TIB: Today I Bought (and Sold) - An Investors Journal #384 - Japan - Financials, Industrials, Airlines, Electronics; US Fast Food, China Telecom, Covered Calls

Markets slide as China talks dally. Profit taking in Japan with some new positions and bottom fishing in financials. More covered calls written and continuing to flirt with naked puts.

Portfolio News

Market Rally Stutters

The market rally stuttered ahead of the Federal Reserve meeting

The headlines hide a mixed story. Markets are mostly worried about delays in the US-China trade discussions and about some of the push back coming from China. A new dimension of the China discussion is the Boeing saga. With Boeing suspending deliveries of 737 Max 8's, the trade data will be affected. China will not be able to live up to any dollar commitments it has made.

The last headline is where the hidden messages are. Utility stocks are weak because it is expected that the Fed could announce a change in rate hike expectations. Those are expected to be one less = less demand for utility stocks.

Yields inch higher ahead of the Fed meeting - kind of weird if Fed is expected to say one hike less.

Hidden also was a drop in oil prices as cracks appeared in the Russia-Saudi Arabia story on oil production cuts.

Bought

Interactive Brokers is migrating some of its services to an Australian base. This will change the way its currency accounts will work. One of the currencies affected will be Japanese Yen - all Yen trades will be translated to base currency at trade time. I have some Yen in one account and wanted to deploy that before the transfer. I also felt it was time to do some shuffling work in Japan. I sold two stocks that have delivered more than 15% returns and ran stock screens

Nihon Denkei Co. Ltd (9908.T): Japan Industrial. Nihon Denkei supplies instrumentation equipment and serves Japan and China primarily with some business in SE Asia. Stock appeared on Price to Sales and Price to Book screens. The numbers that stood out for me were Revenue per Employee at double the industry average and Return on Investment of 11.58% (5 year average). Debt levels are low and dividend yield is 2.34%

Price chart shows a stock that spikes periodically but had gone nowhere for 3 years and then did a massive spike in 2018 only to give it all back.

Price has since broken the downtrend and held above the support level at 1459. Of note is the collapse in price in early 2018 precedes any of the tariff war stuff.

I did price comparisons against the Nikkei 225 (red line) and a Tokyo listed Nikko China ETF (1322.T - blue line) over several time cycles. Performance has flip-flopped. Last 2 years outperformed both. Last 12 months underperformed both. My investing thesis is the resolution of the trade dispute with China will allow Nihon Denkei to close some of the that gap - say half (17% return)

Kyushu Financial Group (7180.T): Japan Financials. Quite a few banks and financial groups appeared on the screens. I looked at the chart for this one as I already have holdings bought in late 2017 when price had broken the downtrend line (red line drawn at the time).

Well that break was short lived and price failed the retest of that level (dotted red line) and collapsed with the December selloff adding to the pain. Price has since bounced off the lows and passed through the previous lows (dotted green line). I doubled my position to average down my entry price.

SBI Holdings (8473.T): Japan Financials. I bought a small parcel in SBI Holdings in February 2018 as a way to participate in cryptocurrecy trading (they own a crypto exchange) and as a way to earn dividends from Ripple (XRP) (See TIB195).

Trade was looking heroic with a 46% rise to the 2018 highs. The unused portion of Yen in the account was enough to add another small parcel for a small average down in entry price (1.8%)

MSCI Index Inclusion of China

Watched one of the talking heads from JP Morgan talking about China and emerging markets. One data point caught my attention. China is 15% of world stock market value yet it will only be 3% of MSCI Indices once the full inclusion is complete in 2019. This massive mismatch is going to drive a lot of investing funds towards China as the MSCI allocation increases but also after that. Now I have added China A Shares to my portfolios and two China financials. Time to go a bit further

China Mobile Limited (0941.HK): China Telecom. JP Morgan talking head pick. This is the world's largest telecom provider and also the world's largest dividend payer with its 3.92% dividend yield. Risk in the trade is it is listed in Hong Kong Dollars which is pegged to US Dollar. Hong Kong Monetary Authority has ben hard pressed in recent months holding the peg - the peg could break which would bring an uncomfortable devaluation. The long range chart has the shape I like - broken long term downtrend and retested horizontal levels.

ANA Holdings Inc (9202.T): Japan Airline. This was a stock pick from the JP Morgan talking head. He liked the fact that Price to Earnings ratio is only 11 and the level of international expansion plans. I like the shape of the chart with price breaking a short term downtrend line and retesting the horizontal support level. Add in Japan tourism is going to swell over the next 18 months with Rugby World Cup (2019) and Tokyo Olympics (2020). Talking head did not mention those events.

For completeness, I have compared share price to Nikkei 225 index (red line) which shows pretty well in line performance. Note: ANA does not operate Boeing 737 Max 8 or 9 aircraft.

Sold

Profit taking time in Japan portfolios. I had previously aimed to close trades at 25 to 35% profits. Long periods of sideways has prompted me to reduce the target to 15%

Toyo Seikan Group Holdings Ltd (5901.TK): Japan Industrials. 17% profit since March 2017. Been itching to close this out since Fitch downgraded the stock a little while back.

Ricoh Co Ltd (7752.TK): Japan Electronics. 18% profit since March 2017.

Income Trades

Seven more covered calls written overnight bringing the total to 19 trades - still got a few pending orders outstanding and a few I have yet to set up. Place to focus on the table is the BOX - 1.34% average premium received on trades to date this month.

McDonalds Corporation (MCD): US Fast Food. Sold April 2019 strike 165 call option as a naked put. With closing price of $183.95, this is 11.5% safety margin. Premium was a modest 0.11%

Cryptocurency

Bitcoin (BTCUSD): Price range for the day was $65 (1.6% of the low). Price makes another inside bar and tests $4000 again but not willing to push to test resistance above. The sellers are lurking just above $4000. This steady state is encouraging given than CBOE confirmed the story that they would cease to offer a Bitcoin futures from the end of the June expiry.

Ethereum (ETHUSD): Price range for the day was $2 (1.5% of the low). Price hardly registered any move moving even less than Bitcoin.

CryptoBots

Profit Trailer Bot One closed trade (1.55% profit) bringing the position on the account to 6.92% profit (was 6.90%) (not accounting for open trades).

Dollar Cost Average (DCA) list remains at 4 coins with KNC giving up prior day gains.

Pending list remains at 10 coins with 4 coins improving, 5 coins trading flat and 1 worse.

PT Defender continues defending 10 coins. No change.

New Trading Bot Trading out using Crypto Prophecy. No closed trades.

Currency Trades

Euro (EURUSD): The talking heads are confident that the Federal Reserve will be exercising patience and are unlikely to move from the expected one more rate hike for 2019 in their announcement tomorrow. With 5 weeks to go to options expiry, I opted to close out a 12 month 1.1965 put option on the Euro. The chart shows that price followed a steep price trajectory but was not keen to drop much further than 200% profit.

Outsourced MAM account Actions to Wealth closed out 3 trades all on AUDNZD for 0.56% loss for the day.

Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas

Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work

Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers

Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices

March 19, 2019