Portfolio Management for November 7, 2016

On Thursday, I opened a long 1/2 TGP position because the TGP earnings looked very good, especially for the longer-term. TGP builds and rents out LNG (Liquefied Natural Gas) ships. This is a capital intensive business similar to a utility, because investment must be made in infrastructures before income can be cashed in. There is therefore a lag between cash in/out and an investor needs to look at the investment with a 12 to 24 months viewpoint. Hence, TGP is probably not the best stock to own in a short-term portfolio. It is best made for the dividend portfolio, which has been dormant for a long time. Hence, I will keep it here for now, but I might transfer it to the dividend portfolio later.

TGP offers a 4% dividend. In 2015, the stock price fell down from $37 to $10 as oil prices were falling down and uncertainties about the financing of new ships forced the company to cut its dividends.

The latest earnings report was filled with good news such as continued profitability, long term charter contracts already signed for non-finished ships and access to financial markets. The only negative aspect about TGP is that it belongs to a shipping group of companies (TK and TOO) that look much more fragile than TGP and hence, we could suspect that at some point, the management could use the cash of a strong company to finance a weaker one.

Anyway, I feel that the business model is very stable. This is a cash generating company with good/stable growth prospects and a very conservative management. I believe that the price pullback that started two weeks ago is entirely due to passive funds pulling liquidity from safe US assets.



Coming back to the Friday activity, I started detecting a bounce in the morning and decided to buy QLD and XLE





The bounce seemed to fail in the afternoon, but I decided to keep the positions over the weekend as I thought that the selling was due to daytraders who did not want to keep a long position over the weekend. I also believed that we would have a relief rally even before the elections results will be known. It is also true that the longer term positive divergence on both the NQ and the energy sector reinforced my conviction.... but I did not dare increasing the long positions by the close, simply because they were under water.






Now, the FBI decision of yesterday is a big relief for the 50% long portfolio.



The only problem is that the trade ideas that I generated before the FBI decision was known all point to oversold long trades (the short ideas are also market long positions.) None of the ideas below will trigger today because we will open on a large gap-up.



In a gap-up after a long downtrend, the best is to buy at the open and hope that funds will push prices higher when they come in starting at 9:50 AM. If after 10:00 AM the price falls below the open, then you need to exit the trade.

Since I am already 50% long, I will not have the urge to buy the open.