This is going to be my first monthly income report about the arbitrage investment strategy that I personally follow, and is a big one with a lot of market news, and position changes inside my arbitrage portfolio.
I share my results with you, mainly for three reasons:
- The Benefit of Full Disclosure
- Share the Knowledge
- Track Performance
“No one should talk about investing if they are not willing to show their actual holdings and performance.”
About my Roth IRA, I am only going to report the portfolio holdings yearly since the performance of this portfolio is based on a target date of 2050 (38 years from now). In order to see last year holdings refer yourself to our First – Annual Arbitrage Portfolio Income Report 2011.
Talking about Roth IRAs something amazing happened in the financial blogger community, thanks to Jeff Rose, blogger of the Good Financial Cents Site.
Jeff decided to raise the investing awareness about Roth IRAs creating a contest in which a community of more than 140 bloggers participated for a grand prize of $5,000.
Here are my two cents about Roth IRAs: How to Build a Roth IRA Income Portfolio.
March 2012 – Arbitrage Income Portfolio Performance
Before we start talking about all the changes inside my portfolio, we need to discuss some key markets event in general; especially about one of my biggest positions AAPL.
• The Dow had one of his the best quarter since 1998 (S&P 500 up +12%), which trigger some important investing rules of my arbitrageur playbook.
• The high yield bond funds “junk” had record inflow, while many other investors exit the municipal bond market. A reason for concern since I am overweight in the junk market.
• AAPL released the new iPad with breaking record sales “3 Million Sold in 3 Days”, this trigger a position change in my portfolio. Since the records sales got me more bullish on the stock. “I decided to get longer the stock”.
• I cover my short AAPL 19JAN13 550.0 Call by rolling it over into AAPL 19JAN13 620.0 Call at a cost of -$3,909.59.
• Then the week after, AAPL decided to instate the long awaited dividend plus a buyback program. Prediction I had long time ago, “Yes, I am long Apple Inc. (AAPL), because I want to be in before they announce a dividend”. Because they needed to do something with the 100 billion dollars of cash in their balance sheet. The main reason I decided to invest in the company. This event trigger another position change in my AAPL holdings.
• I cover my short AAPL 19JAN13 620.0 Call by rolling it over into AAPL 18JAN14 800.0 Call at a cost of -$2,768.60.
• Following my own playbook in how to invest on margin I bought another AAPL 18JAN14 400.0 Call contract by selling short another AAPL 18JAN14 800.0 Call. “I double down my AAPL long position”.
The on balance trade position stands at:-$6,678.20 +$8,985.90 = $2,307.70
• We all know very well all the fundamental reasons to be long AAPL: new iPad sales, the 100 billion dollars plus of cash in their books, the iTunes ecosystem, the possibility for a new iPhone 5 LTE, the possible Apple TV release and statement of a divided payment which will increase the shareholders base. However, I would like to talk about what can go wrong with Apple.
There are not many scenarios that can bring the stock down other than a steep broad market correction. However, there are a couple of critical Black Swan scenarios that can really hurt Apple Stock:
1. A natural disaster or accident on AAPL manufacturing lines; to include his suppliers.
2. A change in the politics and regulations of the manufacturing lines; case on point the Foxconn Situation.
Arbitrage Portfolio Holdings – March 2012
Company Ticker Acquisition Cost Shares Held
APPLE INC COM
APPLE INC COM
BANK OF AMERICA CORPORATION PFD
CORNERSTONE PROGRESSIVE RTN COM
DREYFUS HIGH YIELD STRATEGIE SH BEN INT
DIVIDEND & INCOME FD INC COM
WELLS FARGO ADVANTAGE INCOME COM SHS
WESTERN ASSET GLB HI INCOME COM
EATON VANCE LTD DUR INCOME F COM
FLAHERTY & CRMN/CLYMR PFD SE COM SHS
FIFTH STREET FINANCE CORP COM
GLADSTONE COML CORP COM
WESTERN ASSET HIGH INCM FD I COM
MANAGED HIGH YIELD PLUS FD I COM
MFS SPL VALUE TR SH BEN INT
AGIC CONV & INCOME FD COM
PIMCO INCOME STRATEGY FUND COM
PIMCO GLOBAL STOCKSPLS INCM COM
PIMCO HIGH INCOME FD COM SHS
PROSPECT CAPITAL CORPORATION COM
WESTERN ASSET PREMIER BD FD SHS BEN INT
WHITESTONE REIT CL B SBI
ZWEIG FD COM
ZWEIG TOTAL RETURN FD INC COM
$676.00 200 $3.20 -5%
As you can see there are a lot of changes in my positions since last month. Please allow me to share with you the reasoning behind those changes:
1) Sold AWF, FHY: to cut the high yield market exposure.
2) Sold AWP, GDO: arbitrageur investing rule – Higher Gains than Dividends.
3) Sold DEX, EOI, IGD: these funds are highly correlated with the market and after records high they still show me a loss, bad price action. No other kind of investing analysts is better than the price action, because price is true.
4) Sold FLC, FMY, KMM: for diversification and to reduce the total number of holdings.
5) Sold GGN: the price of gold is breaking and the China GDP concerns are driving commodities prices down.
6) Sold EVN, MAV: outflow of the municipal market are increasing, so I decided to book the profit.
7) Sold 200 shares of ZTR: to reduce market risk exposure.
8) Bought EHI, EVV, PFL, PGP: to increase market exposure and dividend payments, while at the same time reducing the overall correlation of portfolio.
9) Double down on AAPL: arbitrageur investing rule – How to Trade on Margin.
Interest Rate Arbitrage on Balance Performance
The interest rates arbitrage strategy gets rebalanced yearly, refer yourself to our Annual Income Reports.
Market Investing, Google Stock (GOOG), versus Investing in Your Personal Blog: ROI – (-100.00%)
“Because every blogger lives and dies by the power of Google”
Blog Revenues: $0.00
March Blog Expenses: $884.94
Current Blog Equity:-$2,626.90 GOOG Equivalent Shares: 4.18 – ($627.85)
GOOGLE INC COM
GOOGLE INC COM
ArbitragePortfolio.Com Traffic Performance
Number of Backlinks: +1181%
Since we are a new personal finance and investing blog, monthly single keyword tracking is very ineffective. The very reason why, we are only going to track them yearly. However, I would like to monthly identify unique niche opportunities about the topics I discuss in this blog, the basis why we are going to track the title tags of our positing and the key queries that are driving organic traffic to our site. They ranks are as follow:
ArbitragePortfolio Paid Traffic Performance
More than a blog this site is a business; with that purpose in mind I decided to experiment with paid traffic.
The results were not very promising since I did not achieve any sales of The Arbitrageur Investing System, even with a steady source of qualified traffic I only obtained 9 leads so far.
I believe that the problem is not the traffic but the conversion rate and the main reason for this is the lack of a sales video inside the squeeze page and not the copy. At least I think so.
Please visit http://www.arbitrageportfolio.net and let me know, what you think.
Do you want to learn more about the playbook that I follow to achieve these Markets Returns?
Discover The Arbitrageur Investing System!