificially higher than its peers, due to its low capital base:



As they increase their capital in future years, ROE will go down.

ROA is comparable to the other large Japanese banks:



This is far less than other countries.  Singapore banks for example, have ROAs of between 0.5 and 3%.

Others

David Eirnhorn bought a stake in 2014 at 547 yen, and probably still has it.

At 620 Yen, Resona yields 2.7%.  Withholding tax for Singapore residents is 15.315%.

Summary

Reasons to buy:

  • Pretty Cheap.  At 620 yen, its trading at 9X earnings and price/book of 0.87  (From year-ending March 2016).
  • It is still profitable, despite operating in a fiercely competitive environment with interest rate headwinds.

Risks:

  • Japanese banking market is more competitive than other countries.
  • Japan's well know demographic problems.
  • Risk of a sudden Yen devaluation if Japan loses control of its bond and currency markets.  May not happen as Japan's debt is domestically funded (1) (2).
  • Cyclical risk.  Japan is now in a boom, with record corporate profits and full employment.  The boom may end if it was solely due to money printing.

Overall, I think its an OK company trading at a cheap price.  Not a 'Buffet buy-and-hold-forever' stock.  The risks are priced in.

[Edit: Bought 2900 shares at 612.4 Yen on Friday 12th May.  Total cost in SGD is 29,505]

I like their mascot too:


                 ___________________________________________

1 There is a breakdown of their fees on p16 here, but it doesn't say much

2 From JGAAP financial results. "Loan losses" calculated as: 
     (Provisions for loan losses - Reversals in provision for loan losses) + (Write off loans - Recovery of write-off loans)