PhilStockWorld April Portfolio Review

$3,008,907!  

That is up $194,874 since our last review and it’s the first time we’ve ever gotten our Paired Portfolios (LTP and STP) over the $3M mark – we usually cash out when they get to $2M from our usual $600,000 combined starts.  Of course, this was the point of running them longer this time – we wanted to demonstrate the compounding effect of putting those profits back in play over time.  So far, so good!  

The S&P was at 4,372 on March 18th and now it’s  back at 4,440 so not a lot of movement but we made a lot of bullish adjustments last month and caught a 2.5% rally, which just caused us to bump our hedges in the Short-Term Portfolio (STP) up to $1.7M and we hit the turn on the nose.  In fact, the STP made more money than the LTP this month!   That should be plenty of protection but we don’t want to be foolish as that $200,000 can go as quickly as it came in our Long-Term Portfolio (LTP).  

You know you are in good shape when your protection has locked in a 200% gain and that’s where we’d be if the LTP were wiped out and the STP paid us our $1.7M ($1.8M would be 3x our $500K/$100K initial outlay).  But we don’t have $1.7M, we have $3M and the idea is to protect it – but still take PRUDENT risks to at least keep up with inflation.

The best thing about the LTP is we have $1.7M in CASH!!! on the sidelines and, as I’ve been emphaisizing lately, our biggest risk factor is in our Short Puts – so let’s make sure we do REALLY want to be in the stocks we sold those puts against – especially in a rising rate environment.  

As we discussed in last week’s Live Trading Webinar, the conservative rule of thumb is to assume that 2% of the company’s debt will be subtracted from Net Income as rates rise.  This is conservative for several reasons – most notably that rates rise over time and won’t immediately impact earnings in full and also the interest is tax-deductible, so about 1/3 of the damage will be mitigated by lower taxes – maybe…

Provided courtesy of Phil’s Stock World.