Stock and Stock Fund Update 6/6/14

The last update was in February: Stocks, Bonds & Politics: Stock Fund Update as of 2/28/14

In this exercise, I am attempting to figure out whether my stock allocation has increased or decreased since the last update and by how much.

A few days ago, I believed that I had reduced my stock allocation a tad since the last update. Instead, I have increased it by over $31,000 according to the following calculations. Most of the adds are in bond substitutes like REITs and BDCs. 

I estimated that the stock allocation increased by about $24,000 between October 2013 and late February when I last performed this analysis. 

The Stable Vix Pattern was formed in September 2012. Vix Asset Allocation Model Explained Simply

As noted in the comment section of an earlier Post, I am attempting to follow the applicable trading strategy for a long term secular bull market in stocks. I am currently above a stock allocation that most financial planners would recommend for someone who is 62.

Generally speaking, the fundamental strategy for a long term secular bull market is buy and hold which simply means keeping my stock allocation at a high level.

It does not mean that I will hold most individual securities for as long as the market remains in a long term secular bull phase. Several stock funds will be held throughout that period, or acquired hopefully in the early stages, with minor pares or no changes. The individual stocks will be subject to what I call "nip and tuck". I may keep some stocks for the entire bull period, while others will be liquidated or pared with other stocks substituted in their place.

One recent shift in the nip and tuck approach was to buy REIT stocks after many of them fell in price by 10% to 20%, and now I am likely to start selling one or two that have risen 20% since my purchase. That is a sector rotation, nip and tuck.

The weight of the evidence is, in my opinion, supportive of the long term secular bull label, as I noted in the introduction section of a December 2013 Post. Long term secular bull markets will have a number of 10% to 20% corrections and at least one 20% to 30% cyclical bear market. The current bull move off the March 2009 lows reminds me of the 1982-1987 move, the first phase of that prior long term secular bull market.

The bull run from August 1982 to 2000 had a 20%+ cyclical bear market which commenced in the October 1987 crash, which is noticeable on a long term chart: Dow Jones Industrial Average (1900 - Present) Notwithstanding that temporary setback, the S & P 500 had over a 14%+ annualized return with dividends reinvested and adjusted for inflation between 1982-2000. The pattern is a somewhat choppy trending up line, ascending at something approaching a 45 degree angle. LONG TERM SECULAR BULL PATTERN 1950 TO 1966

The period preceding that run is a  clear long term secular bear market that produced a negative 1% annualized return calculated on the same basis between 1966 to 1982. Stocks, Bonds & Politics: The Roller Coaster Ride of the Long Term Secular Bear Market (May 2010 Post)

In 2009-2011, I was characterizing the move off the March 2009 lows as a likely (more probable than not) cyclical bull move within the confines of a long term secular bear market, similar to the move made in 1974 to 1976 after the catastrophic phase of a long term bear market occurred in 1974 (similar to what happened after Lehman's failure in September 2008).

1974 or 1982: Start of Cyclical Bull in a Long Term Secular Bear Market or the Start of Secular Bull Market? (September 2009 Post); Stocks, Bonds & Politics: More on 1982 or 1974 (September 2009 Post); The Importance of Identifying the Underlying Causes of Long Term Bull and Bear Markets (June 2011); LONG TERM SECULAR BULL PATTERN 1950 TO 1966/ Long Term Secular Bear Pattern from The Great Depression (September 2009); Stocks, Bonds & Politics: The Big Picture Questions (August 2011).

Irrespective of the characterization, the move had to be played to the upside. Short term bull cycles in long term secular bear markets have been among the most robust rallies in stock market history (e.g. 1933-1937, 1974 to 1976).  The difference is that a cyclical bull move in a long term secular bear must be sold after two or three years generally, whereas an investor needs to transition to buy and hold when evidence supports a long term secular bull characterization. I was able to characterize the move starting in August 1982 immediately as the start of a long term secular bull market. The current situation is not as clear.

My update prior to February 2014 was in October 2013: Stocks, Bonds & Politics: Updated Stock Fund Table as of 10/18/13

The following table contains additions and reflects deletions since that last update, plus a few additions and deletions that have not yet been discussed. The additions include shares purchased with reinvested dividends which were unusually high late last year. The shares purchased with the dividends do not add to the value unless those shares increase in price after the reinvestment.

I include some balanced funds where the stock allocation exceeds 50%. I also include the Permanent Portfolio since the large gold and silver bullion positions scare the OG more than stocks. 

As a general rule, I will adjust my stock allocation by buying and selling stock funds. In 2007, I eliminated most of my mutual funds and pared the others down to 100 or 150 shares except for the Permanent Fund which is viewed as a portfolio designed to withstand most disasters. I sold all of my stock ETFs.

This exercise will cause me to do sell some stocks sooner rather than later. While this computation may be off some due to math errors or a failure to include all transactions, it is close enough to prompt me to respond. The net stock addition since October 18, 2013 is almost $55,000.

Click to Enlarge:

Stock Funds as of 6/6/14

Fund Adds (excluding reinvested dividends):

Bought: 50 IF at 9.73 (6/7/14 Post)= +$487

Bought: 100 ASEA at $16.57, 100 FDL at $23.04/Bought 300 of the Canadian ETF FIE:CA at C$7.26 (5/31/14 Post)= +$5,943

Bought:  50 FNLC at $15.6 30 CHN at $19.89 /Bought 50 IFGL at $31.27 (5/24/14 Post)= +2,941

Bought 150 JDD at $11.7 in Taxable Account and 100 at $11.64 in Roth IRA/Added 50 SWZ at $14.32 (4/12/14 Post)= $3635

Bought Two Fidelity Sector ETFs: 100 FSTA at $25.42 and 50 FENY at $25.49 (3/10/14 Post)= +$3,817.

I am in the process of using some cash flow to buy ETFs that can be purchased commission free. The absence of a brokerage commission makes dollar cost averaging with small lots cost effective.

Approximate Fund Purchases Excluding Reinvested Dividends=  +$16,823

Fund Deletions and Pares: 

Pare:  Sold 100 MDIV at $21.81 (6/7/14 Post)= -2,181.

Deletion:  Sold: 123+ BIAUX at $23.13 (6/7/14 Post)= -2,845

Deletion: Roth IRA: SOLD 109+ STK at $16.53 (5/24/14 Post)= -1,802.

Pare: Pared ADX: Sold Highest Cost 200 Shares at $13.21-Reduces Average Cost Per Share from $10.76 to $10.14 (5/17/14 Post)= -2,642

Deletion:  Sold 50 AMJ at $47.49-Roth IRA (4/26/14 Post)= -2,375
Pare: Sold 200 IRR at $10.06 (3/10/14 Post)= -2,012

Pare: Sold: 200 RMT at $12.8-Lowers Average Cost Per Share to $8.61 (3/17/14 Post)= -2,560.

Approximate Fund Deletions/Pares= -16,417 Reduction 
Plus Pare ADX To Be Discussed: -1579
Total= -$17,996

Net Fund Deletion and Pares:  -$1,173

I thought that this net deletion number would be higher. I will need to do something here. 

When updating this table, I will also attempt to measure whether my overall stock allocation has gone up or down since October. In this section, I will calculate individual stock purchases and sells when the transaction exceeds $500, and will assume that lesser amounts just cancel each other out. 

I am omitting from the following compilations stocks that were bought and sold since the last update (e.g. PRDSY).

Stock Additions

(Assumes 1 CAD=$.91)

Bought: 300 DIR_UN:CA at C$9.53 (6/7/14 Post) =+2,602

Added 200 HLP_UN:CA at C$10.2 (5/31/14 Post)= +1,856

Bought 50 ONB at $13.29 (5/26/14 Post)= $665

Bought: 30 RIG at $42.86 AND 30 ESV AT $50.61, 50 FNLC at $15.6, 50 WARFY at $13.08 (4/24/14 Post)= $4,238

Bought:  50 CZNC at $18.5 (5/17/14 Post)= +$925

Bought: 50 BPFH at $12.35, 50 TRMK at $22.73 and 100 AINV at $7.95/Bought 300 ARCP at $12.69 (5/10/14 Post)= $6,357

Bought: 100 HLP_UN:CA at C$10.17 and 100 American Hotels at C$10.05/Bought 100 PNNT Taxable Account at $10.84 (5/3/14 Post)= $2,904

Added 50 NMFC at $14.2 (4/26/14 Post)= +$710

Bought 200 Northwest Healthcare REIT at C$9.79/ Bought Bought Regular IRA-100 MPW at $12.76/ Bought 50 BKCC at $9.22 In Roth IRA and 60 BKCC Taxable Account at $9.24 (4/18/14 Post, combining two BKCC buys)= +$4,073

Added 100 TICC at $9.75-Main Taxable (4/5/14 Post)= +$975

Bought 100 CSG at $7.73, 50 FNCL at $26.57, 100 Cominar REIT at C$18.14 (4/1/14 Post)=$3,753

Bought 300 Temple Hotels at C$5.85, 50 MET at $51.76/Bought 150 CCG at $8.51-Taxable Account (3/24/14 Post)= +5,462

Bought 30 EPR at $53.3, Bought 300 Dundee International REIT at C$9.27 (3/17/14 Post)= $4,130

Bought 50 NABZY at $15.48 (3/10/14 Post)= $774

Bought: 100 Dundee REIT at C$29.35, 150 IRC at $10.35 and 30 Digital Realty (DLR) at $53.4/Bought: 100 FULL at $7.8 (3/3/14 Post)= $6,606

To be Discussed: $805

Approximate Additions= $46,835

Stocks Sells:

Sold 158+ BDN at $15.28 (5/24/14 Post)= -2,402

Sold 100 of 400 ARCP at $13.35/Sold: 100 PFE at $31.68 (5/17/14 Post)= -1,335

Sold: 58+ DWX at $48.75 & 200 CA:ERF at C$22.14 (4/18/14 Post)= -6,857

Pared Intel Again: Sold 40 at $24.61 (3/10/14 Post)= -605

Sold 100 DRE at $16.57/Sold Roth IRA: 50 TCPC at $17.8 (3/3/14 Post)= -2,547

To Be Discussed -$684

Stock Sells Total: $14,430

Net Individual Stock Adds:  $32,405

******************** Total Net Stock Addition= +31,232