January 2019 is making the -8.8% in 2018 feel like a distant memory.
Since my last post, I’ve received some queries asking about my specific positions. With the CNY break around the corner, I’ve some time to put all this up. Some have asked me why I’m no longer putting up my extensive writeups on stuff that I’ve done DD on. Well, that’s cos I’m mostly working on global equities, particularly US ones, and I don’t think there’s much appetite for that here.
And anyway, I did put up in fact:
OK, I can’t find the one on DIS right now, but I’m sure it’s somewhere around.
This post is specifically on the US portion of my portfolio, excluding the SG and the bond portions.
Since my last post (1st Post Of 2019.), things have gotten… even better. MUCH better.
I’d have taken a 22.11% return and ended 2019 right there and then. Yet, TTI’s US portfolio continued outperforming S&P and other index benchmarks massively.
As of end Jan 2019, the ROI shot up to 28.36%.
NAV rose from USD 441,055.43 to USD 550,988.57, and that’s after a withdrawal of USD 14,716.20 made.
Net quantum gain in Jan 2019 alone was thus USD 124,649.34.
The best 1 day return was on the 04th Jan 2019, when the portfolio gained 7.32% in a single day, while the worst was on the 03rd Jan 2019, when the portfolio fell 4.45% in a single day.
I’d just cut and paste parts of the report that IB churns out for me…
As one can see in the pie chart, my long positions are mostly in the form of equities, and short positions are in the form of options.
There is a huge short position in the form of cash (I utilized USD cash leverage), as I expected the USD – SGD to weaken when there’s a recovery following Dec 2018’s carnage.
And weaken it did in 2019 thus far, giving rise to a tailwind that amplified my returns.
I don’t usually consider forex too much in my considerations, but this 1 instance is… hmmmm…. kinda like a sun eclipse.
Everything’s aligned perfectly.
Well, I’m hoping it lasts a bit longer than an eclipse.
Here’s what fueled the outperformance:
FB, BHC, CTL, CHK and V were the 5 largest positions, of which, only CTL is currently in the red YTD. All other positions are up, with the others being up double digit percentages.
Although I didn’t do an extensive write up on these positions, I did put in estimates on IN with a quick explanation:
Even nestled within the “OTHERS” part of the portfolio, are smaller positions, but they too have contributed greatly to the outperformance with double digit returns in Jan alone. Like my perennial favorite AVGO and MU, as well as a new small position in SWK:
The 1 position that has not come through for me thus far is CenturyLink, yet I remain confident in my DD. At an average entry price of around USD 18+, the yield is almost 12%! (lower after the 30% witholding tax)
Obviously, markets are anticipating a dividend cut… as they have been since the past 6 quarters. For the record, management has reaffirmed that the div will be protected, and thus far, their FCF is able to support the div and debt payments until 2021.
Despite growth in FCF, the markets attributed a lower share price to CTL since Q3’s ER, mainly due to concerns over the topline.
Management has explained the reason for the revenue weakness. As part of their ongoing review of contracts, management has eliminated contracts or allowed the lapsing of contracts that are not FCF generative.
The question I guess, in everybody’s mind, is… how much lower will the revenue drop when this exercise is concluded. We’d find out more in the next ER due on 13th Feb 2019, so that’s something really exciting for me to look forward to. In the meantime, my options strategy provide a constant tailwind. I just… need a tiny boost from CTL’s results k.
Back to the reporting:
This bar chart looks simple, but packs quite a bit of info.
Firstly, obviously, most of my long positions are in the form of the traditional long equities. Options account for a tiny part, but really provide a massive boost (if I get it right) from the inbuilt leverage.
Also, we can see the blue bars getting shorter, as I’ve been liquidating some positions and locking in the profits.
The green bars also indicate my short USD positions since the start of the month, and since the USD has weakened considerably, I’ve started covering the USD shorts, hence the shortening of the green bars.
Man. What’d you know…
IT idiot TTI is actually pretty heavily vested in… gasp. Technology?!
LOL. Basically from my outsized positions in FB, which has gone ballistic.
This is the most important to me, the relative performance against benchmarks:
(Blue line = TTI)
Well, like what Alex Ferguson used to say:
“The table doesn’t lie”
Breaking it down, that’s when it gets interesting.
Basically, I can best summarize it as: “when it gets good, it gets great, when it gets bad, it gets terrible”
When markets are red, TTI drops much more than the benchmarks, but when it’s green, well, I’m unbeatable.
OK, I won’t try to be an expert here. I have no idea what VAMI is.
But obviously, TTI’s volatility is much much greater than all 3 benchmarks.
Max drawdown is the highest
Sharpe ratio is the highest too
Interestingly, the number of positive periods is the least amongst the 4, while the number of negative periods is the greatest!
Hmmm, so massive outperformance, but I’ve more days of red and less days of green than the benchmark.
This can only mean that when it’s green… I made it really count.
Which brings to mind the famous quote by Stanley Druckenmiller:
“It’s not how often you are right or wrong that matters, but how much you make when you are right and how much you lose when you are wrong that matters”
OK, I’d include this link right here, from an interview with Druckenmiller:
So what’s next?
I don’t proclaim to be a macro guy.
I don’t… really know.
But I know a 28.36% return in a mth is not normal, so I’m locking in profits. In my previous post, I painted a pessimistic picture.
28.36% makes me a bit happier, but otherwise doesn’t change anything fundamentally. The world doesn’t care about what TTI feels.
My own sense is that with the generally positive earnings season underway, we’d see a period of green for a while longer, perhaps another month or 2 till March, before things get dicey again.
Having shorted VXX (which has since been redeemed and no longer exists), I’m still currently short it’s reincarnation VXXB.
VIX is back into contango, and I think it’d go back firmly into contango a bit longer as the markets calm down, but it’d be a mistake to think this will last. I plan to start rebuilding a position in VXXB again.
In the meantime, here’s wishing all readers a big fat prosperous CNY ahead!