Sold HAWK

I don't have time to do a full write-up, but I wanted to post that I sold my 1,000 shares of HAWK at $7.45 today.  My purchase price was $9.11, so I ended up lossing about $1,660 on this position... oh well, I guess you can't win em all.

Options are weird...

As you may recall I purchased 75 SuperValu (SVU) Jan 2013 $15 LEAPS back in December.  The contract price back then was $.50, so including commissions my cash outlay was $3,810.  Back when I purchased these LEAPS SVU stock was trading around $8.60. 

Earlier this morning SVU released earnings and they were absolutely horrendous, in fact as I type the stock is down about 13% to $7.50.  HOWEVER, I was actually able to sell my contracts for $.70 today, which after commissions came to $5,195!! 

So, just to recap, in the past month SVU's stock has fallen about 15% while the LEAPS have gone up 36%... did I mention options are weird?

All's well that ends well???

2010 was interesting, for most of the year my returns lagged the S&P (click "Returns" under labels for all the details).  In fact, going into Q4 my portfolio was DOWN 2.8% whereas the S&P was UP 3.5%.   This being the case, I didn't think I'd actually beat the market this year (btw I'm sure there will be PLENTY of years where I lag the S&P).  Luckily, during the fourth quarter things turned around, and several of my holdings did quite well:

• SandRidge - I purchased SandRidge 2012 LEAPS at the end of August for $5,387 and as of year end they're worth $13,600 (for a total return of 152% in just over 4 months).  Click here for the original post: http://mevsemt.blogspot.com/2010/08/fool-me-once.html
• Jackson Hewitt - I bought Jackson Hewitt call options in the middle of September.  This started as a very speculative $525 bet, but now these options are worth $4,140.  Here are the related posts: http://mevsemt.blogspot.com/2010/09/all-or-nothing.html and http://mevsemt.blogspot.com/2010/12/jtx-follow-up.html.
• Sears - I bought 2013 LEAPS in November and December (http://mevsemt.blogspot.com/2010/11/transaction-alert-sears-holdings-2013.html and http://mevsemt.blogspot.com/2010/12/more-sears-leaps-in-eddie-we-trust.html) for a total outlay of $9,323.  Sears stock has jumped since then, and so has the value of the LEAPS (which are now worth $13,500).

So where does that leave us?  Well, I started 2010 with $107,514 and finished with $126,967 (this number is actually understated, see footnote [1]).  I didn't make any deposits or withdrawals, so this increase is straight appreciation: 

• On an absolute basis, my portfolio gained 18.1% for the year while the S&P (w/ dividends reinvested) was up 14.6%. 
• I've been tracking my returns for 5 years, during which time my annual rate of return is 18.4%.  Had I invested in an S&P index fund (and reinvested dividends) my annual returns would be 4.4%. In other words, I've outperformed the S&P by 14.0% per annum. 
• Click on the "My Returns So Far..." link to the right for full details and to see how this outperformance translates into real dollars - it's actually pretty significant.

Now I should stress that the 2010 11th hour outperformance could be dumb luck.  I've mentioned this many times before and I'll do so again: my portfolio is VERY concentrated and it tends to bounce around A LOT (click the image below to see my current portfolio along with any gains/losses, I included the bottom screen shot b/c it show my cash balance).

Now with all that out of the way, what are my thoughts going into 2011?  Well, the recent market rally has made me pretty nervous about both valuations in general and my portfolio in particular.  Following is a brief discussion about my portfolio as well as a few names on my watch list:

• I'd like to increase my cash position after the recent run up.  In fact, I could see it going over $30K in the near future.  I have to sell JTX b/c the options expire in a couple weeks.  I'm also considering selling COV/HAWK outright and maybe trimming a few other positions.
• My watch list is perhaps as small as it's ever been.  It includes CSCO, BAC, NRG, and maybe 2 or 3 other names.  These names haven't participated in the recent market rally and IMO could be somewhat resilient if the market pulls back.
• Call me crazy, but I think something could happen with Sears in 2011.  Of course I have no idea what that "something" might be, but the possibilities include selling real estate, increased brand distribution, a short squeeze... heck, I've even read speculation that Sears, Autozone, and/or Autonation could merge one day.  I should also emphasize that my purchase of Sears LEAPS had nothing to do with any of this (but it's fun to speculate!).
• I think SandRidge will continue to do well.  It was one of the first natural gas E&P companies to focus on oil and it did so very aggressively.  Also, recent (and future) asset sales have given the market a glimpse into how valuable this company could be, and the stock has responded accordingly.
• Lastly, I think we might see TTT make an acquisition.  I think the company's significant cash hoard is burning a hole in Michael Smith's pocket, and I'm very interested to see if he can come up with something. 

Well, that's about it... I'd like to wish everyone good luck heading into the new year, and if you have any questions/comments I can be reached at mevsemt@gmail.com.

[1] The $126,967 is understated because TTT is trading ex-div BUT the spunoff KHDHF shares haven't been deposited in my portfolio yet (b/c KHDHF is traded in Germany).  Anyway, my 2,268 shares of TTT translates to 226 shares of KHDHF.  Since KHDHF closed the year at $9.00 these shares are worth $2,034.  This means my portfolio balance is really $129,001, giving me a return of about 20%, but for consistency I'm going to stick with my official statements as reported by TradeKing.