$PCG rising from the ashes

You will remember the wild fires which severely hit Northern California back in 2018. As a result of this natural disaster, PG&E Corporation (ticker: $PCG ), a large utility company operating in Northern California with electricity and gas, had to file for bankruptcy and the stock price tanked. Well, this bankruptcy is different than your average one and $PCG is now seeing the light at the end of the tunnel. Time will tell if their plan will pan out but for investors this may be a profitable trade.

stock-photo-natural-disaster-firefighters-spray-water-to-wildfire-1051337354

I sent a Buy Alert on May 27th and the stock has shot up 9.37% since then: nice start ! In that alert I have indicated a Stop Loss (SL) of 9.5$ (corresponding to a 14% loss from my buy price of 10.88$) and a Target Price (TP) of 15.5$ (corresponding to a 43 % gain). These are my SL and TP values, based on my risk profile: you should assess what your own risk profile is and determine how tight a leash you want to keep.

I also warned that this is a trade, implying an opportunity based on technical analysis and/or momentum, not an investment. A lot will depend on the decision of the bankruptcy judge which is inherently affected by a certain degree of unpredictability. Utility companies do not tend to be cyclical as people always need to buy electricity and gas, also in times of crisis or a pandemic (though large companies will have reduced their consumption, albeit temporarily), which means that cash continues to pour in. But these large companies tend to be under the radar of politicians: if the wind blows in their favour, the future will look brighter for $PCG ; conversely, if regulators get in their way, further moves to the downside may be experienced by the stock.

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I currently own another utility, Italian-headquartered $ENEL.MI . My portfolio also has spicier stocks, like $RACE and $VIAV . If you wish to see the long and short positions in my eToro portfolio, please follow this link.

Enjoy the weekend and invest responsibly !

 

$INDA and $EWZ : two ETFs to invest in G20 stock markets

ETFs are an efficient way of investing in markets or sectors for which one would otherwise have to hold multiple positions to reproduce. This is especially true is you have a limited capital to invest, say up to 10k Euro or Dollars.

We opened a 2% position in $EWZ which reproduces the Brazilian stock market. While the outbreak seems to be nearing the peak only now over there, the stock market fall has been so significant that some of the stocks in that market are greatly undervalued, e.g. Petrobras. As always, we will be vigilant and prepared to act if the outlook changes.

We also hold a 2% position in $INDA which mirrors the Indian stock market. I have opened this one due to a favourable technical pattern, something I do rarely as I am mainly guided by fundamentals when selecting stocks and ETFs.

Brazil and India

At present I have 21 open trades (4 of which at $SQQQ trades bought at different price levels). When I am fully invested, I target having 30-40 open trades with an average percentage of 3% each, though some positions may be higher or smaller depending on the strategy. It is very important to be diversified across the various sectors but also to have enough positions to avoid being severely affected by a major swing in an investment with too high a relative weight. While this limits the potential for greater gains, it does protect you on the downside and makes your portfolio more resilient.

Here are the 4 trades in my eToro portfolio from this past week (May 18th to May 22nd):

  • $AMAT +5%
  • $XLK +2 %
  • $DUE.DE +2% (thanks to the positive Zew numbers in Germany, we might be back)
  • $EWZ +2% (we might be back in this one too)

The US stock market is up about 3% this week and 5 of my positions have outperformed them, namely $KO, $SYF, $USO, $IRM, $VIAV. The European stock markets have also grown by about 2%.

In my eToro portfolio I am 35% in cash, 8% in hedges and the rest are long positions in stocks and, to a lesser extent, ETFs and cryptocurrencies.

$CSX, $VIAV and $RR.L are my top 3 winners this week

Seven winners this past week ! Out of these, 3 were opened and closed in the same week and the rest I owned since earlier in 2020.

The top 3 winners where $CSX with a 10% gain in 5 days, $VIAV with a 5.01% gain in 2 weeks and $RR.L with a 4.90% gain in one day. While the future remains uncertain for Rolls Royce, I will look for opportunities to go back into CSX Transportation in the near future; also we still hold a 2% position on Viavi Solutions.

This week we have also gone back into Coca Cola (ticker: $KO ) which is a long term investment. The stock has dropped a lot and seems to have now stabilised with a potential breakout in sight. The dividend yield is 3.6% at these valuations and the stock goes ex-dividend early in June.

Aroundtown (ticker: $AT1.DE ) has been badly hit during this corona virus crisis, just like most of the real estate companies. We have previously invested in $AT1.DE and made a decent profit out of it. As the sector stabilises, it seems a good moment to go back in as it offers capital appreciation potential and sports a 5.2% dividend.

Just as the sentiment was turning on Thursday, I added to my $SQQQ position which played out really well as a hedge: the US markets were down between 2.5 and 3.2% on Friday, whereas my eToro portfolio was only down 0.39%. This highlights the importance of having hedges in times of volatility as the market can quickly change its course.

At this time, I am 58% in cash and have 5% in hedges (inverse ETF): if you don’t have enough cash, you won’t be able to take advantage of bargain stocks that will come your way in the future.

If you want to find out about all the positions in my eToro portfolio follow this link.