First Half Trading Update

It’s been a month since I last initiated a group of new buys on the swing trade front. Below I’ll outline the two new trades I put on this week, the one trade I exited, and the two trades that failed to achieve my desired outcome. As this isn’t my regular mid week post, there aren’t any linked articles below….. but I have been thrilled with the feedback I’ve received about that new feature.

Long Term Investments-

I want to preface all this by saying that our preference is to make long term investments, but given current valuations we don’t see many any appealing ones at this time. Therefore, we’ve been making small swing trades as a way to generate a little return while keeping our accounts largely liquid. Our swing trades have only generated about $5k so far this year, but those returns are much better than we would have gotten in a money market account. I think foreign equity markets looks more appealing than the US market at this time……although the financial, healthcare, and energy sectors in the US could be worth a look in a couple months…..if the current under performance continues.

Our preference continues to be in making longer term investments. Last year we were fortunate to keep our head on straight when Union Pacific’s (UNP) stock was collapsing along with oil. It felt good to sell the shares we purchased at $70, a year later for $109. A solid 55% return in little over a year. Union Pacific is a company we like quite a bit, but we decided to sell a little over half of our position to lock in profits. In my opinion, one of the following needs to happen in order for Union Pacific shares to justify a higher valuation:

  1. Oil prices need to climb substantially from here…..thereby making oil production in the Bakken shale profitable and restoring the significant profit center that is hauling oil.
  2. A significant uptick in American trade

Neither look likely to me, so we decided to lock in our profits. Our remaining ownership shares in Union Pacific will continue to work for us, as we like the company’s efficiency and barriers to new competition. At least until commercial teleportation becomes a viable alternative for hauling freight :)

2 Year Chart- Yahoo Finance

UNP 2 Year Chart- Yahoo Finance

Earlier this year we were fortunate enough to spot a great opportunity in shares of Novo Nordisk (NVO). Over the last two months we have benefited from a 25% return from this purchase. The reasoning for purchasing these shares can be found HERE, but this purchase wasn’t all roses and unicorns. Unfortunately, we were so late to the party that we only got the chance to invest half of the $20k we were hoping to put to work in NVO. No matter, and no sense being greedy. We are happy for the return and believe the company’s shares still have quite a ways to run. The biggest reason for this confidence is that Europe’s shares have only begun to gain favor with investors again. Over the last several years they have been largely shunned. With this in mind, I believe investor’s cash will give European large capitalization stocks a decent tailwind. We like the company’s market position, and aren’t likely to sell in the near term. Ideally, we would hold this stock for a few years.

1 Year Chart-Yahoo Finance

NVO 1 Year Chart-Yahoo Finance

Swing Trades-

Unfortunately, we are completely dependent on Mr Market to offer us opportunities. Unlike other aspects of our lives, it is really a bad idea in investing to go out and try and “make something happen”. When speculators feel like they MUST do something, they often end up losing. That is one reason why I think my background as a surfer really helps me invest, it encourages me to be patient and wait for the right opportunity. That being said, the opportunities don’t always last as long……. or have as much upside……. as I would prefer. This year we have been very happy with our swing trade approach, especially in the volatile precious metals space. Our swing trades on Franco Nevada (FNV) and Pan American Silver (PAAS) have returned 21% and 12% respectively. Combined we have profited $3,300 this year while never employing more than $15k…..and we feel pretty darn good about that. We sold out of the rest of our Franco Nevada position, and hope to get the opportunity to buy it again at lower levels. Our preference would be to have our portfolio completely invested, but…… well, we already covered that above.

All of our trades (and investments) did not go our way however. Sometimes I was just wrong. Other times the company’s operations took a negative turn after we’ve invested. We lost $1300 on a remnant position in BHP Biliton (BBL), that we purchased a few years ago.  It was intended to be a long term investment, then the company began to struggle.  It makes me feel good that we sold our stake 20% above Friday’s closing price, but it doesn’t change the fact that we bought a large position just as the wheels were falling off the Australian mining giant. At least we picked up substantial dividends along the way, and successfully timed our exit. We also lost $400 when we sold half of our position in Fortuna Silver Mines (FSM), but again it was at higher levels. Silver miners generally look weak at the moment, but I like their longer term fundamentals. We are watching closely for the chance to swing trade Pan American Silver and add to our Fortuna position.

Not all positions turn out as winners or losers of course. Some just end up being dead money. Such has been the case on my latest swing trade with Iradimed (IRMD). I have written in the past about making a few hundred dollars here and there swing trading this small capitalization stock, but unfortunately I missed my latest opportunity to exit this position. I should have been paying attention a few weeks ago when the shares spiked to $9 per share one day. (I should have listened to my friend Bjorn…..who texted and emailed me to get the hell out.) Anyway, I was off having fun with the family and wasn’t anticipating the spike. Flexible independence isn’t about being chained to the computer watching stock prices bounce around. I will likely exit this position soon at a break even.

VDSI 6 Month Chart-Yahoo Finance

VDSI 6 Month Chart-Yahoo Finance

Likewise with our position in Vasco Data Secutity (VDSI). We are up slightly on this trade, but it took so long for investors to realize this company’s potential that a fair bit of overhead resistance has developed. We are currently looking to exit our swing trade around $14.95, which is the 200 day moving average……. at that point we will reevaluate.

This week we initiated a swing trade in the Archer Daniels Midland Company(ADM) and added to our existing swing trade in Klondex Mines (KLDX). ADM operates in an extremely cyclical industry and sentiment is just too low. While I wouldn’t make it a long term buy at these levels, it seems like a reasonable risk. I’ve been both trading and investing in ADM for a decade now, and been very happy with the results. Klondex is certainly just a swing trade as I will never make a long term investment in the precious metal mining industry, but it seems too cheap to ignore. Time will tell if I am right!

Obviously, we are not the “world’s greatest traders” or any such thing. Such titles are reserved for folks like Druckenmiller and Soros, but on the whole our trading produced very nice returns while putting little capital at risk. Our long term positions have continued to rise along with the overall bull market of course, but picking up a few extra percent(on our overall portfolio) by swing trading (and barely risking any capital) is a nice exchange in my mind. Eventually, long term opportunities will emerge again….and we stand ready. In the mean time we’re looking to pick up $500 here and there, while we kill time. I don’t recommend this approach for other investors, but it has helped us meet our objectives.  Just remember, you make your money when you enter the trade at the right price…..no matter the asset.

Disclosure: We are long NVO, FSM, KLDX, IRMD, VDSI, UNP, and ADM. This update is for informational purposes only and should not be considered a recommendation for anyone to buy, sell, or hold any equities. I am not a financial professional. The information above is provided by Yahoo Finance.

12 thoughts on “First Half Trading Update

    1. Income Surfer Post author

      Glad you enjoyed it BHL. We prefer longer term investments, and tend to do much better on them, but these swing trades have been an interesting experience for us. I hope you’re having a great weekend.
      -Bryan

      Reply
  1. Meow

    Sweet! ADM has caught my attention too. I like their dividend. You seem to be pretty experienced with ADM, at what point do you think they’d make a long term buy?

    Reply
    1. Income Surfer Post author

      Thanks for stopping by Meow. Love the kitty mascot by the way. So I first bought ADM back in 2008 in the low $20s, held it through a series of disappointments, added to it in 2012 in the mid $20s, and finally gave up…..throwing in the towel at a profit a couple years later. ADM’s shares then continued into the $50s, before plunging to below $30 in early 2016. As you can see, ADM’s industry is pretty volatile…..and its margins are very small. The good thing that happened after I sold, and the reason we’d consider a long term purchase of ADM’s shares again, is they have made some progress in repairing the balance sheet. Until a couple years ago, the company was far too indebted and highly leveraged to Ethanol. Thank God they got over that.

      We will probably start accumulating a meaningful position if/when the price gets down around $36. At present levels it is only a short term trade for us. Consolidation within their industry could improve the business metrics, but it would have to go beyond the rumored Glencore-Bunge deal. Even though we don’t give advice to others, I would suggest that there are better businesses in better industries…..if you are looking for a long term stock purchase. I hope you’ve had a great weekend
      -Bryan

      Reply
    1. Income Surfer Post author

      Thanks Jay, I’m glad you enjoyed the update. Yes we’ve been enjoying small but steady profits on these little swing trades. Staying patient and waiting for the opportunities to pour in again. Hope you have a great week
      -Bryan

      Reply
  2. Roadmap2Retire

    Thanks for the update, Bryan. Looks like some really good trades in the books. Congrats on the good returns.

    I own a few shares in ADM and have owned them for years. I haven’t looked at the valuation in a long long time…will need to take a look after reading your article.

    Best
    R2R
    Roadmap2Retire recently posted…Outlook for June 2017My Profile

    Reply
    1. Income Surfer Post author

      Nice Raptor. If the puts are far enough out of the money they may even be worth taking the shares. I’ll take a look. Have a good week and happy hunting
      -Bryan

      Reply
    1. Income Surfer Post author

      Thanks for the kind words Time. Our nature is not to be a trader, but doing so with a small amount of capital has worked out well for us. Thanks for sharing your thoughts on Europe’s valuation. I hope you have a great week
      -Bryan

      Reply

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