TRADE ALERT: YARP ups weightings in 5 stocks
TRADE ALERT: YARP ups weightings in 5 stocks
Ex-dividend season in full bloom, so I'm grabbing more dividend income
As I noted last week, 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.
This continues into the new week, and I see a lot going on beneath the headlines that remind me why I built YARP, the CORE ETF portfolio and the 2-ETF ROAR portfolio (the 3 components of the Sungarden Institutional service) in the first place. Because the S&P 500 doesn’t always tell the market’s “story.” And that story is what I use my 44 years of charting and investing experience to decipher, searching for the best reward/risk tradeoffs I can find.
And as the market starts to broaden out a bit beyond the “Magnificent 7” stocks, it appears it is playing right into the hands of YARP-style tactical dividend investing. So yeah, I like what I see. And remember as I always say, I’m a tough grader!
Trades I made today
Paid subscribers can view today’s changes in the shared research deck
Raised position weights in 5 of the 34 stocks currently owned. These each go ex-dividend in the near future, have decent to excellent chart patterns, and are fundamentally sound businesses (or else they would not have made the cut). The adjustments took positions which were 2-3% of the portfolio, and raised them to 4% or 5% weightings. This is either temporary (thereby capturing more dividend yield when they go “ex” soon) or not, if the price trends continue higher, which some look poised to do.
I also sold off 1 stock, which was at the minimum 1% position. There are better ideas out there, and so that one, a “dip of the toe into the water” has now convinced me the water is too darn cold to stay in. That’s one of the many aspects of YARP that I built in that fits my investment approach: better to try a 1% position and quickly decide “no thanks” than feel like I have to commit “long-term” to every idea. I’m not infallible, and I willingly admit when I misjudged something. The key is that a 1% weighting in the portfolio costs very little in the bigger picture.
I sold the rest of the T-bill ETF position to have the cash for the position increases above.
Current portfolio positioning
YARP
Cash is quite low now, those 34 stocks are now 85% of the YARP portfolio, plus a pair of income-oriented ETFs at 5% each. That’s getting close to “fully invested.”
HOWEVER, recall that I own a market put option position which, if we had a sudden big drop in the broad market, would spring to life and act to offset a significant amount of the stock exposure. That’s how YARP plays “offense and defense at the same time” as I like to say.
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.
CORE ETF portfolio
Currently holds 8 ETFs, a mix of cash equivalents, equities, an inverse ETF and a put option on SPY.
My CORE account hit an all-time high value today, is up 3% so far this year, and up 11% the past 12 months. That may not sound like much, but recall that this aims for low volatility total returns, without relying mostly or fully on bonds. A conservative allocation portfolio is up 4% the past 12 months and the AGG bond ETF including dividends is about flat.
2-ETF portfolio
Continues to reflect the latest ROAR (Reward Opportunity And Risk) Score allocation, as is its mandate.
YARP goals (a reminder)
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.
Best regards,
Rob