For the sake of timely and full disclosure I provide this interim report in which I touch upon recent trades made within the FFJ Portfolio and in accounts for which I do not disclose details.

In addition, we have an impending sale of a rental property. Sale proceeds will be deployed toward the purchase of shares in high quality companies when valuations become more favorable.

Given my perspective on current market conditions I have been extremely hesitant to deploy new money. As a result, the frequency of articles has dropped.

My hesitancy to deploy new money also coincides with the exponential increase in my time devoted toward elderly parents who are experiencing health challenges.

Despite the above I provide this brief post to disclose recent changes made to our equity holdings.

Around the time I entered retirement in mid-2016 my better 50% and I formulated a 5 financial road map. Included in our plan was a conscious decision to simplify our lives which included the gradual liquidation of our residential rental properties.

Fast forward to the present day.

Within the next couple of days we will be closing the first sale of a rental property. The plan is to eventually deploy these sale proceeds toward the purchase of shares in attractively valued high quality companies when valuation levels retrace to levels I deem to be more attractive.

In addition to the above impending real estate sale, I executed the following trades on October 15th.

Korn Ferry (KFY) – POSITION LIQUIDATED

In September 2018 I acquired 300 KFY shares in one of the Core Accounts within the FFJ Portfolio; I also wrote covered calls against these shares and disclosed same in this article.

While my investment in KFY was negligible I should have taken a pass on KFY. KFY comes nowhere close to some of the high quality companies in which I already had exposure and in which I should have increased my position.

After accounting for nominal dividend income and some covered call option income I ended up incurring a loss of ~$3,500 from this investment.

The J. M. Smucker Company (SJM) – POSITION LIQUIDATED

In June 2017 I disclosed the acquisition of 200 SJM shares @ $127.52. I then acquired another 200 shares in July 2017 @ $118.629 for an average cost of ~$123.07. These shares were held in one the Core Accounts within the FFJ Portfolio.

SJM has struggled subsequent to my purchase and while it is possible SJM’s performance may improve in due course I have a list of higher quality companies which I think will provide superior long-term results.

On this basis I exited my position on October 15th at ~$107.03 for a loss of ~$16.04/share or ~$6,400. This loss was partially offset by the quarterly dividend distributions and ~$3,000 in covered call option income.

PepsiCo, Inc. (PEP) – CLOSED OPTION POSITION

In this article I disclosed my decision to write 4 October 18th $130 covered calls. This trade was initiated through an account for which I do not disclose details.

While I generated ~$1390 in option income, PEP’s share price appreciated to a greater extent than I had expected (it is currently trading slightly in excess of $136). It is certainly not my intent to part with any PEP shares so I closed my position on October 15th at a cost of $6.51/share or ~$2,600. After taking into account the option premium I collected when I initiated the covered calls my net loss is ~$1,210.

The Goldman Sachs Group, Inc. (GS) – CLOSED OPTION POSITION

On April 16th I disclosed a Bull Put Option spread trade which I initiated through one the Core Accounts within the FFJ Portfolio; this trade generated $815 in option premium income.

With these options due to expire October 18th I proactively closed out my position today at a cost of ~$600 thus resulting in a profit of ~$215.

For the sake of full disclosure, GS shares continue to be held in one of the Side Accounts within the FFJ Portfolio.

Mastercard Incorporated (MA) – CLOSED OPTION POSITION

Writing covered calls on some of the MA shares in one of the Core Accounts within the FFJ Portfolio is perhaps my worst recent investment decision!

On February 4th when MA was trading at ~$215 I wrote 4 April 2019 $230 covered call contracts and generated $957 in option premium. By the time the April option expiry date rolled around, MA’s share price had risen above $230 and I closed out my position at a cost of ~$3,435 for a loss of ~$2,478.

I then turned around and wrote 4 October 2019 $250 covered call contracts which netted ~$4150.

I like MA as a long-term investment and have no intention of parting with my shares. In fact, at the beginning of October I disclosed that I had acquired additional MA shares at ~$263/share.

In a nutshell, MA’s share price once again exceeded my expectations. With no intention of parting ways with any MA shares and with shares trading in excess of $278.50 on October 15th I decided to close out my position to eliminate the risk of having 400 MA shares being called away at $250 on October 18th.

Closing out my option position has resulted in me having to shell out ~$11,800. Add up the inflows/outflows from my MA option trades and I have incurred in a net cash outflow of a little over $10,000. I do, however, still own the underlying shares on which the book value is currently ~$124.25 and I fully expect these shares to continue to appreciate in value over the long-term.

3M Company (MMM) – OPTION POSITION TO EXPIRE WORTHLESS

On April 26th I wrote 3 October 2019 $210 covered call contracts on shares held in one the Core Accounts within the FFJ Portfolio. This trade generated ~$840 in option premium.

With MMM currently trading at ~$163 and with only a couple of days remaining before the option expiry date I am reasonably confident MMM’s share price will not appreciate to the $210 level. As a result, the option contracts will expire worthless meaning I will retain the underlying shares AND 100% of the option premium I collected.

Automatic Data Processing, Inc. (ADP) – OPEN OPTION POSITION

In this article I disclosed that I had written 5 November 2019 $180 covered call contracts on shares held in an account for which I do not disclose details. This trade generated $2.30/share or ~$1,134 in option premium income.

Shares are currently trading at ~$164 and I am cautiously optimistic ADP’s share price will remain below the $180 strike price by the time the November 15th expiry rolls around. If this happens I will retain the underlying shares AND 100% of the option premium I collected.

As an FYI - were I to close out these covered calls today, I would need to lay out ~$0.27/share which would result in a profit of $2.03/share or ~$1,015.

Share Purchases

Earlier this month I acquired additional shares in Mastercard Incorporated (MA) and in Brookfield Asset Management Inc. (BAM.a) (BAM) and disclosed these purchases here and here.

Final Thoughts

That’s it for my brief update. With any luck we’ll get a broad and meaningful market pullback in the not too distant future which will provide us with better buying opportunities.

I wish you much success on your journey to financial freedom!

Note: Thanks for reading this article. Please send any feedback, corrections, or questions to [email protected].

Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.

I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.

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