YTD (3Q15) Performance Update: October 2015

YTD performance (as of 9/30/15): -7.16%

S&P performance (as of 9/30/15): -5.29%

Common Cents Portfolio is down by 1.87%!!

Portfolio Composition by Position:

AAPL:  14%

V:  11%

RH:  9% 

LUV:  9% 

BP:  8% 

CLNE:  5%

T:  5% 

HD:  3% 

GLD:  3%

HZNP:  2% 

CASH:  31% 

Portfolio Composition by Sector/Industry (excluding cash):

Retail:  19% 

Technology:  19%

Energy:  18%

Financial Services:  17%

Industrials:  16%

Communication Services:  8%

Healthcare:  3% 

3Q15 Review: Common Cents did not distinguish itself in the third quarter.  Significant losses were obtained due to the "call options experiment." The poor performance trading options has accounted for a significant portion (estimated at 5% - 10%) of the portfolio's underperformance since mid summer.  It's good news that the actual positions themselves are outperforming the S&P; however, the losses due to options trading has been abysmal.

There was quite a bit of volatility during the 3rd quarter due to fears of a slowdown in China, and probably some other headline events that escape me at the moment.  The gist of the current China conversation is that mining/manufacturing (and related) industries are slowing in China, but the consumer and service industries are growing.  This is the result of a socioeconomic population shift from rural to middle class.  In short, the middle class is growing in size and wealth, and is likely looking to shift spending from necessities to luxuries.

Common Cents attempted to capitalize on this volatility through use of options, along with some purchasing of common stock.  The options strategy inflates both your good and bad guesses.  In addition, it pits you against time, which is what my traditional portfolio management strategy attempts to negate.  I am still gathering data to see if there is room in the portfolio for options trading; however, I have single-handedly wiped out my gains for the year while attempting to figure it out.

Going forward, I will continue to modify the options strategy and will perform a review at year-end to see if the strategy is appropriate for the Common Cents portfolio.  Looking into the future, it appears that the restlessness (volatility) has subsided momentarily; however, future fed funds rate hikes will likely cause individuals to move assets from stocks to bonds.  This will likely cause some level of declines in most stocks; however, the magnitude and timing of these moves is anybody's guess.