Passive Equity Portfolio: Annual Report

Let’s get to the ugly truth. Since inception (July 2014), my passive portfolio is up only 2.18%19 times less than the market return during the period. For 2017, the portfolio returned only 3.82%, 6 times less than the market return. Um….um….um, let me try to justify the low returns.

My peers and people jealous of me would be laughing like this:

Kuroda’s evil laugh
2014-2015

When I opened the account in the summer of 2014, TD Ameritrade gave me 2 months to trade for free. So during that time, I wanted to fill the account with stocks. The only problem was I did not know which stocks to buy. At the same time, I did not know how to research potential investments.

Mostly guided by “expert” recommendations and positive headlines, I bought some stocks which destroyed my portfolio, including Ford (F), J.C.Penny (JCP), Cisco (CSCO), General Electric (GE), and General Motors (GM). In 2015, I still did not know which stocks to buy. I wanted to do my own research. I decided to research all the stocks that were bought the previous year.

From my research, I found CSCO, GE, and JCP attractive. So I decided to keep them in the portfolio. I even wrote about CSCO and GE on the blog. I did not write on JCP as I was not profoundly convinced. Funny thing is I have never shopped at JCP, just at its competitors. Even my mother did not like J.C. Penny.

I did not like F, yet I decided to keep F in the port because it was not worth getting rid of them at $10 commissions. For GM, I was on the fence. In addition to these names, I decided to research new names and bought some of them. 70% of my portfolio was in cash in January of 2015. In December, it was 42%.

The new stocks I bought in 2015 were non-dividend yielding risky names, such as Bellatrix Exploration (BXE), Twitter (TWTR), and GoPro (GPRO). All of which did not work out well to this day. BXE, because I tried to find a good energy company at the time every energy companies were distressed. I’m very active on Twitter and use GoPro most of the time. So I wanted to invest in them. At that time, I thought Twitter would get acquired, and GoPro management would start to turn things around, and the Karma Drone would be positive for the company’s financials.

2016-2017

In 2016, I continued to research new stocks. However, I did not invest in any of them. I deposited more money into the account during that year. At the end of 2016, 82% of the portfolio was in cash.

I always found real estate interesting. Used to read about them. My interest in the real estate market skyrocketed after my first ever internship, at a small real estate firm. In January of 2017, I decided to buy WPC, a Real Estate Investment Trust (REIT). During the year, I also bought Verizon (VZ). I did not want the remaining cash in the port to sit idle. So I decided to purchase free commission based short-term bond funds, very stable dividend yielding cash parking (and one high-yield ETF). At the end of 2017, 17% of the port was in cash.

Over the past month, I have been researching consumer goods companies. I’m looking to add one to the port. When I do, I will be sure to write about it.

10 Equities

I’m currently holding 10 companies; CSCO, GE, GM, BXE, WPC, JCP, F, TWTR, GPRO, and VZ.

All shares of 10 different companies belong to 1 class: domestic equity. 62% are in large cap., and 38% are in mid-cap.

On February 16, 2015, I recommended going long Microsoft (NASDAQ: MSFT) when the share price was $43.95. Since then, it is up 101%*. I made a mistake of not buying when I wrote about it. “Put your money where your mouth is, Khojinur.”

On April 12, 2015, I recommended going long General Electric (NYSE: GE). Since then, GE is down 33%*. Dividends are automatically invested in new shares. Average price I paid for the shares is $26. I’m down 29%. Despite the 50% dividend cut recently, I’m staying with the stock for two reasons. The cost-cutting will be the best bet for us the shareholders. The $7 commission fee won’t be worth it, especially since the stock was bought in 2015 when I had less money. If I can open second Robinhood account, I’ll transfer from Ameritrade to the free-commission based brokerage.

In the summer of 2015, I wrote about CSCO (part 1part 2 AND 4Q FY’15 earnings report). Since the first article, the networking giant is up 44%*. Average price I paid for the shares is $25.11. I’m currently up 57%.

On November 21, 2015, I wrote my first article on LLY and believed it was overvalued (it still is). Since then, the pharmaceutical company is up a mere 1.25%*. The second article on LLY was posted a year after the first article. I personally am not short the stock as I cannot short.

On December 26, 2015, I recommended going long GoPro (NASDAQ: GPRO) and believed it was a buy. Since then, the action camera maker and I are down whopping 59%.

On May 2, 2016, I recommended holding FireEye (NASDAQ: FEYE).  Since then, the cybersecurity firm is down 15%.

On January 20, 2017, I recommended going long W.P. Carey (NYSE: WPC). Since then, the REIT is up 11%*. Average price I paid for the shares is $61.44. I’m currently up 10%.

On May 9, 2017, I recommended going long Verizon (NYSE: VZ). Since then, the telecom is up 46%*. Average price I paid for the shares is $46.05. I’m currently up 47%.

*dividends not calculated

Estimated the portfolio dividend yield is 2.48% (that is very similar to the 10-year yield), with largest being 6% and lowest 0%. I plan to increase the portfolio dividend yield by getting rid of non-dividend yielding stocks and/or buying dividend-yielding stocks. That will happen fast, if I can make second Robinhood account and transfer the portfolio to there.

When I started doing research in-depth and writing down my findings and thoughts, everything started to improve. Writing is powerful!

Every new trade and investment will first be announced on Twitter. Almost always!

Q1 2017 Performance: Forex

As you may know, I published my forex performance for 2016 and since inception. From now on, I will also share my quarterly performance. March 31st marked the end of first quarter, here are my performance results for FX trading.

Forex Trading Performance – Q1 2017

For currency trading, I was up 2.15%. I know, it’s low (in % terms at least). But, allow me to explain.

Before this year, my currency trades used to be in 1,000 units (or 0.01 lots), lowest I can trade. Since I usually had about 10 positions, each of 1,000 units, the nominal amount was large enough. After depositing more money and getting a clear picture of my Forex performance, I decided to increase my trades to 2,000/3,000 units (or 0.02/0.03 lots) for each position.

Getting a clear picture of my performance – average gain/loss, drawdown, trade duration, the percentage of profitable trades, etc – helped me improve my performance significantly.

This quarter [Q1], I further minimized my drawdowns. By minimizing drawdown, I minimized my returns. And that works for me. Stable uptrending P/L with a low risk.

It is true Forex is way riskier than other assets classes due to its leverage, mostly 1:50. But, that does not mean your portfolio has to include a lot of risks.

While 2.15% return this quarter from Forex trading is low, it’s still big in nominal terms for me and I’m getting a much better understanding of my weakness/strengths as I look through the metrics.

I don’t have the key metrics (besides the returns) and charts to share with you for this quarter for one reason: FXCM was Banned from the U.S. (I’m not even surprised after what happened on January 15, 2015).

FXCM is a retail FX broker and my former broker. They were banned by CFTC for defrauding retail foreign exchange customers and engaging in false and misleading solicitations.

As a result, FXCM customers were automatically changed to a different broker, Forex.com by Gain Capital Holdings, on February 24th. Unlike FXCM, this broker did not offer an analysis of trades. In addition to that, a third-party software did not offer an analysis of trades for Gain Capital’s customers since the broker did not allow the software to be connected with it.

Good news is that I’m currently in process of changing the platform to MetaTrader, which will make it easier for me to track performance metrics. The other platform, ForexTrader made it harder for tracking key metrics.

For the next quarter’s results, you can expect to see more performance metrics for FX trading.

Live On Twitter

As you may know, I tweet out trades/investments I’m making. That’s one of many reasons you should follow me on Twitter if you haven’t already. One of many ways I measure success is through twitter followers, believe it or not.

Here are some of the tweets:

My target for annual FX return is 15%, with minimal violability (less than 4% drawdown).

Interested in investing in me? Feel free to privately message me for more details. The minimum investment is $1,000.

 

Note: Equity/Commodity portfolio performance will be posted later.

Update: “Q1 2017 Performance: Equity Investments” article is posted.

Update: “Q1 2017 Performance: Equity/Commodity Trading” article is posted.

Trump’s Market-Moving Tweets Are Awesome

Believe it or not. I love the tweets from @realDonaldTrump. No matter what the content of the tweets are, I love the fact it moves the markets. Why would I love it? Because I love volatility.

In December, Trump tweeted out;

The tweet sent shares in small uranium miners soaring, including Uranium Resources (NASDAQ: URRE) and Uranium Energy Corp. (NYSE: UEC) by 31% and 13%, respectively.

Despite the real world complications, I just love the fact it agitates the markets.

More tweets;

These tweets, as you can guess – sent the shares of Lockheed Martin (NYSE: LMT), which is the supplier of F-35 program, and Boeing (NYSE: BA) – down. From both tweets, Lockheed Martin lost billions in market cap. The rival Boeing was barely unchanged at the end, as it means more opportunities for them to gain more contracts.

However, Trump targeted Boeing in earlier December when he tweeted this;

The tweet sent the stock price down by 1%, but ended the day flat.

Year-to-date……so far, Trump has already targeted General Motors (NYSE: GM) and Toyota Motor (NYSE: TM);

Trump’s tweets are just awesome. The volatility it brings allows me to make more money than the non-volatility. As I mentioned in my previous article, I recently opened RobinHood account, broker with $0 commissions. Using the broker in the future, I’m planning to buy some shares of the companies Trump negatively targets, especially if investors overreact.

Since it seems Trump has a strong hatred towards Mexico and the U.S. companies working there, here are the potential targets;

It seems there are seconds delay until the stocks react to Trump’s tweets. That’s rare considering the era of algorithm trading which can react in milliseconds and less.

Algos have yet to incorporate Trump’s tweets into their codes. It’s not that simple yet as it can be difficult to determine the sentiment from a tweet. Algos can easily get the direction of the stock wrong. We need more tweets to better analyze it.

But, will the future tweets move the markets or not? It all depends on how successful Trump is in implementing what he tweets. If Trump is unable to do so, he will just lose credibility.

Meanwhile, markets will react to the tweets and I plan to take advantage of them.

Trigger (originally a class project at Cornell Tech) just recently introduced “Trump Trigger” that will send you a notification every time Trump tweets about your investments. Not an algo, but notification that can be useful for amateur investors. Not my thing.

Photograph courtesy of Trigger

Almost 4 years ago, Associated Press (AP)’s twitter account tweeted out;

Photo: Screenshots.
Source: USA Today

It was tweeted minutes after the account was hacked. Seconds after the tweet, S&P 500 lost $136 billion in market cap., before quickly rebounding.

What if Trump’s account was hacked? The account can be exploited for financial gain, to cause geopolitical instability, or worse.

Whatever it is, I plan to take take advantage of them for financial gain.

Speaking of Twitter, follow me. I tweet about some of the articles I read, my trades and some sarcasm. Unfortunately, my tweets do not move the markets……for now.

Legendary Investor Carl Icahn Was Right Next To Me And I Didn’t Even See Him!!! (Video)

As you may know, I met legendary investor Bill Ackman (Short Herbalife) in the first half of this year. He was taller and bulkier than I expected. Ackman speaks in a soft voice (to strangers of course) and has a firm handshake. My tiny hands were nothing compared to the strong hands of Mr. Bill Ackman.

Great meeting with Mr. Bill Ackman, Founder and CEO of Pershing Square Capital Management
Great meeting with Mr. Bill Ackman, Founder and CEO of Pershing Square Capital Management

In case you don’t know, Ackman is one of the world’s most famous hedge fund managers and activist investors. Pershing Square Capital Management net return was 40.4% in 2014, the highest among its peers. Since inception in 2004, Pershing Square posted net gains of 567.1% versus 135.3% return for the S&P 500. The hedge fund’s 1.5% base fee and 16% performance fee is low relative to industry standards.

Last Tuesday (September 13th), another legendary investor Carl Icahn (Long Herbalife) was right next to me at the Delivering Alpha and I didn’t even see him.

Yes, I know!!! Oh my god.

In case you don’t know, Icahn is one of the world’s most famous hedge fund managers and activist investors. As the chairman of Icahn Enterprises LP, Icahn says “Some people get rich studying artificial intelligence. Me, I make money studying natural stupidity” according to his Twitter bio. I love that quote.

How did this happen? During a coffee break before Stephen Schwarzman – Chairman, CEO, and Co-Founder of Blackstone (another legend) – was due to speak in front of investors, press, students (me unfortunately), etc…I lost my focus.

How did I lose my focus? I wanted to be on the cover of Institutional Investor magazine. Well, not the real magazine. There was a photo booth at the conference.

Why was the fake magazine cover so important? Besides being in love with finance, I wanted to get a picture of my handsomeness. Someone who works for NBC even told me I was handsome when I was leaving the event. My response was “I always look handsome” which is a fact.

…So here I am, stepping on the booth while Icahn is just passin’ by!

Baby Boy right to the Crazy Old Man
The legend is on the left. I’m on the right. Is Icahn looking at me?

I was 5-10ft away from the man I admire and I didn’t even see him. I didn’t even notice the cameraman with a strong lighting. I noticed nothing. I was thinking about how I made it to the cover of Institutional Investors magazine and Forbes is next.

Here is the video of me on CNBC for the first time and Carl Icahn on the same screen.

I messed up…for this handsome picture of myself.

Khojinur Usmonov on the cover of Institutional Investors magazine.
Khojinur Usmonov on the cover of Institutional Investors magazine.

Although I didn’t see Icahn there, I did see him on stage after the interview of Schwarzman with CNBC’s Becky Quick.

Schwarzman Interview at the 6th Annual Delivering Alpha:

Great summary of the interview can be found on the Institutional Investor’s website.

BECKY QUICK: I think Blackstone has gone from something around $35 to around $26 over the course of the last year. Why is that? What is that a reflection of?

STEPHEN SCHWARZMAN: That’s a reflection that investors are wrong.

I love the sarcasm.

STEPHEN SCHWARZMAN: I don’t want to be selling an asset that’s gone down because the world has gone down. If it’s a wonderful company, if I want to sell it, I’d sell it after everything goes well.

What Schwarzman is trying to say is…

“Investing is the only business I know that when things go on sale, people run out of the store” – Mark Yusko

Here comes Carl Icahn on stage:

Everybody excited. Their phones are out. Chairs are being moved to get a better angle of the legend.

img_5222
Carl Icahn, Icahn Enterprises chairman during his keynote at the 6th annual CNBC Institutional Investor Delivering Alpha Conference

And no, Bill Ackman did not show up again.

Transcript of the CNBC interview with Icahn can be found on CNBC’s website.

CARL ICAHN: I think Ackman’s a smart guy.

CARL ICAHN: and, again, I think Ackman’s smart

CARL ICAHN: I really think he’s [BILL ACKMAN] a smart guy.

CARL ICAHN: I sort of like him [BILL ACKMAN]. I think he’s smart.

CARL ICAHN: I really believe Ackman being smart

I also think/believe Ackman is smart and so is Icahn.

I didn’t know Icahn was right next to me until I came home. At around 8:40 P.M, I come home. Until 10:24 P.M, I eat my dinner and some snacks, while checking emails and twitter, and reading news.

At 10:24 P.M, I’m scrolling through @CNBCnow twitter and that’s when I saw the video. My reaction was too graphic to describe it here.

The rest is history.

Delivering Alpha 2016 is one of the moments I will forever remember. I really enjoyed the conference and meeting people from the media and hedge fund world.

Although I came late to the conference, at around 1:40 P.M, and missed Ray Dalio, the experience was still amazing. Not just amazing, but also incredible, stunning, astonishing, etc.

Delivering alpha as a concept is all about beating the market. Over the past six years, the investment conference has brought many great investors who got a track record of actually delivering alpha to speak in front of audience.

CNBC and Institutional Investor hosted the annual Delivering Alpha conference at NYC’s Piere Hotel.

I will forever remember this day, September 13, 2016.

What’s Next?

So far I met Ben Bernanke, Marcus Lemonis, Chamath Palihapitiyaa (CEO of Social Capital), Bill Ackman, and Carl Icahn. Who’s the next high-profile person I will meet? Janet Yellen? Mario Draghi? Warren Buffett? Stay tuned.

So far I made it to Bloomberg (for real) and Institutional Investors (literally), what’s next? Forbes? WSJ? Time Person of the Year? Stay tuned.

It’s only matter of time before I’m on stage at the Delivering Alpha and media asks me questions. Stay tuned.