Trade Alerts: Core and YARP portfolios
Trade Alerts: Core and YARP portfolios
A "free look" into the Sungarden Institutional service
WHY ARE WE SENDING THIS TODAY?
We realize that as opposed to our sister publication, ETFYourself.com, which is pretty “wysiwyg” (what you see is what you get) and in many ways looks like traditional investment letters from the outside, the Sungarden Institutional service is a bit unique in the subscription publishing world. Why?
It is a total portfolio, at least to me, as it represents everything I do with my own money, except for short-term lifestyle funding assets (first money to be used to pay bills, etc.) and the more aggressive trading/experimenting I do (with a very small amount of capital). We put all of it out there so that our subscribers can learn from the ongoing process, and apply it as they see fit. That’s why you don’t hear much from us about “past performance” and “a great trade I made” because what I do with my money has nothing to do with what anyone else does with theirs. DO IT YOURSELF INVESTING means, well, you can finish that sentence! We’re just providing what we think is high-end research that includes the specific actions (buys/sells/position sizes) I am using, as a reference.
The strategies I run for myself, based on doing it for others for decades before retiring from investment advisory, are things we highly doubt investors will find elsewhere.
The Core portfolio is tactical, go-anywhere, long-short, uses a wide range of ETFs and will use options as a “tail risk hedge” to top things off. It is the opposite of the cookie-cutter ETF portfolios that flood the market these days. And I’m putting my 30 years of hands-on experience with ETFs to work for me…and for our subscribers to observe and learn from.
The YARP portfolio is unique as well. We know that because I invented Yield At a Reasonable Price (YARP) investing. In fact, we are in the process of trademarking it. Whereas most “dividend stock” portfolios just, well, buy dividend stocks, and hold them, YARP is a completely different take on modern income investing.
So, as we will do frequently, we will copy free subscribers to SungardenInvestment.com on the TRADE ALERT notices we send out to the paid subscribers of this service. The difference is that the trade alert is just that, an alert that I did something today. What is reserved for the paid subscribers are the specific trades, and short notes explaining them. That’s all contained in the shared research deck they get when they subscribe. It is the same deck as ETFYourself.com paid subscribers get, but with a tab added to show the Sungarden Institutional portfolio. There’s a sample of what that looks like on the site (www.SungardenInvestment.com).
So, here’s today’s Institutional service alert
TODAY’s PORTFOLIO CHANGES
CORE portfolio
As always, this is a defense-first portfolio, but with the stock market looking more like it has survived another scare (for now), and with plenty of “defense” in place in multiple forms, I added modestly to the “offense” side of things today. I bought 2 ETFs that I have used many times over the years. To make room for them, I sold all of a small position and a slice of a large position. Overall, CORE is still positioned defensively, and with that SPY put option as the “tail risk prevention” position, this allows me to get a touch more reward-seeking a lot easier than I would if I didn’t have that in place. To me, the best part of the current portfolio mix in CORE is this:
If the market falls apart quickly, the puts and other defensive positions will at a minimum guard against major loss, and if that decline is more like 2020/1987/2008 (i.e. swift like Taylor), I think there’s a fighting chance CORE keeps going up in value as it has been for a while. As noted here in the past, when the S&P 500 fell 33% in 5 weeks in 2020 when the pandemic hit, CORE was up 2.5%. Yes, performance data showing that, including the specific trades, is available on request.
If the market is on the verge of another “liftoff” through to new highs, there’s plenty of opportunity to keep adding offense and removing some defense, but those put options would still provide that “disaster protection” I have always coveted, and insist on having in this portfolio in some form.
YARP portfolio
This was THE day I have been looking for in YARP for a while, as I build this stock portfolio to 40 stocks, with portfolio weightings that fluctuate from 1% to 5%. This is not the only “day I’ve been looking for” however. Allow me to explain.
Most stock positions were 1-2% weightings. However, my goal is to own as close to 5% in each stock as its ex-dividend date approaches each quarter. That often is not possible, and I don’t get in the habit of chasing stocks. Instead, the ideal situation is this:
I own the stock at a low weighting (1% or 2%)
I have a modest gain since purchase
The stock is nearing its ex-dividend date and is not announcing earnings for a while, so potential “event risk” from the market’s reaction to the quarterly results is not present.
This was the case with 4 of the 24 stocks currently in the YARP portfolio (yes, that means I’m on the prowl for 16 more to get to the full 40).
What did I do, which highlights what I think is so special about YARP for dividend investors? I upped the positions in those 4 stocks, as follows:
One stock went from 1% of the portfolio to 5% (goes ex-dividend this week)
One stock went from 2% to 5% (also goes ex this week)
Two stocks went from 1% to 3% (they go ex next week, and I’ll either keep them at 3%, lift them to 4% or perhaps 5%)
Why bother? A 40 stock portfolio with each stock paying a quarterly dividend will produce 160 dividend “events” every 12 months. If I owned 2.5% in every stock, I’d get whatever the yield of those stocks was, say 3% or so, as my annual dividend portfolio yield. However, using my chart analysis, willingness to operate tactically by raising/lowering position sizes the way Wall Street analysts raise and lower stock ratings, and the YARP methodology itself, my potential dividend upside is far greater. When I ran this strategy as a mutual fund years ago, I recall that the yield on the portfolio was about 7-8%, even though the stocks I owned yielded about 3%. Depending on the investor, this could result in a higher average tax rate on the dividends earned. But I am not a tax advisor, nor is this advice of any kind. It is research, to be used as every subscriber chooses. For me, shooting for that higher yield is not only about earning more income from the same stocks. It is also about getting the best total return I can from those 40 stocks each year, but holding more or less of them at different parts of the year. Some years YARP needs to be more active than others.
The YARP portfolio continues to have a pair of options (call and put) which, as with the CORE ETF portfolio, add some tail risk protection (puts) and also some additional upside potential (calls). Since this is a dividend stock portfolio and I’ve seen for years how that market segment can significantly lag the broader stock market, that allows me to get some of what I’d otherwise miss. Again, something most high-dividend-yield portfolios don’t do.
Up next? Why, tomorrow of course! Another day of opportunity for tactical investors.
This note today was primarily to help paid subscribers understand the ongoing thought process behind what they pay for each month. I’ll continue to provide generic alerts from time to time, so that those who are curious about the Sungarden Institutional portfolio service can get a feel for what it is about, without us giving away information reserved for the paid subscribers.
As always, your questions, comments, and feedback are welcome!
Best regards,
Rob