Signals for CINF, BEN, CARR, VGT

Today our systems created four signals: three sell signals and one buy signals.

Reduce: Cincinatti Financial Corporation

Based on the sell signal for Cincinatti Financal Corporation (CINF) we reduced our position at an average price per share of USD 71.12. With average unit costs of USD 55.70 this represents a gain of 27.68%, a very good result.

The previous sell signal was on Thursday, 04 June 2020, at a price of USD 64.3017 (see blog post).

We started this position in 2016 and increase and reduced our holding several times since then to make use of good buying and selling opportunities.

Reduce: Franklin Resources

And another sell signal for Franklin Resources (BEN). We already reduced this position somewhat on Friday, 05 June 2020 (see our post), at a price of USD 22.68.

Today we reduced it further at an average price per share of USD 24.2850. With unit costs of about USD 16.46, this means a gain of 47.54%. This is quite satisfactory.

This position was started in 2016. We added and reduced this position several times to seize good opportunities.

Reduce: Carrier Global Corporation

Carrier Global Corporation (CARR) has seen several sell signals recently (see our blog posts here, here and here). We started this position in April 2020 and increased several times in that month. In May our systems started to created sell signals, so we reduce our position several times.

Today we sold at an average price per share of USD 24.2850. With unit costs of USD 13.32 we realized a gain of 82.32%, which is a very satisfactory result.

Add: Vanguard Information Tech ETF

To increase our exposure to the technology sector we started the position in Vanguard Information Tech EFT (VGT) earlier this month. Today we added at an average price of USD 271.96.

Like all other holdings mentioned in this post, we see VGT as a long-term investment, although we may choose to follow our system's signals to increase or decrease respectively.

Disclaimer

Past results have no bearing for future results. Keep in mind that we do not accept any responsibility for your investment decisions. Do your own research and due diligence and consult with your financial advisor before making decisions. Any investment vehicle mentioned on this site is used for illustration purposes only and does not constitute investment advice.

A Busy Day: EMR, XOM, OTIS, LEG, AMCR, VGT, AOS, BEN

Triggered by the positive numbers from the US job market, the US stock markets are up today. The S&P 500 gained 2.62%. The US job market reported 2.5 million new jobs in May, the most jobs added in a single month since 1948. The unemployment rate dropped from 14.7% in April to 13.3% in May. Analysts expected an unemployment rate of up to 18%.

Our systems tend to create more signals when there are larger market moves (up or down) compared to when things remain mostly unchanged. Today was no difference with 8 signals, one buy and 7 sell signals.

Here is the rundown.

Reduce: Emerson Electric

We started our position of Emerson Electric (EMR) in 2016. Since March we reduced our holding slightly at various price point.

Today we sold at an average price of USD 67.17 per share. With unit costs at USD 57.08 this reprsents a gain of 17.68%. Not earth shattering but still a good result.

Reduce: Exxon Mobil

Oil companies have been unders pressure for along time. Exxon Mobil (XOM) is no different. We've held this position since 2018. We increased our position in 2019. Just a few days after the lowpoint at end of March we added even more shares at an average price of USD 37.05.

While the overall position still carries an unrealized loss, our systems have created a couple sell signals in April at USD 39.97 and USD 43.47. Today's sell was at an average price of USD 52.72. Compared to the low point in March this is a gain of 42.29%.

Basically with this holding the play was buying when nobody liked the stock, then slowly sell the shares acquired at the low point as the stock price increases again. Without closing this position our systems help realizing a gain by seizing the opportunity to get additional shares at a steep discount.

XOM is not out the woods yet. The company has postponed the increase of their quarterly dividend, which should have happend in the current quarter. To keep their status as dividend aristocrat they will have to increase their dividend that is payable in the fourth calendar quarter of 2020, and if that increase is just a fraction of a cent.

There are indications that business for oil companies will improve again over the next few months. As the economies around the world start to come out of the coronavirus hibernation, demand for oil is likely to increase again. The oil price has recovered from its ridiculous low of minus USD 40 (!). Output of existing wells is being reduced, e.g. the number of oil rigs in the US is dropping.

As business improves again, the stock prices of oil companies should continue to increase as well. Today XOM advanced by 8.11% and Chevron (CVX) was up by 4.71%. Obviously this is just a single day, so is not indicative by any stretch of imagination. On the other hand, XOM is up by over 40% since its low point in March 2020.

Reduce: Otis Worldwide Corporation

Our position started when Otis Worldwide Corporation (OTIS) was spun off from what is now called Raytheon Technologies (RTX), formerly United Technologies (UTX). We increased our position since then several times. Today was the first time our systems produced a sell signal.

We reduced our position at an average price of USD 58.14. With average unit costs of USD 46.0305 this represents a gain of 26.31%. This is a very good results for two months.

Reduce: Leggett & Platt Inc

And yet another sell signal for Leggett & Platt (LEG). Just a day ago there was a sell signal at USD 35.57 (see our post).

This time the sell signal for LEG was at USD 37.04. With average unit costs of USD 28.52 this represents a gain of 29.87%. This is a very good result.

Reduce: Amcor Plc

Amcor Plc (AMCR) increased in price further, so our systems determined that it is time to reduce again. The previous sell signal was generated only two days ago (see our post).

This time we reduced our position at an average price of USD 10.87. With unit costs of USD 7.40 this is a gain of 46.89%. A very good result, given we started this position in March 2020 only.

Add: Vanguard Information Tech ETF

Another buy signal for Vanguard Information Tech ETF (VGT). We've previously provided more details about the rationale for having this position in our US portfolio (see out post).

Today we increased our position with at an average price of USD 269.65.

Reduce: A.O. Smith Corp

For A.O. Smith Corp (AOS) our systems created a sell signal. We have held this position since July 2019 and added more shortly after.

Today we reduced the position at an average price of USD 52.03. With unit costs of USD 46.34 this represents a gain of 12.28%.

Reduce: Franklin Resources

We started this position in 2016. Performance in terms of stock price was disappointing so far. However, the company continued to increase their dividend each year. Dividend yield is currently at about 4.67%.

In April 2020 our system created a couple of buy signals. We increased our holdings accordingly. Our algorithms took the opportunity to buy near the bottom.

With today's sell signal we reduced our position at an average price of USD 22.68. With average unit costs of USD 16.46 we realized a gain of 37.79%. A quite satisfactory result for just 1.5 months.

Summary

It was a comparably busy day for us. However, we are confident that today's transactions were the right thing to do based on the signals generated by our system.

All of the stocks mentioned in this posts are long-term positions in our portfolio, i.e. a minimum period of 10 years. However, based on recommendations of our algorithms we may choose to increase or decrease any of the positions in the future.

Comparing our portfolio, which is managed by our software, with the S&P 500 index shows that our portfolio is up by 0.20% year-to-date while the S&P 500 index is down -1.14%. In other words, year-to-date our portfolio outperformed the index by 1.34%.

Disclaimer

Past results have no bearing for future results. Keep in mind that we do not accept any responsibility for your investment decisions. Do your own research and due diligence and consult with your financial advisor before making decisions. Any investment vehicle mentioned on this site is used for illustration purposes only and does not constitute investment advice.

Sell Signal for FRT; Started VGT

Sell: Federal Realty Investment Trust

On 3rd June 2020 our systems created a sell signal for Federal Realty Investment Trust (FRT). We started this position in 2019. In March and May of this year we increased our position after prices dropped and our systems created buy signals at USD 74.78 and then again USD 67.95 respectively.

This week a sell signal was create and we reduced our position slightly at an average price of USD 93.5745 per share. Based on an average price of USD 71.3645 for the buys in March and May, this represents a gain of 31.12%. Here, too, we are quite satisfied with this result.

We continue to have a long position in FRT. While we see this as long-term investment, we may increase or decrease our position based on the signals created by our systems.

Buy: Vanguard Information Tech ETF

Also, on 3rd June 2020, we decided to increase our exposure in the technology sector. We started a position in this sector in May with "SPDR Select Sector Fund - Technology" (XLK). Our post back then already explains some of the reasons for the step back then. With adding the ETF "Vanguard Information Techology" (VGT) to our portfolio we have increased our technology holdings further. The technology sector currently represents about 8% of our US portfolio.

Both, XLK and VGT, have a quite different structure.

XLK has about 86% of assets in technology plus a further 12% in financial services. The remainder being about 2% in industrials. In total XLK consists of about 71 stock holdings.

In contrast VGT has 88% of assets in technology plus a further 10% in financial servicess. The remaining 2% are in industrials. The main difference is that VGT has 316 holdings which reduces the stock specific risks even further.

The past performance of the two ETF's is in the same ballpark. Both funds pay cash distributions typically once per quarter, so both are generating some cash (1% to 2% per year).

We started the VGT position with an average price of USD 267.15.

Disclaimer

Keep in mind that we do not accept any responsibility for your investment decisions. Do your own research and due diligence and consult with your financial advisor before making decisions. Any investment vehicle mentioned on this site is used for illustration purposes only and does not constitute investment advice.

Trading out of boredom?

A Bloomberg article that we found on Yahoo finance caught our attention today and we would like to share a few remarks.

Trading vs Rebalancing

This is not the first time that we've heard about retail investors placing a higher number of buy and sell orders since the coronavirus lockdown started. Most (if not all) of the online brokers serving retail investors have a note on their website along the lines that they are experience a much larger number of customer service requests. In some cases we observed that brokerage websites also showed signs of stress, e.g. some data not updating as quickly as it used to.

So there is some evidence that there are more orders being place, whether that is for stocks or options or other derivatives. We believe that trading, in particular day trading where you start and close a position on the same day, does not fit our investment preferences.

Having said that, we also observed an increase in the number of orders we placed since beginning of the year. All of those orders, however, were to rebalance our portfolio. Based on our data, there were more positions requiring rebalancing due to the significant fluctuation of the stock markets. There were days with declines or increases of 10% and more.

Not all stocks that we own moved to the same degree, though. Throughout the last few months and this is still ongoing to a lesser degree, there is a high uncertainty as to the effect of the coronavirus on particular companies and sectors. Because of this uncertainty, it appears as if "favorites" change within days.

As a result there was an increased need to rebalance our portfolio and keep all positions closer to the target allocation. The upside was that the vast majority of these adjustments resulted in additional gains due to buying at lower prices (the stock was "out of favor") and selling at higher prices (the stock was "in favor"). All of those buy and sell signals were created by our algorithms, so all we had to do was approve the suggested orders.

This kind of "trading" can help to improve the portfolio performance. Our data shows that without those short-term trades the performance would be lower. Still, this is no day trading. There was not a single cases where we started a position then closed it within the same day. Equally there was no case where we traded the same ticker symbol twice on a given day.

Therefore in our view rebalancing helps with performance. However, we are staying away from day trading.

Technology Sector

The Bloomberg article also quotes a co-head of derivatives strategy at a trading firm, referring to "message board trading" when people buy or sell based on whatever they read at a given point in time. He mentioned Apple Inc (AAPL), Stitch Fix Inc (SFIX) and TripAdvisor Inc (TRIP) as affected by this type of "trading".

For day traders it may make sense to look at individual stocks. However, if you take a longer term view then looking into the technology sector may make sense as long-term position in a portfolio. So instead of trying to make money as an amateur day trader with individual stocks it might make more sense to just buy into a basket of companies and keep that investment for a very long time.

Buying a basket can be achieved with exchange traded funds (ETFs). For the technology sector low-costs funds include SPDR Select Sector Fund - Technology (XLK) or Vanguard Information Tech (VGT). There are others more but these are good starting points for further research. In all cases you should seek independent advice. And before making a decision you should definitely also find out the ETF's portfolio, i.e. which companies do they invest in.

Using an ETF also helps reducs the risk that is associated with a direct investment in an individual stock. If the company you pick gets into trouble then your investment is likely to loose quite a lot. That same stock in an ETF is only one of many, at times hundreds of companies, so the risk that is unique to that company has only a very limited impact on the ETF portfolio and therefore price.

As always, do your own due diligence and seek independent advice before making decisions.

References

Article: "Bored Day Traders Locked at Home Are Now Obsessed With Options": https://finance.yahoo.com/news/bored-day-traders-locked-home-152732093.html

Note that we do not receive any compensation for mentioning any product, e.g. ETFs, in this post.