TIB: Today I Bought (and Sold) - An Investors Journal #3 - Italian Banks and Oil Drillers

The week started kind of crazy. A new Italian Prime Minster and I bought Italian banks. Also went into more offshore oil drilling. This is the December 12, 2016 activity - some trades and some techniques I use

Bought

Unicredito (UCG.MI) - bought both stock and options. You must think I am crazy. UCG has been beaten down almost back to the bottom of the GFC - I doubt there are many sellers left. I am thinking they have written off most of what they have to write off. That is what the European Central Bank (ECB) stress tests require. When I compare them with Bank America (BAC - in blue) I see a big gap in the chart.

If price gets back to where it was 12 months ago, I will more than double my investment for no more risk than the cost of a weekend away. For the options I chose to be in the money (strike price is below the current price = €2 strike vs €2.57 current price). I paid €0.98. I could get options expiring in Dec 2019 and I have only to recover €0.41 of time value to break even and there are 3 years to go. Either this will sink with the new Prime Minister - only been 60 since the end of WWII - or I will double my money and I have 3 years to be right.

Royal Dutch Shell (RDSA - listed in Amsterdam)- added to Jan 20 Call 28 holding I have had for a while. I do hold the stock and Jan 20 Call 24 which are in the money and Jan 20 Call 28 which are out the money. I like to staircase the options (my invention) so that I gain the kicker of the delta. This is a bit technical. I hold a series of options at different strike prices. As the stock moves up the staircase I close the bottom rungs and buy new rungs higher up. When a call (Means: right to buy) option is below the strike price, there is a gap between the way the stock moves and the price moves (they call this the delta). As the stock price moves closer to the strike price the gap begins to close - delta gets squeezed and I get a delta price kicker.

Why do I hold Royal Dutch Shell? It tends to lag the big US oil companies like Exxon Mobil and Chevron. If I miss the big move, I can catch up or benefit from the catch up. More importantly I can buy options with 2019 and 2020 expiries - more time to be right.

Now you will want to know why and when I bought Royal Dutch Shell anyway. I had Exxon Mobil in the portfolio I took over from the fund manager. Oil price bottomed in Jan 2016 and I added to that position. RDSA lags because it is listed in Europe. I track the ratios between the stocks and saw this chart turn over - time to add RDSA and not load up any more on XOM and benefit from the catch up.

Very soon RDSA will have caught up with XOM and I have scored more on the catchup.

[Explain: This chart maps what happens if I buy the first stock (XOM) and sell the second stock (RDSA). This is shown this way XOM:RDSA. When the chart is rising - the first stock is doing better. When it turns over the second stock is doing better]

I also added to a small position I have in an Australian gas producer - Karoon Gas (KAR.AX). They have some solid gas assets in Australia but they are exposed to the Brazil corruption scandal - this is never good for stock prices but markets always over-react. When they do, I buy more. I will ride the storm out or lose my small investment.

Oil drillers. The oil patch has had a tough time. As the oil price improves the oil service companies will improve with a lag to the big producers. While the oil price has been down the big guys like Exxon and Chevron and Royal Dutch Shell and BP have been cutting costs like crazy - the service companies have paid. As oil price rises the producer share prices will rise. The service companies will follow. I have been invested here for a while through the big players. We got a big kicker to the oil price with the extended OPEC deal announced last week and today. This means that oil producers will come back to producing - the highest cost way of producing oil will turn around last = offshore drilling which is the most expensive way to produce oil.

I used the same tools to identify when the big oil drillers (e.g., Transocean - RIG) would turn. Oil price had turned. XOM had turned. When would RIG turn?

The charts tell me April/May 2016 and I bought in May 2016. The smaller players will follow. I have added a few others recently (e.g., ORIG). Some are now showing signs of breakout and today I added Gulfmark Offshore Services (GLF). Chart shows I may be early.

They have a solid fleet of offshore service ships. I will add a few different stocks so I reduce the impact of one going bankrupt - (Hercules Offshore (HERQ) was consolidated last week on a deed of arrangement - I may lose my small investment)

Vodafone. Vodafone is the world's second largest mobile phone company operating in 26 different countries. Their history has been a travesty of borrowing too much and growing too fast. I invested because they are #2, and because their price to book ratio is less than 1 (i.e, the market thinks they are worth less than their assets), and because more than 60% of their earnings are not in Pounds - this means that their Pound earnings will look just fine with a weak Pound. The price has not truly shown a solid bottom - so I made a small purchase - if I am wrong I will keep adding until I see the bottom. After the fact I see the buy:sell chart with British Telecom shows this turned over nearly 12 months ago - missed finding that sooner.

Cryptocurency

Now I do invest in Cryptocurency too. I currently run mining pools in Bitcoin, Ethereum and Zcash. I am also building a presence in Steemit. My strategy here is to focus my resources on the cryptocurrency where I can dictate the outcomes or where I think a "mine and hold" strategy will pay. I love Ethereum as a concept but I have some misgivings about their ability to get some real applications going. However, I do see great possibility with Steemit. I can manage content and get rewarded and the more Steem Power I have the more power I have. I have been steadily selling ETH (and ETC which came from the DAO hard fork) and buying STEEM. I did some more today - not a huge whack in ETH but all I had was sold for STEEM. The plan here is to power up in blocks of 100 so I can avail myself of periodic Steemboost boosts.

I made a video showing the steps to go from ETH to BTC to STEEM using Bittrex

Currency Trades

Added long GBPJPY as part of the JPY breakout patterns I am following. It retraced a little to a level and I traded the continuation. I will not be adding any positions against the USD with the Federal Reserve meeting going on. We know what they will do but the words they say may change the course of markets

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. I do participate in an investing group - some of the ideas flow from there.