Real Life Trading Spring Portfolio 2018: First Edition
Real Life Trading Spring Portfolio 2018: First Edition
What a fantastic time to be a Real Life Trader! Welcome to April and welcome to spring for those who reside in the Northern Hemisphere. Itâ€™s been a bit rainy here in Nashville, TN. April showers bring May flowers right?
Traveling season has started for me. Iâ€™ll be in Miami in 3 weeks, then Jamaica for the 2018 Real Life Trading cruise, then Iâ€™ll be in Montreal the first week of May and then Iâ€™ll be popping down to Houston, TX the last week of May and then San Diego and then LA mid June.
I am really intrigued to see what this wild market will do. As Iâ€™ve mentioned pretty recently, day trading is going to be an exceptional way to produce income during what I foresee as a pretty volatile next few months. Which is good! Option sellers, long term trades and day traders should be just fine. But for my short term swing traders, there will just be a lot of overnight volatility. So, be prepared for that and keep in mind cash is a position. You donâ€™t have to be in a trade. Plan, be â€˜pay-tientâ€™, try to buy it as cheap as possible, but also donâ€™t wait too long for the trade. Because one candle could change everything!
This is going to be a fun group of stocks to follow for this season. There are many news stories spiraling and circling around the world wide web recently, regarding China, its economy and some possible tariffs. In the big picture, tariffs on 50 billion of Chinese imports is pretty measly. Which companies will be effected? How large will that effect be? Will this present a good buying opportunity on some stocks? Well, the easiest way to find out is to track some Chinese companies, do some research and determine how we as traders can leverage our skills and use the markets to provide us with some extra cash, which we can use to enrich lives!
Letâ€™s do this!
1. Baozun Inc. - Ticker: BZUN Analysis on March 31st, 2018
Baozun Inc. provides e-commerce solutions for brand partners in the People's Republic of China. It offers end-to-end e-commerce solutions, including IT infrastructure setup and integration, online store design and setup, visual merchandizing and marketing campaigns, store operations, customer services, warehousing, and order fulfillment. The company also operates Maikefeng mobile application that offers various branded products. It serves brand partners in the apparel, appliances, electronics, home and furnishings, food and health products, cosmetics, fast moving consumer goods, insurance, and automobile categories. The company was formerly known as Baozun Cayman Inc. and changed its name to Baozun Inc. in March 2015. Baozun Inc. was founded in 2007 and is headquartered in Shanghai, the People's Republic of China.
You can think of BZUN as â€˜Chinaâ€™s Shopifyâ€™. Which, SHOP was no slouch of a stock over the last two years either.
Now, US traders and investors will find acquiring valid financial reports trading on some Chinese stocks and companies decently difficult.
I reached out to one investor contact of mine, asking him to look into BZUN for me and he said â€œI would rather buy bitcoin on margin than Chinese stocks. I do not see anything that inviting in the fundamentals. The profile is interesting but I would have to do some research.â€
I hope he counts this as additional research. The more you know, right?
One thing we can say is, the trend is quite healthy. Another prospect I really like about the chart is the recent gap on earnings. Earnings, which I could say really werenâ€™t awful. Back in November 2017, they reported .06 earnings per share (relative to .08 earnings per share) from the previous earnings. But back on March 6th they reported .38 earnings per share! Wow. Thatâ€™s a huge increase, which brings validation to the gap.
As you might have noticed from the above chart, a few Real Life Traders are selling some puts on BZUN. A $35 put sale expiring May 18th is over earnings. This upcoming earnings will likely gap down or do nothing at all unless they report .38 or higher again. OR at least, thatâ€™s just my thoughts since the dramatic increase between the last report and the most recent one.
And, at only $46 a share, this stock isnâ€™t very pricey, compared to SHOP at $124. BZUN a pretty similar product and value in a space with 4x the population of the USA smells like a buy to me. Therefore, letâ€™s keep both eyes on BZUN as a buy, especially if BZUN pulls back to the 50 ema on a weekly at any point.
But between now and then, look to buy some pull backs and at least have a plan to be more bullish than bearish on this gorgeous trend and growth company.
2. Tencent Holdings Inc. - Ticker: TCEHY Analysis on March 31st, 2018
As you pull up this stock, youâ€™ll notice it gaps A LOT. Like, every day. Thatâ€™s because its an ADR = American Depository Receipt
â€œAmerican depositary receipts were introduced in 1927 as an easier way for U.S. investors to purchase stock in foreign companies. Non-U.S. companies also benefit from ADRs as it makes it easier to attract American investors.
Before ADRs existed, if American investors wanted to purchase shares of a non-U.S. listed company, they had to buy the shares on international exchanges.
To offer ADRs, U.S. banks simply purchase shares from the international company and reissue them, typically on U.S. exchanges. An ADR may represent the underlying shares on a one-for-one basis, or it may represent a fraction of a share or multiple shares. The depositary bank sets the ratio of U.S. ADRs per home-country share at a value that is appealing to investors. If an ADRâ€™s value is too high, it could deter some investors, but if it is too low, investors may think they are like riskier penny stocks.
Numerous companies trade in the United States as ADRs. For example, Volkswagen trades OTC under the ticker VLKAY. BP Plc. trades on the NYSE under the ticker BPâ€, which as many of you know is one of my favorite companies to trade. Anyway, thatâ€™s why TCEHY gaps a lot. HAHA. Itâ€™s traded on multiple exchanges across the world and by the time the US markets open up, it has already fluctuated in price.
I am sure you have heard of this company already. I mean… itâ€™s in the 500 billion club! Meaning, we arenâ€™t talking about some â€˜randoâ€™ here - this company is serious. Iâ€™m about to make a pretty compelling case here.
I mean, Tencent has overtaken BABA! Just recently, they also purchased 5% of TSLA.One of their more well known products, is actually still a slight mystery to US investors and traders. Why? Because we donâ€™t use it…therefore we do not hear about it. But itâ€™s called WeChat.
And we know how the APP Facebook has done over the last few years. Check out this video about WeChat. When I watched this, I thought to myself â€œyeah, there is no way this stock doesnâ€™t go higher. Especially if WeChat ever gets exposed to any other market, ever…
Keep in mind, that really is Tencent Holdings and not Bitcoin. HAHA. Growing a measly 5,300% in the last 9 years. Whatâ€™s exciting to me is that TCEHY might finally be entering a distribution phase. Which is healthy and needed. Every stock needs to rest and trade sideways for a while (at some point). December 2016 is the last time TCEHY has hit itâ€™s 200 SMA. So, Iâ€™m looking for that to occur again at some point as a nice buying location.
Now, I do think TCEHY is a better longer term play. Of course we can make some short term gains on this stock, but one true downer is the fact that we canâ€™t trade options on TCEHY. Or, at least, not through US exchanges.
As simple as it might seem, this is my plan to potentially pick up a few more shares of TCEHY for the longer term.
Buy the salsa right?
3. Yum China - Ticker: YUMC Analysis on March 31st, 2018
We have here a returning candidate and stock. Whatâ€™s cool about YUMC is we already know tons about it. I mean, itâ€™s YUM (only in China).
As of November 1, 2016, Yum China Holdings, Inc. became a licensee of Yum! Brands in Mainland China. Yum China has exclusive rights to KFC, Chinaâ€™s leading quick-service restaurant concept, Pizza Hut, the leading casual dining brand, and Taco Bell, which is expanding globally but is not yet in China. It also owns the Little Sheep and East Dawning concepts. Yum China has more than 7,300 restaurants and more than 400,000 employees in over 1,100 cities, and generated over $8 billion in system sales in 2015. The standalone company, Yum China, began trading â€œregular wayâ€ on the New York Stock Exchange under the symbol â€œYUMCâ€ on November 1, 2016.
KFCÂ® was the first quick-service restaurant chain to enter China in 1987. Today, KFC is the number one Western QSR brand in China with more than 5,000 restaurants in over 1,100 cities. In terms of number of restaurants, YUM has a two-to-one lead over our nearest competitor and is growing in both large and small cities. In addition to Original Recipe, KFC in China has an extensive menu featuring beef, seafood, rice dishes, fresh vegetables, soups, breakfast, desserts, and many other delicious products. They are also leveraging our restaurants throughout the day with breakfast, delivery and 24-hour operations.
Pizza HutÂ® was the first restaurant chain to introduce pizza and Western-style casual dining to China in 1990. Today, Pizza Hut Casual Dining is the number one Western casual dining brand in China in over 400 cities and over 1,600 restaurants. Pizza Hut Casual Dining has an extensive menu offering a broad variety of pizzas, entrees, pasta, rice dishes, appetizers, beverages and desserts. In addition, Yum! introduced pizza delivery to China in 2001 and there are more than 300 Pizza Hut Home Service units in almost 50 cities.
Yep, I can see growth here. Both in the weight of humans and also the price of this stock.
They way I see it, YUMC is just a cheaper, fresher way to get into YUM. YUMC also pays dividends and surprisingly, they do not track each other like you think they would. Since June of 2017 YUMC has been pretty sideways.While YUM over that same time period has increased pretty well.
Anyway, as Real Life Traders, we can trade any chart. Earnings on YUMC are right around the corner. My thoughts, the bullish trend and longer term buying opportunity should stay in tact as long as YUMC doesnâ€™t gap down below $38.83 on earnings.
On the flip side of that coin, a gap up above $44 would be nice a bullish. Otherwise, just look to play this one bullish to neutral for now.
4. MOMO Inc. - Ticker: MOMO Analysis on March 31st, 2018
Hereâ€™s another stock we have looked at in the past, in a portfolio. It was actually almost 1 year ago, in the summer portfolio here.
Think of MOMO like Chinaâ€™s Tinder. Aka, a dating app. Which, these dating apps have been crushing lately. Have you seen Match Group Inc? Look at this weekly chart.
Granted, I do not have any personal experience with dating apps. I havenâ€™t used one in over 6 years. So, Iâ€™m assuming they are doing something right… haha. At least, thatâ€™s what the investors think.
Whatâ€™s interesting about MOMO is itâ€™s been holding up pretty well in this market sell off since February. MOMO did itâ€™s selling during September and December of 2017. This itâ€™s weekly chart.
I personally thought that was a great time to go long MOMO when it was hitting into the 100 SMA on the weekly. And a few other Real Life Traders thought the same. We did really well on this put sale as a few traders got put shares of MOMO back in December 2017. Is this a bad thing? Well, no, since that was the bottom. Buy low, sell high right? Meaning, many are in this with a dollar cost average of somewhere around $24.50. And now itâ€™s up at $37! Thatâ€™s about $13 per share, close to a 50% ROI on the original entry.
If in 3 weeks, we get called away on this April $35 covered calls it will be for about 4.5Râ€™s. For those not presently in MOMO, I still think there are plenty of opportunities on this one. Just Wednesday of this past week, MOMO traded down brilliantly to the 200 SMA. And who bought there? These guys did. Ever since Ricky and Mikey did their pain for breaking their plans, they have been on a tear. Congrats gents!
5. APPLE Inc. - Ticker: AAPL Analysis on March 31st, 2018
Alright, onto the biggest company in the world. Itâ€™s a staple in each of my portfolios that I write up. We track it, we trade it and we make bill paying money with it. Feels real good.
The semi ironic part about AAPL (at least right now) is, this sucker is going real sideways.
I do not have any option position (like a covered call) on AAPL right now, which is pretty rare. I will however, next week, peer into some premium to determine if there is money in an iron condor OR just a bull put spread. Youâ€™ll notice from the above chart, Real Life Trader Kevin has a put sale. Itâ€™s at a great location too.
In order to get any premium for a credit spread on AAPL, Iâ€™ll probably have to go over earnings. Which is generally okay as AAPL normally doesnâ€™t gap super large.
The big take-away on this chart is AAPL is still making higher highs and higher lows on the weekly chart.The 50 ema on the weekly acted as a superb support just weeks ago when the markets â€˜were tankingâ€™ It looked like a wonderful dip buying spot to me. Anyway, that pink line on my screen is also a wager I have with a really incredible guy. His name is Richard and he lives in England. The terms of our wager is, AAPL needs to go lower than $135 by November 1st. He thinks itâ€™s going to occur and I donâ€™t. Loser flies winner to his country / city for some hang out time. Sounds like a win, win either way -so I took the bet. Letâ€™s find out what happens!
So, be â€˜paytientâ€™ on AAPL. Buy the dip if she gets into the $155 ish area again. If you have some shares, scout out covered call premium. Thereâ€™s about .30 per 100 shares at $200 for May, which isnâ€™t bad. I still think AAPL hits $200 this year, but I donâ€™t think it occurs before May 18th, 2018.
Anyway, that is what I have for now my friends. 2,600 words of free, enriching and super valuable content that didnâ€™t cost you 1 single dime. THANK YOU for supporting Real Life Trading in our mission To Enrich Lives. I hope to see you in one of the RLT meets ups in the near upcoming few months.
~ Jerremy Alexander Newsome
The guy who really needs a new hair cut.