FINANCIAL INDEPENDENCE PORTFOLIO UPDATE #5: Staring Down the Maw of a Ferocious Recession

April 28th 2020

  • Target: $1,100,000
  • Current Balance: $719,000
  • Remaining: $381,000
  • Portfolio Appreciation Since November 15th 2019 (4 months): $162,000, $6,000, $115,000

Oh my it’s been a wild ride and there has been a lot of volatility but my portfolio was naturally resistant to the worst of the Covid-19 fueled market pullback. This is primarily due to three reasons.

  1. Heavy exposure to Amazon, Google, Microsoft, and AMD. All of the aforementioned have benefited from the stay at home orders that have locked down the world for the past 45 or so days. I’d like to brag that I saw this all coming and positioned myself such but this was just plain old luck.
  2. Redeployed my ~15% cash holding during the dip. Namely, I picked up positions in ABBV, AKAM, DIS, and FB when they pulled back to attractive valuation. ABBV is an enormous biotech company with a bargain valuation. My stake in ABBV is an attempt to get some skin in the game in the biotech sector in anticipation of the influx of research dollars in the wake of the pandemic. AKAM is a content delivery network and hosts much of the media that people have been consuming from home. Similarly, my position in Facebook was to gain exposure to the new post-Covid behaviors patterns of staying indoors and reading endless shitposts spawned from the collective boredom of humanity. That and the stock was unfairly punished during the initial dip. Disney was purchased at the 80 dollar range and is what I consider to be my riskiest new position. Disney’s theme parks are closed and that money printing machine is on hold indefinitely but their foray into online streaming as well as their wealth of content is what lead me to enter a position.
  3. Taking advantage of extreme levels of implied volatility by selling covered calls and cash secured puts. The market has been whipsawing in an attempt to price in the economic impact of Covid-19. This results in wild swings and high levels of implied volatility that drive options premium pricing. Rather than being on the speculative buying end of the options game I am opting to be on the selling end. There is an adage that says during the American gold rush, the people that made the most money were those selling shovels. I’ve been watching hawkishly for multiple consecutive up or down days and have been selling far out of the money calls or and near in the money puts respectively. This has allowed me to generate free cash to put on the market in the event of further testing of market lows.

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