We have some exciting times ahead! All of our Dogs and Small Dogs positions will be closed out prior to the December 29, 2023, expiration cycle and we will once again start anew by adding all the qualifying Dogs for 2024 during the first week of the new year. Stay tuned as I will have more information as we near the end of the December 29 expiration cycle.
Shortly after we add our Dogs and Small Dogs during the first week of 2024, we will begin the process of phasing out of our 2025 LEAPS and into 2026 LEAPS in the passive portfolios (All-Weather and Yale Endowment).
I will be discussing the details of the approach, strategy, positions and potential trades in our upcoming subscriber-only webinar tomorrow so you will not want to miss the event. If you do happen to miss, no worries, if you sign up at least you can immediately receive the recording once it’s available.
Current Positions
Click here to access the “Portfolios” section to view each portfolio’s respective positions.
Portfolio Discussion
All-Weather Portfolio
The latest market surge has left the All-Weather portfolio up a respectable 10.8%, with our poor man’s covered call in the Vanguard Total Stock Market ETF (VTI) continuing to do the heavy lifting, up 31.3%. The S&P 500 is up 11.1% over the same time frame.
Our SPDR Gold Shares ETF (GLD) position has been resurgent of late. After being down roughly 20%, our poor man’s covered call position in GLD now sits 12.7% higher.
The performance of the overall portfolio is certainly nothing to write home about, at least at the moment, but the portfolio has been far less volatile and requires far less capital (65% to 85% less) compared to a stock-based portfolio using the same underlying ETFs.
Nothing has changed from the last few expiration cycles, both bond funds (TLT and IEF) and the commodity fund (DBC) continue to lag behind, but that is the yin-yang protective nature of the All-Weather portfolio just doing its job. That being said, all of our positions continue to outperform their respective ETF benchmarks, once again showing the power of using a poor man’s covered call approach.
We have several short call positions that need to be rolled this week including DBC and GLD. I plan to buy back our short calls and immediately sell more call premium.
Yale Endowment Portfolio
Our Yale Endowment portfolio is up 12.4%.
Not much has changed from the last expiration cycle. Our S&P 500 (SPY) position is up 21.8%, emerging markets (EEM) is up a paltry 1%, and the European Union (EFA) is up 9.8%. The three ETFs have led the way for the Yale Endowment Fund while bonds (TIP) and real estate (VNQ) have lagged. That being said, both VNQ and TIP are making comebacks.
Much like I stated above in regards to the All-Weather portfolio, the performance of the overall portfolio is certainly nothing to write home about, at least at the moment, but the portfolio has been far less volatile and requires far less capital (65% to 85% less) compared to a stock-based portfolio using the same underlying ETFs.
We only have one position, VNQ, that needs to be rolled this week.
Dogs (and Small Dogs) of the Dow
Our Dogs approach continues to be a tale of two portfolios since the beginning of 2023. Our Small Dogs portfolio continues to rise, currently up a healthy 25.2%, while our Dogs of the Dow portfolio is down 3.0% since the onset of 2023.
If the market rallies into the end of the year we should see significant gains going forward. Both portfolios saw significant gains over the past several expiration cycles, but the September 15 expiration cycle and October 20 expiration cycles proved to be a bit more challenging as we saw overall returns pull back. Thankfully the November and much of the December expiration cycle has us back on track.
Three out of five Small Dogs are in positive territory with Intel (INTC) leading the way, up a staggering 128.6% on the year while the stock is only up 58.4%. Cisco Systems (CSCO) has a return of 17.3% while the stock has only gained 1.3%. Dow (DOW) is slightly above break-even at 2.3%, while the stock is down 1.1%. And after being the big loser in the portfolio for most of the year, Verizon (VZ), down 40.1% two expiration cycles ago, is now up 19.0%. The stock is down -2.8%.
As for the remaining higher-priced stocks that make up the rest of the Dogs of the Dow (including the Small Dogs), the hands-down winner continues to be JPMorgan (JPM). Our position is up 39.9%, while the stock is only up 15.0%. Unfortunately, JPM is only one of two winners among the remaining holdings in the portfolio. IBM is the other and has made a roaring come back, currently up 16.5%. If the largest holding in the portfolio, AMGN, manages to close out the year with a nice rally, the overall portfolio should close well into positive territory. Our position is currently down 8.6%.
Warren Buffett’s Patient Investor Portfolio
At the moment, we have three positions (AAPL, GOOGL, TXN) and intend to add several more over the coming week or so, if the market cooperates … again, a statement we’ve been making for quite some time now.
Back in late June we added Alphabet (GOOGL). Since adding the position, we are up 43.8%, while the overall stock is up only 11.9%.
I wish we could say similar things about our position in Texas Instruments (TXN). Our position started off great, but a few sour earnings reports several cycles ago pushed the position lower and, as a result, TXN has yet to fully recover.
Our longest-standing position, AAPL, is up 15.6% after being down close to 25% just a few months ago. But only a month or two ago our position was up over 20%. A rally will obviously help to push our position back to recent highs, and until then we will continue to lower our cost basis by selling more and more call premium.
As I have written in our last few issues, I will be building out the portfolio to a minimum of five positions over the coming expiration cycles, and remember, because this is an active portfolio, we will be rebalancing every month around expiration, with the most recent around the November 17 expiration cycle.
James O’Shaughnessy’s Growth/Value Portfolio
Absolutely nothing has changed since last expiration – except the returns. Like the Patient Investor portfolio, my Growth/Value portfolio continues to take a cautious approach. My hope is to add at least two to three positions over the next few expiration cycles. Of course, we’ve been planning this approach for several months, but our indicators and low options premium have kept us on the sidelines, and thankfully so.
However, we did have the good fortune to add a position in TotalEnergies (TTE) back in late June; so far, so good as our position is up 55.5%, while the underlying stock is up only 15.3%.
The market is beginning to accommodate our cautiously optimistic stance, but we’ve said this before only to have Mr. Market pull the rug out from under us. I’ve allowed the passive portfolios (All-Weather and Yale Endowment) to do a lot of the hard work.
Next Live Analyst Briefing with Q&A
Our next Live Analyst Briefing with Q&A is scheduled for tomorrow, December 12, 2023, at 12 p.m. ET, where we will be discussing the options market, giving a detailed look at open positions, strategies used, and will have a follow-up with live questions and answers. Register here.
The next Cabot Options Institute – Fundamentals issue
will be published on January 15, 2023.