ETNs Of The Month: GLDI, USOI

First, a sale!  Facebook (FB) triggered a sale after declining 20% from its all-time high.  First bought in January 2016, it was repurchased seven additional times but not since May 2018.  It was sold for a 159% gain (17% annualized).  Facebook is a cash cow which seems to have squeezed every imaginable dollar from its current platforms.  Facing an uncertain future with its announced pivot to the Metaverse™ as well as increasing regulatory scrutiny, I am more comfortable owning FB via QQQM and not directly.  

The proceeds from this sale were directed into my favorite basket of yield ETF/Ns:  the index covered calls of QYLD, RYLD, and XYLD; the covered calls of SLVO (silver, previously bought); and new covered calls GLDI (gold) and USOI (oil).

As noted in July, SLVO's yield was an unsustainable 35%; it is currently 28%.  GLDI and USOI are currently yielding 11% and 24% respectively.  Anything above the index covered calls' range of 9% to 12% is a bonus.  Adding GLDI and USOI to SLVO will result in more reliable, less lumpy overall monthly cash flows.

Boilerplate time...

As a stretch goal: for dividend income purposes, I'd like this portfolio to eventually be as much as a 50/50 split between stocks and yield. As seen below, it is currently 54/46.

I am in no rush to flip into yield. I would rather let my winners run forever. However, if in any given month I see no stocks that present themselves as especially good buying opportunities, I have no reservations in simply adding to my bond, preferred stock, and/or covered call ETF/Ns. It is truly a month-to-month situation (as it has always been!).

For the foreseeable future, I want to track my Big Five Two every month, whether I buy them or not.

Amazon (AMZN)

• $1.73T market cap
• no dividend
• $458.0B revenue
• 15% revenue growth
• $79.0B cash
• $152.8B debt
• $54.7B operating cash flow
• $9.3B free cash flow

Microsoft (MSFT)

• $2.42T market cap
• 0.8% dividend yield
• $176.3B revenue
• 22% revenue growth
• $130.6B cash
• $78.9B debt
• $82.0B operating cash flow
• $49.8B free cash flow

Here's my current portfolio (buy, hold, and sell). As always, I believe in all of these stocks/ETF/ETNs - until I sell them.

Microsoft (MSFT) 16.16%

Amazon (AMZN) 12.48%

Global X U.S. Preferred ETF (PFFD) 11.77%

iShares Broad USD High Yield Corporate Bond ETF (USHY) 11.73%

Xtrackers USD High Yield Corporate Bond ETF (HYLB) 11.60%
Invesco NASDAQ 100 ETF (QQQM) 7.21%
Alphabet (GOOGL) 5.75%

Global X NASDAQ 100 Covered Call ETF (QYLD) 3.79%

Invesco NASDAQ Next Gen 100 ETF (QQQJ) 2.82%
Intuitive Surgical (ISRG) 2.69%

Global X Russell 2000 Covered Call ETF (RYLD) 2.43%

Global X S&P 500 Covered Call ETF (XYLD) 2.34%
Costco Wholesale (COST) 1.70%

UnitedHealth Group (UNH) 1.51%

Verizon (VZ) 1.09%

Visa (V) 1.06%

AT&T (T) 0.94%

Credit Suisse X-Links Silver Shares Covered Call ETN (SLVO) 0.84%

Credit Suisse X-Links Crude Oil Shares Covered Call ETNs (USOI) 0.75%

Credit Suisse X-Links Gold Shares Covered Call ETN (GLDI) 0.75%

ProShares UltraPro QQQ (TQQQ) 0.10%

ProShares UltraPro S&P 500 (UPRO) 0.04%

ProShares UltraPro Russell 2000 (URTY) 0.03%

ETN Of The Month: SLVO

This month's choice may seem like a reeeeeeeeach for yield...and perhaps it is.  Having previously dipped my toes into the covered call strategy, I'm now diving in.  My investment thesis is as follows:

• The covered call strategy for monthly dividend income is a successful one, given that the underlying asset will support it.
• Silver is a time-tested store of value; a secondary one to gold, but perhaps relatively undervalued (a currently popular sentiment among a subset of commodity traders).
• Silver is also an essential raw material for technological purposes, which should see increasing demand in the future.

So far, so good.  Now the risk which will throw many red flags:  SLVO's current dividend yield is 35%.  This is clearly not sustainable.  My expectation is that the yield will bounce (down and) around, with a floor in the range of my other covered call investments of 9% to 12%, which is more than acceptable.  In the meantime, I will enjoy the 35% while it lasts.

Boilerplate time...

As a stretch goal: for dividend income purposes, I'd like this portfolio to eventually be as much as a 50/50 split between stocks and yield. As seen below, it is currently 54/46.

I am in no rush to flip into yield. I would rather let my winners run forever. However, if in any given month I see no stocks that present themselves as especially good buying opportunities, I have no reservations in simply adding to my bond, preferred stock, and/or index covered call ETFs. It is truly a month-to-month situation (as it has always been!).

For the foreseeable future, I want to track my Big Five Two every month, whether I buy them or not.

Amazon (AMZN)

• $1.73T market cap
• no dividend
• $419.1B revenue
• 44% revenue growth
• $73.3B cash
• $101.5B debt
• $67.2B operating cash flow
• $31.4B free cash flow

Microsoft (MSFT)

• $2.04T market cap
• 0.8% dividend yield
• $160.0B revenue
• 19% revenue growth
• $125.0B cash
• $81.3B debt
• $72.7B operating cash flow
• $37.8B free cash flow

Here's my current portfolio (buy and hold). As always, I believe in all of these stocks/ETFs - until I sell them.

Microsoft (MSFT) 13.85%

Amazon (AMZN) 12.89%

Global X U.S. Preferred ETF (PFFD) 12.33%

iShares Broad USD High Yield Corporate Bond ETF (USHY) 12.14%

Xtrackers USD High Yield Corporate Bond ETF (HYLB) 12.03%
Invesco NASDAQ 100 ETF (QQQM) 6.65%
Alphabet (GOOGL) 5.09%

Global X NASDAQ 100 Covered Call ETF (QYLD) 3.34%

Facebook (FB) 3.18%
Invesco NASDAQ Next Gen 100 ETF (QQQJ) 2.96%
Intuitive Surgical (ISRG) 2.65%

Global X Russell 2000 Covered Call ETF (RYLD) 2.28%

Global X S&P 500 Covered Call ETF (XYLD) 2.18%
UnitedHealth Group (UNH) 1.38%

Visa (V) 1.30%
Costco Wholesale (COST) 1.30%

Verizon (VZ) 1.22%
AT&T (T) 1.20%

ProShares UltraPro QQQ (TQQQ) 0.05%

Credit Suisse X-Links Silver Shares Covered Call ETN (SLVO) 0.04%

ProShares UltraPro Russell 2000 (URTY) 0.02%

ProShares UltraPro S&P 500 (UPRO) 0.02%

ETFs Of The Month: QYLD, RYLD, XYLD

I have sold all of my previous holdings in the iShares Core U.S. Aggregate Bond ETF (AGG) at a slight loss.  The proceeds from this sale, plus some of my existing cash reserves, were used to:

• add the usual monthly purchases of HYLB, QQQJ, QQQM, and USHY;
• add a large "catch-up" purchase to PFFD; and
• initiate purchases in three "Covered Call" ETFs:  QYLD (NASDAQ 100), RYLD (Russell 2000), and XYLD (S&P 500).

These covered call ETFs are an idea I've been looking for ever since I started investing - I've just discovered that they actually exist.  Everybody knows that on average over the long term, the market goes up 8 to 12 percent per year...just not in a straight line.  Covered call ETFs approximate these long term returns by owning the underlying assets (in these cases, stock indices) and selling calls (in these cases, stock index options) against those assets, turning capital gains into monthly dividend payments.  The prices of these ETFs follow the overall performance of the assets, with dampened volatility:  investors are forgoing the potential of excess total returns (and paying an expense ratio of 0.6%) for more immediate cash flows.

Boilerplate time...

As a stretch goal: for dividend income purposes, I'd like this portfolio to eventually be as much as a 50/50 split between stocks and bonds. As seen below, it is currently 53/47.

I am in no rush to flip into bonds. I would rather let my winners run forever. However, if in any given month I see no stocks that present themselves as especially good buying opportunities, I have no reservations in simply adding to my bond and/or preferred stock ETFs. It is truly a month-to-month situation (as it has always been!).

For the foreseeable future, I want to track my Big Five Two every month, whether I buy them or not.

Amazon (AMZN)

• $1.54T market cap
• no dividend
• $386.1B revenue
• 44% revenue growth
• $84.4B cash
• $101.2B debt
• $66.1B operating cash flow
• $36.6B free cash flow

Microsoft (MSFT)

• $1.77T market cap
• 1.0% dividend yield
• $153.3B revenue
• 17% revenue growth
• $132.0B cash
• $82.9B debt
• $68.0B operating cash flow
• $34.8B free cash flow

Here's my current portfolio (buy and hold). As always, I believe in all of these stocks/ETFs - until I sell them.

Microsoft (MSFT) 12.91%

iShares Broad USD High Yield Corporate Bond ETF (USHY) 12.89%

Global X U.S. Preferred ETF (PFFD) 12.89%
Xtrackers USD High Yield Corporate Bond ETF (HYLB) 12.84%
Amazon (AMZN) 12.49%
Invesco NASDAQ 100 ETF (QQQM) 6.11%
Alphabet (GOOGL) 4.63%

Global X NASDAQ 100 Covered Call ETF (QYLD) 3.50%

Facebook (FB) 2.86%
Invesco NASDAQ Next Gen 100 ETF (QQQJ) 2.80%
Intuitive Surgical (ISRG) 2.28%

Global X Russell 2000 Covered Call ETF (RYLD) 2.20%

Global X S&P 500 Covered Call ETF (XYLD) 2.17%
UnitedHealth Group (UNH) 1.40%

Verizon (VZ) 1.39%
AT&T (T) 1.38%
Visa (V) 1.27%
Costco Wholesale (COST) 1.25%