August 18, 2014

08-18-14 – Morningstar Report

08-18-14 – Transaction Record

So that was an interesting first half of August.  We had Putin related fears driving markets down and then the specter of war subsided.  I really don’t believe that another large scale war between sophisticated armies meeting on battlefields will occur anymore.  Wars aren’t declared and ended with signings aboard an aircraft carrier.  Wars between developed nations with standing armies are conducted via hacking, economics, and proxies.  So when fear of a conventional war occurs, I generally see that as a buying opportunity, as I alluded to on July 17th.

On July 17th, right after the downing of the Malaysian airliner, I blogged about the S&P levels that I would buy at due to that geopolitical unrest.  On August 5-6th, the S&P hit the first real threshold of 1920, so I bought.  Before then, I was stopped out of utilities (XLU) and Southern (SO) on August 4th and August 5th.

On the 6th, due to those stops, I had cash on hand.  I noticed that even with this geopolitical unrest, oil prices were falling and energy (XLE) was falling in sync.  Typically, oil prices would raise gas prices and boost energy stocks (relatively speaking).  Like I said on April 27th, Russia needs high oil prices. But their saber rattling is no longer spiking the prices as Putin needs to fulfill his domestic promises. Maybe this is a “boy who cried wolf” situation and the wolf call no longer garners attention anymore.

My belief was that here in the U.S., we now have sufficient oil supply and oil production that geopolitical events don’t effect our oil prices as much.  Supply and demand do.  As such, I wanted to whittle my broad based energy position and convert that into pipelines (i.e. master limited partnerships) which makes money transporting this vast quantity of oil & gas we now have, as well as reduce my energy position by transferring that capital into other sectors.

With that in mind I sold half of the XLE position and purchased Coach (COH), Apple (AAPL), Enterprise Product Partners (EPD), and the MLP index (AMLP).

Coach seems to have hit a bottom.  Also, a for-fun investment club I’m in has a huge fan of Coach, named Frank, who consistently recommends Coach.  Although he’s been doing so since the stock was in the $40’s.  So I watched it a bit. It reached an inflection point and had been trading flat since mid June, so I figured I’d take a flyer on it.  Plus, as part of my personal life, I have a girlfriend who is addicted to hand bags (as I suppose many women are), and she still liked Coach.  I bought her a Coach bag for her birthday, the one she was heavily hinting at wanting, and she loves it. She talks about how other women compliment her about it!  Plus, on August 4th, Michael Kors Holdings (the “hot” hand bag for that past year) got crushed due to commentary about “margin pressure” on its earnings call.  Meaning that they might have to cut prices… following in the path of Coach.  If that’s the case, Coach is ahead of the curve in selling lower cost aspirational hand bags.  So I bought it.  I don’t really like Coach that much, I can’t tell the difference between most hand bags… but the stock is extremely cheap and expectations couldn’t be lower.  That is a formula for “can’t get any worse” and therefore “can’t get hit too hard”.  P.S. the women I talk to now say Torey Burch is the new hot handbag.

I also bought Apple because it was pulled back, I believe the stock is going to over $100 per share, and it is a strong company that is cheap in earnings and growth.  This is a “core” position that I will purchase more of over time.  I will probably deploy about 6K over 2-3 months buying  in roughly 2K lots.

Lastly, I diversified XLE into the pipeliners.  The pipeliner ETF (AMLP) and Enterprise Product Partners (EPD).  Although AMLP contains EPD, EPD is the “best of class” for pipeliners in my opinion.  If I were more conventional, I would have only bought EPD, but I like diversification through ETF’s based on my thesis of energy independence and lowing oil prices.

All that worked pretty well on the 6th as I still had 18% cash in case we hit the 1900 or 1880 level. But we began rebounding on August 8th when it became obvious that full scale war was very unlikely, and the S&P hasn’t looked back since.

Along the way I sold a call in Twitter to raise some cash.  If my shares got called away, super, I made a nice profit.  If not, I gained a little yield.  It did not get called so I made $47.

Also, on 8/13/14, I purchased JC Penny.  I’ve been checking out their stores for quite a while (remember, I need something to do while my girlfriend shops at the mall, so I “research” retail) and the foot traffic was impressive.  In Manhattan, there’s tons of foot traffic at that location.  In the malls around Philadelphia, the stores look nicer, and there is a bit of foot traffic and good deals.  Also, the stock has been flat for pretty much the whole year, and especially flat over the past month and a half.  Also, the 50 day moving average is on the verge of crossing the 200 day.  So I bought it.  The earnings call on August 14th was fantastic with the stock shooting up in the after hours, only to be taken down hard the very next day.  I like JC Penny, however, the last time I went there, I noticed a pricing increase.  I feel as though their prices are on par with Macy’s now… and Macy’s is much better than JC Penny.  I think the stock will “levitate” over the next quarter until the next earnings call.  I’ll probably sell before then unless I see something. I much prefer Macy’s as the best of breed retailer in that space.  Macy’s reported a poor quarter, but I think they’ll take back market share over the 2nd half of the year.  I probably missed the buying opportunity with Macy’s, but I’m watching it.

My gold miners position (GDX) is interesting, it had the “golden cross” (50 day average crosses the 200 day average), but I don’t see a catalyst (i.e. bearish events) that will send that higher.  I’ll continue to hold it, but I’m watching that closely.

Also, as I’m writing this, Yahoo is up big (3%), higher than its been since May.  I’m not sure why. The Ali Baba IPO is set for September 18th. It received some good press today, making purchases into e-commerce.  I don’t think I’ll sell it quite yet because I think the rumor of the Ali Baba IPO is providing momentum to the stock.  For the longer term… I suppose the best case scenario is that Ali Baba buys Yahoo! Yahoo is not a core holding for me and I have quite a nice gain, so I have to feel this one out a bit more.  I’ll most likely sell one Sept. 5th call at 39 which is trading at 64 cents right now.

P.S. Intraday, I sold 100 YHOO for $37.45 and sold 1 Sept. 5 39 call lot for $60.  Bought 75 shares of Walgreens.  Walgreens unreasonably hit because they didn’t do a tax inversion.  That sector has been doing well.

Sold 50 XLE and purchased 75 EPD. I like the technical setup and lower end support is at 70 (or ~9% lower) for EPD.  EPD is a core position.