Update: January 25, 2016

| January 25, 2016

January 25, 2016

 

Portfolio Update

Well, it hasn’t exactly been a promising start to the year for bullish stock investors.  On the other hand, at least things have stabilized somewhat after a period of fairly extreme volatility.  Investors have settled down to some extent, although there’s still a fair amount of risk on the table.

In terms of performance, the numbers are still pretty scary.  The S&P 500 is down 7% year-to-date, the Dow Industrial Average is down 8%, the Nasdaq 100 is down nearly 8%, the Russell 2000 is down over 11%, and crude oil is down almost 20% for the year.  Besides bonds, one of the only assets up on the year is gold, which has climbed about 4% so far.

At first, it seemed like the downward pressure on US markets was coming from the selloff in Chinese stocks.  Now, investors seem to be paying more attention to the price of oil.  Both West Texas and Brent Crude are getting hammered this year due to oversupply and lower demand.  The main concern here is the plummeting price of oil could be a sign of a global economic slowdown.

I don’t personally believe we’re anywhere close to another recession in the US, or even Europe.  The overall economic picture is still plenty reasonable for the US.  Europe is also slowly showing signs of life.  If the Fed refrains from raising rates any higher (which would be absurd at this point), I believe the markets will stabilize and volatility will settle in.

Let’s take a look at some portfolio highlights…

 

Portfolio Highlights

Just a quick note:  We won’t update every open position every update.  I try to focus on the positions that have some significant news or price movement.

  • Gilead Sciences (GILD) March 100 Calls – Our position in GILD has survived the brief downturn last week and is now spiking higher. While we haven’t yet hit a profit-taking point, our peak gain in the calls so far is 81%.  Not a bad way to start off the trade!

 

  • Cisco Systems (CSCO) March 27 Calls – CSCO hasn’t rebounded like I hoped, and continued to sell off with the overall market last week. While the stock has come back a little, last week’s plunge dropped below both of our risk-control points.  Sometimes the issue with heavily indexed stocks like CSCO is when the market falls sharply, index components get hit more heavily than they would otherwise.

 

  • PG&E (PCG) March 50 Puts – PCG is basically our only position which really hasn’t done a whole lot this month, despite the high volatility in stocks. The utility stock just seems to bounce in a $1 or $2 range.  That’s okay for now, as the position will still give us decent protection in the event of a major market selloff.  We have lots of time left on these puts as well.

 

Category: AOA Updates

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