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Re-visitng Past Blogs

Richard Croft
June 3, 2014
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In this Blog I occasionally follow up on previous recommendations. Taking some credit where due and blame when trades are not so successful. The idea is to engage in self-examination with the hope that it will make us better traders.

I began 2014 with the Blog “New Year Optimism” where I talked about the possibility that the North American economies may actually be in better shape than many analysts believed. Any pick-up in US activity, which I still think is a second half story, would likely benefit Canada’s transportation sector.

Specifically, I suggested buying July 60 calls on Canadian National Railway (CNR) at $2.75 or better. The CNR July 60 calls closed Friday at $5.75 (up 109%). I also suggested buying the Canadian Pacific (CP) July 160 calls at $10 or better. The CP July 160 calls closed Friday at $22.25 up 122.5%. So far so good.

In March I revisited gold stocks (March 10-2014 – “Where’s The Glitter?”). Something I do from time to time for reasons that escape me. I’m kidding, of course, although I have never really liked this sector aside from employing option writing strategies on the individual equities. In the March Blog I suggested writing the Goldcorp July 28 puts at $1.60 or better. At the time, Goldcorp was rallying and I did not want to jump on the bandwagon. The idea was to buy shares at a lower price because I thought many gold stocks may have put in a medium term bottom… Goldcorp included. The stock briefly touched $30 per share and then fell as inflationary expectations waned. At the end of trading on Friday, the Goldcorp July 28 puts closed at $2.78 for a loss of -42.45%. Not so good, although with this position I would simply take possession of the shares and write an at-the-money call ou,t say, three months.

On February 28, 2014 (“Blackberry Resuscitated”) I revisited an iconic Canadian brand trying desperately to survive. The latest strategy being Blackberry instant messaging (BBM for short) ,which had gained some traction among tech aficionados. But so far the company has not been able to monetize BBM to the point where it sparks any enthusiasm that a turnaround has begun. In the February Blog I suggested that anyone wanting to hold Blackberry consider writing covered calls against the position. It was a general point of view with no specific suggestions. The stock has drifted lower since February and those who employed the covered call strategy have at least had some downside protection and cash flow. If you remain a fan of Blackberry, I encourage you to keep writing the covered calls. Sometimes even the most loyal follower has to accept the reality of the situation.

Richard Croft
Richard Croft http://www.croftgroup.com/

President, CIO & Portfolio Manager

Croft Financial Group

Richard Croft has been in the securities business since 1975. Since February 1993, Mr. Croft has been licensed as an investment counselor/portfolio manager, operating under the corporate name R. N. Croft Financial Group Inc. Richard has written extensively on utilizing individual stocks, mutual funds and exchangetraded funds within a portfolio model. His work includes nine books and thousands of articles and commentaries for Canada’s largest media channels. In 1998, Richard co‐developed three FPX Indexes geared to average Canadian investors for the National Post. In 2004, he extended that concept to include three RealWorld portfolio indexes, which demonstrate the performance of the FPX portfolio indexes adjusted for real-world costs. He also developed two option writing indexes for the Montreal Exchange, and developed the FundLine methodology, which is a graphic interpretation of portfolio diversification. Richard has also developed a Manager Value Added Index for rating the performance of fund managers on a risk adjusted basis relative to a benchmark. And In 1999, he co-developed a portfolio management system for Charles Schwab Canada. As global portfolio manager who focuses on risk-adjusted performance. Richard believes that performance is not just about return, it is about how that return was achieved.

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