TRADE ALERT: YARP adds 11 stocks
TRADE ALERT: YARP adds 11 stocks
Portfolio nearly full, with 35 of 40 slots filled, hedges in place
Highlighted in blue on portfolio sheet in the research deck for SungardenInvestment.com subscribers, today I added 11 stocks the the 24 I already had. The target is 40 names, and from there the goal of YARP stock investing is to keep that 40-stock list intact, making a small number of changes to the component stocks each year.
That’s because YARP dividend investing is about taking a basket of stocks and applying to it my soon-to-be trademarked, quantitative and technical methodology (YARP=Yield At a Reasonable Price).
The goals:
Produce more yield from those stocks than a “buy and hold” approach, via tactical adjustments to the position sizes
Increase position sizes in certain stocks (up to at most 5% at cost) to capture more dividend yield and capital gains when conditions are most favorable
Reduce position sizes of certain stocks (down to as low as 1% of the portfolio) in order to avoid major drawdowns in those stocks
This is a strategy I ran during part of my advisory career, and it was the focus of a hedged dividend mutual fund I managed for a few years. Now, it is simply my portfolio, for me, but available to SungardenInvestment.com subscribers, with each move communicated on the day it occurs.
The 11 stocks purchased today were from a range of industries, but there is, not surprisingly, a strong tilt toward sectors and stocks that have higher yields, though all 11 S&P 500 sectors are well-represented. Most of today’s additions were 1% positions, signifying that I want to own them, but that I don’t see them as being in as strong a reward/risk tradeoff situation as some of the others. There were some stocks added at 2% and 3% positions, including some with ex-dividend dates occurring later this month.
The total portfolio is just about built out:
35 stocks totally 75% of the portfolio
But I’ll quickly remind subscribers that there is a put option position in the portfolio which provides what I think is strong “tail risk protection,” as well as a call option position that aims to provide some additional upside if the market continues to run higher.
Cash and equivalents were reduced to make room for the new stock positions, and I own a pair of yield-oriented ETFs that I think can boost the dividend yield and total return. As a reminder, these are tactical positions, and I have a watchlist of dozens that can be used in those ETF “slots” in the portfolio as I see fit.
Perhaps most significantly, and as subscribers to SungardenInvestment.com and ETFYourself.com likely realize, the stock market is starting to tilt toward favoring “YARP-type” stocks. So it would be a fair statement to say I’m trying hard to contain my enthusiasm.
I’ve been doing this long enough to believe in these 2 things:
The markets don’t do what we tell them to do
Playing offense and defense at the same time is the only way I want to invest
That’s the other reason for the tail risk put position. I never assume I’m going to be “right.” I just want to pile up the dividend income, and have steps in place to guard against major drops in value. “Avoid Big Loss (ABL) is still rule numero uno to me.
Best regards,
Rob