Alaskan Railroad
The Hawking Portfolio is strictly an “Income” Portfolio with a target return from distributions of at least 8%. Over the past month, TSLOs were hit on four of the funds held in the portfolio (EXG, EOD, IGD and BGB) and current performance looks like this:
Thus, we have seen an ~8% maximum draw-down since the highs in November and this means that yields are presently running relatively high. The screenshot below shows current holdings with projected yield calculated as ~10.4% of current portfolio value (although this is distorted by the unrealistic 63% yield shown for SSSS).
I was a little surprised that four TSLOs were hit – considering that these were set at 3 SD from the highest price reached and, statistically, these only have a 0.3% probability of getting hit. The stops were hit on sharp spikes down (with rapid recovery) – so I suspect some degree of manipulation by big institutional players. However, my broker has solved the problem for me by cancelling all my existing TSLOs.
I chose to replace shares held in EXG and EOD and added positions in two new CEFs – BRW and EIC. The portfolio is therefore almost 100% invested as we HODL (Hold-On for Dear Life) for next month’s distributions.
David
Hi David,
In the Hawking portfolio you own 31 CEF’s out of a total monitored of 40 CEF’s. Some of the CEF’s not owned in the portfolio are generating income above the 8% threshold. For example, GLQ is selling at parity with its NAV but yielding about 11%. Can you elaborate on why you chose the CEF’s that you did for the portfolio and your philosophy regarding the mix of CEF’s? Do you pretty much follow Steve Bavaria’s Income Factory philosophy?
Thanks, Phil
Phil,
I would like to keep this portfolio as close to buy-and-hold as I can – but it does need a little adjustment from time to time (although I don’t have a schedule for this).
My plan is to hold up to 30 funds – at present my “official” count is 29 – the other 2 are just “shards” resulting from distributions of shares in lieu of cash from funds that were sold out of the portfolio. I try to keep these funds reasonably diversified between available asset classes/fund styles (e.g. equity funds, bond funds, real estate, leveraged/unleveraged, option enhanced … etc) but I don’t overly obsess about the diversification and only really worry about it if I have a choice of 2 funds and I need to make a decision as to which one to add to the portfolio. Most of my adjustments result from either getting stopped out on TSLOs or pro-active selling when Rights Offerings are proposed – although re-investment of dividends could also be considered adjustments – but these decisions are more focused on re-balancing (without incurring significant transaction costs).
When I wish to add new funds I will update my CEF “quiver” (that holds more than the 40 funds showing in the Kipling sheet) and rank the funds (very crudely) based on dividend distributions and discounts to NAV. Here’s an example of the table that I used for for my recent adjustments:
https://www.dropbox.com/s/6jar6lj192cgsfa/Hawking%202022-02-05_08-56-24.png?dl=0
The last column is simply Dividend – Discount. As you will see, BRW and EIC were closer to the top than GLQ – but GLQ looks quite good.
I do follow Steve Bavaria and include most of his suggestions for inclusion in the quiver (along with suggestions from others on SA that specialize in this area) but I don’t follow any of his specific portfolios – I construct my own as described above. I don’t try to rotate between the ranked assets on a schedule – as I do with momentum strategies – just pick those at the top at the time that I need to add new assets.
Hope this answers your questions.
David
David,
Very helpful, especially appreciate the table of distributions and discount to NAV as an aid to selection. Thank you,
Phil