YTD (2Q15) Performance Update: July 2015

YTD performance (as of 5/31/15): +0.47%

S&P performance (as of 5/31/15): +1.23%

Common Cents Portfolio is down by 0.76%!!

Portfolio Composition by Position:

AAPL:  13%

V:  10%

RH:  9% 

LUV: 7% 

CLNE: 7%

BP:  6% 

AGNC:  5%

T: 5% 

HD:  5% 

GLD:  3%

CASH: 31% 

Portfolio Composition by Sector/Industry (excluding cash):

Retail:  21% 

Technology:  20%

Energy:  17%

Financial Services:  15%

Industrials:  11%

Real Estate:  8%

Communication Services:  8%

2Q15 Review: The second quarter of 2015 was going gangbusters-the Common Cents portfolio was significantly outperforming the S&P.  However, maybe out of greed or boredom, Common Cents purchased call options for CLNE in hopes of making a small quick profit.  The trade immediately turned south and wiped out the majority of the years profits.  In addition, LUV was a significant underperformer due to certain seemingly negative news releases, which amplified the CLNE mistake.

Why is the CLNE option trade a mistake?  Common Cents purchased the options with no other conviction than, "it will probably go up and earn us a quick buck."  While the long-term prospects are still intact, and still speculative, making a "leveraged bet" using options amplified the volatility typical of this position, which exposed the portfolio to a significant amount of risk.  Lesson learned.

The CLNE trade has recouped some of its value but is still highly volatile.  The trade still has potential to regain its value, or even to turn a profit, based on the conservative way in which it was purchased.  However, the short-term headwinds are not in CLNE's favor, and the earnings report on August 5 will be key to exit this trade with minimal detriment to the portfolio.  The good news is, the rest of the portfolio is continuing to perform well. The damage due to the CLNE trade has reached its near-full effect, and performance can only improve from here.

Common Cents Take: The CLNE option trade wiped out the entire half's gains in a matter of a few days.  Options increase the volatility of the portfolio dramatically, especially when purchased for a volatile stock.  These trades should receive increased scrutiny before purchasing for a short profit.