Updated: Mar 21
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At the end of Feb 2021, The Snowball Portfolio is up 11.11% YTD. Meanwhile, our benchmark, the Vanguard Total World Stock Index is down 1.50% YTD, representing an outperformance of 12.61%. The aggregate value of The Snowball Portfolio is now S$704,173.10 (Long: S$747,671; Short: S$43,507). The 37.6% month-on-month increase in aggregate portfolio value was driven by the consolidation of the Singapore-listed stock positions into the new IBKR Singapore account as well as gains from gains from CDON, Bitcoin, Ethereum, and GameStop short puts.
Notable February Transactions
Feburary was also another hectic month with many trades due to the closing and opening of numerous put options and portfolio rebalancing now that the Singapore-listed stock positions are fully consolidated at the portfolio level. As such, I will focus on the key transactions made in February.
I first highlighted CDON in last month's portfolio update, where I shared that I had been averaging up on the company with a total 5% allocation at the end of Jan 2021. On 4th Feb 2021, CDON announced its 4Q results and the share price tanked ostensibly due to the less-than-stellar growth. However, during the online results briefing, the CEO provided more color to the 4Q results and outlook for CDON moving forward. It soon become clear (to those dialling into the briefing at least) that the sell down was irrational and the share price began to recover (see green arrow in the chart above). I managed to further increase position in CDON with a 7.5% allocation with an overall average price of SEK 465.09. Given the price appreciation of CDON since then, it now forms the largest position in The Snowball Portfolio, around 9%.
Since 3Q20, the FANGMA (Facebook, Amazon, Netflix, Google, Microsoft, Apple) stocks as a cohort have been consolidating sideways despite the improving macro outlook and strong earnings. The FANGMA stocks still have a superior growth profile and are not yet overpriced. Also, they account for more than 20% of the S&P 500 index. Hence, at the macro level, I am of the view that the FANGMA stocks will be a beneficiary of the continued rise of passive investing. Passive fund flows into broad market indices would inevitably flow into the key index components driving prices and valuations higher. As such, I have rebalanced the portfolio to make a 5% allocation to each of the FANGMA names. I think it is a matter of time before the FANGMA stops consolidating, participates in the rally, and pulls up the S&P 500 index higher.
3) Gamestop Puts
I have previously shared my setup for selling Gamestop puts here. I sold the puts on 29th Jan at US$3.85 and closed the position at US$0.38 for a 90% gain on 12th Feb, booking a decent profit of around S$9,200. I had thought that the lemon had been squeezed since the implied volatility evaporated subsequently. Then another spike happened...
So I just took out the same old game plan and sold fresh April 16 puts at a strike price of US$20 for US$1.40. The yield-on-exposure is certainly less attractive at 7% compared to 19.5% the last time around. But still, an attractive risk-reward setup. Based on the last close, Gamestop has to decline more than 80% for me to lose money, which I think it pretty unlikely. That said, I have limited the exposure to less than 6% of the portfolio in the event of exercise. If all goes well (i.e. Gamestop shares remain above US$20 by 16 April), I will pocket S$2,600 in premiums.
Tech stocks have broadly corrected around 20% from the recent highs on concerns of rising interest rates. Meanwhile, Bitcoin and Ethereum have corrected by roughly the same magnitude as well. In the immediate term, I intend to continue to redeploy my option selling premiums into increasing the Bitcoin and Ethereum allocations to 5% each, unless crypto prices rapidly recover. Should the tech stocks continue to correct further by 10% or more, I will likely rotate the non-tech plays into some tech stocks that I have on my watchlist.
Thanks for reading,
Disclaimer: This article is not an investment (buy/hold/sell or otherwise) recommendation, this is only for educational and discussion purposes. This article is not tailored to the specific circumstances of any reader. I/we/The Snowball do/does not purport to be in the business of providing financial advice and the contents of the article should not be regarded as such.
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