Portfolio Performance +6.8% Through April 2009

Click here to view the spreadsheet containing all disclosures for my complete equity portfolio, including initial entry points, YTD returns, total returns, etc.

THE ENLIGHTENED-AMERICAN PORTFOLIO SPREADSHEET

  • Enlightened-American Portfolio: +6.8% YTD (including dividends)
  • DJIA: -6.9%
  • Nasdaq: +8.9%
  • S&P 500: -3.4%
  • DJ WIlshire 5000: -1.4%
  • Russell 2000 (smallcap): -2.4%

I have been lax as of late in more ways than one, which I will detail further in a minute, but these returns are as of last Thursday. With today’s strong rally, it is possible that all of the indices listed are now positive for 2009. My portfolio, while still positive and ahead of most indices, has lagged during the recent spring rally. I am now trailing the NASDAQ for the year with the other indices fast gaining ground, but the nature of these gains is puzzling.

I read an article over the weekend stating that over half of the NASDAQ rally is driven by three out-sized stocks (AAPL, RIMM, I don’t recall the third one but probably GOOG — I can not source this article so verify for yourself if you feel the need). Furthermore, as some pundits have pointed out, the broader market rally is being led by lower quality, single-digit names in sectors like financials and homebuilders.

Yes, the gains are tantalizing but it seems foolish to pine away over folding a 2-7 offsuit hand that happened to flop a full house. A bad analogy, perhaps, but I remain focused on better quality names with good cash flows, balance sheets and/or assets and leave it to those better-suited to play the others.

Portfolio Moves Last Month:

  • Rolled Yamana Gold (AUY) Apr 09 $9 calls into July 09 $9 calls for 3.4% gain relative to strike price. The new calls yield 11% to the strike price if assigned and frankly, I’d love to do this all year if gold meanders in the $800 – $900 range.
  • Rolled Intel (INTC) Apr 09 $15 calls into July 09 $16 calls at a slight loss . The previous premium was 3.6% yield to strike price. The current call yields 7.3% to a higher strike and I collect another dividend to boot. Lots of optimism in the tech space but overwriting calls should help cushion a price drop in case optimism is unwarranted. Analysts expressed concern over netbooks and gross margin during recent earnings but Intel still seems a lock to be the dominant player in its space.
  • Opened Breitburn Energy Partners LP (BBEP) Sep 09 $5 puts at 20% premium to strike price. If assigned, the effective price of the position will be $3.95 per share. The shares have recovered to over $7 since I blogged about their distribution suspension so I left some money on the table but naked puts struck me as the most attractive option to make a decent gain while avoiding the thorny tax carry¬† issue.
  • Closed out a previously undisclosed Microsoft (MSFT) Oct 09 $13 naked put position for 8.3% gain relative to the strike price. With the sharp recovery in MSFT since the March lows, an equity position would have made more money but again, I feel comfortable leaving a little money on the table in exchange for more breathing room. With the option priced at $0.27, the risk-reward profile dictated removing my exposure to a falling MSFT share price.

As I stated at the top, I have been lax in my portfolio management, with no new longs opened despite the March lows. Frankly, my attention has been diverted elsewhere as my wife and I are closing on our first home. As I live one of the hardest-hit real estate markets in the country, it may seem as if I’m calling a bottom in the housing market. I am not.

Some pundits refer to major stock market bottoms as a process, not an event, but this phrase definitely applies to the housing market. We are comfortable buying this home despite the distinct probability of losing some equity in the first year or two, maybe even the full value of our downpayment (a “paper loss”, of course). Nevertheless, if stocks have taught me anything, it is that I am a bad market timer. There is value in parts of the housing market even if we are not at the bottom. For reference, a similar house two blocks down just rented for 19% more than our PITI and from a personal standpoint, all of the stars were aligned for us to make this investment.

For reasons unrelated to my house, this will be the last portfolio update for my blog. For the vast majority of these past three years, I’ve posted good results so hopefully, I’m not jinxing future performance! I will make an official announcement soon (I know I’ve been promising this for some time now) but there are some exciting changes underway. Stay tuned and thanks for reading.

3 Responses to “Portfolio Performance +6.8% Through April 2009”

  1. PlanMaestro Says:

    Good luck Enlightened, and hope to know what are you up to soon

  2. North Fork Investors Says:

    Breitburn is an interesting “special situation” right now having suspended their dividend to pay down debt, and if one reads between the lines, to choke Quicksilver. It’d be interesting to hear your perspective on this company and the current litigation. We own LINE as a more conservative but similar play.

  3. Davy Bui Says:

    I posted something about BBEP when they suspended their distribution:

    http://enlightened-american.com/2009/04/20/klarmans-energy-pick-runs-into-credit-crisis-buzzsaw/

    I’m cautious on holding the stock while they’re not paying a distribution. They should still generate taxable income this year so it’s possible unitholders may have to pay taxes on earnings but with no offsetting payouts from the company. Interesting to see that Baupost switched from passive to active on this one.

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