Consolidating Monday.
"You never bet on the end of the world, 'cause that only happens once, and something that happens once in infinity is a long shot." — Art Cashin
The Portfolio Performance
The portfolio is UP +21.26% YTD
The S&P 500 is UP +26.86% YTD
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On Monday, December 16th, I will remove several positions from the portfolio. I'm marking these positions on the website portfolio with a SELL marker. I'm providing some insight below so that you know my thinking. I want to stress that you should not blindly accept my decisions for your portfolio. Please do your homework and consider my choices as one more piece of information.
Time to Quit?
In my last blog post, I mentioned that I’m considering ending this blog at the end of this year. So far, there are only three comments, which is insufficient data for me to decide. Hopefully, by the end of the year, I'll have more clarity on what I want to do.
The Cuts
RYLD & JEPQ
These two funds are not tax-advantaged. Both of these positions are "Covered Call Options ETFs." The RYLD tracks the Russell 2000 small-cap stocks, and the JEPQ tracks the NASDAQ 100, mostly technology stocks. The fund manager sells an at-the-money covered call option on the stocks in the fund. That sale generates a premium payment from the buyer of the Call Option. Most of the option premium is used to pay the high dividends that owners of the ETF receive each month. This sounds like magic if you want income, but there's a hitch. The IRS taxes option income at earned income rates. Earned income is the same as your wages from your job, which is a higher rate, depending on your tax bracket, than the capital gains tax rate. Even if you hold the RYLD and JEPQ in a ROTH IRA, the IRS will tax those dividend payments just as they would any new contribution to your ROTH. Plus, every new contribution to your ROTH comes with a new 5-year clock that locks up your money. I would rather see growth in liquid assets taxed at lower rates.
TBT, UBT, PSQ, SH
These four positions are all protective. We made some money on these positions, but it is time to put cash to work. The TBT shorted the US 20+ year treasuries. The UBT does the opposite of the TBT. The PSQ shorts the NASDAQ 100 by shorting the QQQ ETF. The SH shorts the S&P 500. I'm not interested in shorting anything in this market for the next six months. By mid-year, I might have a different view; we'll see.
CNRG
I'm very disappointed in this position. Many of the holdings in this ETF have performed well over the past year, but the fund has underperformed. Year-to-date, Utilities have been the second-best-performing sector, and many of the positions in the fund are utilities. The third largest holding is Tesla, yet the fund is down -12.23% year-to-date. Something is wrong with this fund. My guess is that the problem is in the Kensho algorithm that is supposed to be directing the fund, or the fund managers are not sticking to the Kensho algo. Regardless of their problem, I can't let it be a problem for this portfolio anymore.
NOVA
Sunnova is a residential solar energy company. Their business model focuses on lending and leasing, with installation handled by partnerships. Their business model requires a large amount of capital to fund loans that can extend 20 years or more. Current debt is $8.25B, while quarterly revenue growth is a meager 18.60%, and there is no growth in earnings. Residential solar is at the wrong end of the solar business in the current market as California, the largest market, has been fumbling the ball on new solar regulations and incentives.
ARLP
Alliance Resource Partners is a diversified natural resource company that produces and markets coal primarily to utilities and industrial users in the United States. We have a profit of nearly 36% with little upside potential in a declining industry. Let's take the win and ring the register.
OXY
Occidental Petroleum is a Warren Buffet favorite, but we couldn't buy OXY at the prices Warren did. OXY stock peaked in November of 2022 and has been on a rough slide ever since. If the new administration does anything to increase oil supply or reduce the price of gasoline, oil stocks will take a direct hit. When it comes to fossil fuels, I prefer the natural gas market. Natural gas is an increasingly important fuel source for utilities and data centers that use massive amounts of power. We'll take a hit on this position, but there's no point waiting for a recovery above $60/share.
CHTR
Charter Communications, Inc. operates as a broadband connectivity and cable operator company serving residential and commercial customers in the United States. I bought this stock when my concerns about a recession were high. I should have sold it a long time ago. We've made about 1.3% of the investment, and in my view, that's dead money. I think it's time to cut this position and put the money to work.
GNRC
I've liked Generac for a long time. Generac makes good products and is critical in the data center, telecommunications, and healthcare industries for their industrial standby power systems. The reason I bought the company for this portfolio and my portfolio was that Generac was purchasing and developing software and hardware to manage community power systems, essentially turning a group of Generac generators, solar panels, and battery storage into micro utilities that can sell their excess power back to the utilities. Small mobile reactors, utility-scale solar, and new battery technologies are eroding that opportunity and their data center business. Generac lost their lead. Add to that a supply chain and inventory debacle and poor residential service. Generac may recover. The stock is up nearly 37% over the last 12 months. However, our position is down almost 24%, and the upside over the next 12 months is only about 7%.
FREY
Freyr is a battery maker and battery manufacturing facility maker. I bought this as a speculation. Our position is down about 82%, but the initial cost was only $2,258.52. Freyr recently announced a strategic pivot from producing battery cells to producing solar modules, aiming to become a vertically integrated company that also produces solar cells in the U.S. It will achieve this by acquiring the U.S. assets of Chinese solar panel manufacturer Trina. It will dispose of its European battery cell manufacturing assets and plans. This feels like a hail mary that throws the company into an even more competitive market with headwinds from the new administration. We don't need to be heroes, I'm out.
AMRN, BTAI, VEEV
These three companies make up our biotech sector. We have a nearly 42% gain on Veeva Systems, but Amarin and BioXcel got knocked down hard by rising interest rates. In the case of Amarin, the company had received patents on their drug and approval from the FDA. Still, a series of court cases caused the company to lose patent protection in the United States, which allowed generics to take over market share at much lower prices. BioXcel has too many uncertainties for me to be comfortable holding it any longer.
BAC
We hold Bank of America with a nearly 34% gain in our financial sector. The stock is up 36.78% year-to-date, and a big chunk of those gains have been made since the election. Financial stocks will do well in 2025, but I'd like to be in other financials as we advance.
"Markets don't go to zero; portfolios do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
Stay Invested,
Clay Baker
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Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't; Stay Invested
Rule #4: When good stocks you own drop 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your homework.
RULE #10: Don't expect a company's stock to perform according to your timeline; be patient.
Rule #11: Investing is easy. Waiting is hard; waiting is the hardest part.
Rule #12: It's hard to be incredibly intelligent. Not being stupid is pretty easy.
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
None mentioned
I am invested short in these securities mentioned in this post:
None mentioned
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or be interpreted as providing a personal recommendation. This and all articles on this website are provided for entertainment purposes only. Investing involves risk and risk of loss of part or all of your capital. Invest wisely, make your own decisions, seek advice from multiple sources.
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