This post is to have an overview of my latest actions year to date. Sometimes I am under the impression that I do little, which actually is a very nice feeling. I prefer inaction and to just do things after quite some thought and only being very sure.
Lets start with Dell. I have been adding it since May 2012. I had 60 shares that I had bought during the 2008/2009 market fall. I also had a strike 7.5 call that I had bought in 2011 for around 6.5. I exercised it in May and is roughly equivalent to having bought 100 shares at 14. That’s the highest price I have paid for Dell. This year I started adding slowly in the upper 12 price and as I kept studying it and feeling more comfortable with the lower prices I kept on adding more up until the low 9s in October. I manged to build a decent position of 900 shares at an average price of 10.86. During the same time I sold a strike 10 put and I added several calls. I started by buying Jan 2014 strike 10 calls and as the stock moved lower in October I added more and more Jan 2014 strike 8 and even an interesting Jan 2015 strike 7 call. When the stock reached 8 I was just buying calls. The position got big and I did not feel comfortable with the initial strike 10 calls I bought therefore I sold them today along with half of the strike 8 calls. Goldman Sachs helped, I must thank them for their latest coverage on Dell which pushed up the stock and allowed me to exit fast my riskiest positions. My assessment of Dell has not changed. I just fine tuned the position. That allowed me to lower my average price and exit the riskiest positions with a slight gain. I have quite some money invested also in Cisco. It is one of my main positions and it has the potential to overlap with Dell on servers so I needed to be careful not to be overexposed. Now I have a position that I feel very comfortable with. I could exit the riskiest strike 10 calls and I have more cash to keep adding if it goes back down again. All the calls I now have are quite positive and the stock is just a bit over my average buying price. Finally I ended up with 900 stocks, 4 calls and 1 shorted put. Dell is now my 4th biggest position. It comes after Tesco.
Tesco is the only non technological stock I have initiated this year. The other one is Banco Santander (SAN, ADR), where I increased positions. In the case of Banco Santander I had 889 stocks at the beginning of this year. I bought and sold 5 calls for a decent profit and exercised one which allowed me to buy 100 stocks for the nice price of 5.15. Including all the stocks received instead of cash dividends I have now 1088 stocks. I am still quite sure that Santander will end up doing very well and that it is quite undervalued.
In the case of Tesco I initiated its position starting in the beginning of 2012 and now have 630 adrs (TSCDY) and 950 ordinary shares in London. Tesco still seems to be quite undervalued and the dividend is tax free. Plus I like the fact that it allows me to get diversified away from the Dollar and the Euro. It has a huge margin of safety with it’s real state.
Applied Materials (AMAT) is the other technological position initiated this year along with Dell. I bought it in May, June and July. I now have 675 stocks, 3 strike 10 Jan 2014 calls and one Jan 2014 strike 10 put short. It is my 7th biggest position just after Cisco. It’s business is extremely volatile. Sometimes its customers pass several quarters without buying their machines. Fine with me. Thar keeps away a lot of investors (my competition). What I care about is the end result no matter how volatile the path may be. Actually the more bumpy the better. From my calculations demand for their machines will inevitably come back along with the share price, which as of now seems quite attractive. The nice thing about Amat is that no matter who wins the technological race their machines will be sold to foundries. They will be used to build iPads, PC’s, Smartphones or whatever is in fashion.
Cisco and Intel are two companies I like quite a lot, specially at current levels and which a added into this year. I had the equivalent of 480 Cisco shares at the beginning of the year. They were originated by shares and options I had bough last year at the equivalent price of 15. This year I just added 100 shares more in July when it touched 15 again. So now I have 580 shares and it represents my 6th portfolio position.
I substantially increased Intel (INTC) this year. I had 100 Intel shares at the beginning of the year. 15 were bought in 2006 at 17, 45 in 2008 at around 14 and 50 in 2011 at around 19.3. Intel is a company I have always admired but that I never felt it was cheap enough to get in big. This year I finally felt it was at a good price. Therefore I added. So in October and November I added 135 shares and bought the interesting Jan 2015 strike 18 call for 3.21. Basically my position went from 100 to the equivalent of 335 shares.
Finally the last Technological stock I increased substantially is Western Digital (WDC). WDC is a stock I have made quite a lot of money with. Already 2 times in the past I have made several thousands. The details are written in past posts. The reason is that it is an extremely volatile and misunderstood stock. Fortunately it has been very inefficiently valued and seems to still be. I had 100 stocks at the beginning of the year and I have added and keep adding now. I now have 255 stocks. WDC is probably the only stock I will keep on adding for sure if it does not go up soon. It’s now my 9th position and could increase. It has been already twice in the last 5 years my number one position.
Besides the buying activity detailed above I sold out this year American Express, USG (bonds, options and stocks), Jefferies (Bonds) and AV Homes. The reasons I sold were posted and the realized profits were quite nice.
Note that in practical terms I have been shorting the dollar. Most of the stocks I bought were financed by US dollar debt which I get at 1.5% interest rate with Interactive Brokers. That debt is fully collateralized by Euros which are giving me more than 2% interest. In other words I am carry trading and I am short around 40 thousand dollars. I prefer to do it like that because I do not want to buy dollars to finance my US purchases. I do not trust the currency.
As you can see even though it seems like I have not done much I actually have done a lot. I bought Tesco, Banco Santander, Amat, Intel, Cisco, Western Digital and Dell. Tesco and Banco Santander represent almost 19.5% of my portfolio. The 5 technology companies I just mentioned represent 19.7% of the portfolio and most of them were added during 2012. It has been a year rather concentrated on Technology. Nothing was planned, I just grabbed the opportunity to buy what I knew were cheap and good companies.
That’s all for now, this post was basically done in order to have a summary of my recent activities.
Cheers and best wishes !
PD: I just received a small book called Benjamin Graham, The father of Financial Analysis, written by Irving Kahn and Robert D. Milne. Thanks to the person that sent it to me ! Here is nice a sentence from Graham that I just read in it:
“True investors can exploit the recurrent excessive optimism and excessive apprehension of the speculative public”