Snapshot
My Implied Share Price: $32.62
Situation
I wanted to fund additional opportunities in LULU and ACN, and rebalance my portfolio.
Response
I took some profits in BBBY, still leaving a good amount of exposure.
I am excited about UPWK because it is similar to FVRR. I also found it to be undervalued. After I bought it, the stock price quick rose, so I quickly rebalanced and that was able to offset some of the costs of getting more LULU.
I added more to ACN exposure, but unfortunately, the quoted price dropped sharply shortly after I added. I will continue to hold.
I decided to double my PETS exposure because I believe the price is extremely low. I am rebalancing and getting ready for a possible tax loss harvest, to recognize the loss and reset my cost basis. However, depending on how things go, I may hold on to the entire overweighted position, because of its intrinsic value.
I increased WEYS to bring it up to my target exposure and rebalanced it with the rise of my portfolio as a whole.
Small rebalance adjustments to USNA, MED, and FVRR. I bought the rights to options in FVRR, to gain exposure to up to 8% of my current portfolio’s balance, if executed successfully. I risked about 2% to do it. I do not include the current value of the premium of any stock options as value for my Implied Share Price. I only include the amount above premium that is in the money. I adjust the premium and consider it like goodwill. This would explain the significant drop in value of my Implied Share Price. However, I am hopeful to recover the value based on how undervalued the underlying securities are.
SITC
I understand this REIT is looking to essentially liquidate many of its assets, but I consider it undervalued. It appears the intrinsic value is much higher than the current EV.
IIPR
I wanted to increase this position before the dividend. This has a nice dividend. I also found it indicative of the undervalued nature of the position that there were new investments made at a higher cost than the price of the current stock.
EXE
This is my effort to add an undervalued energy company to the portfolio and for diversification. This is very undervalued in my opinion.
Reflections
I am currently very confident and comfortable with my current allocation. I always would feel even more comfortable with a little more cash, and I hope to gradually increase my cash position to get it strong again. I am also keeping in mind the business analogies for allocation decisions I make.
For example, my decision to double my position in PETS, giving me the option to maintain my current overweighted position long-term or to sell my initial position and take a tax loss, is similar to a hotel that as come under disrepair and losing money. An owner could make the decision to double the position and build a new wing to that hotel, at which time he is temporarily operating a larger position. That the same thing I’m doing by adding more shares. Then the hotel owner would have optionality, the ability to tear down the original structure and continue to run the new structure, therefore taking the loss on the original. That’s tax loss harvesting. Or, the business could turnaround, and he could decide to keep the entire operation long-term. That would be like me holding.
The other example is how I’ve bought stock options in FVRR and NVO. It would be like a land developer paying a premium to lock in the price of a large parcel of land for a certain amount of time. He could see how much value, of his current assets and operations, he is giving up in order to gain the right to this option. Once purchased, it’s essentially goodwill. Then if something good happens during the ownership of the option, like a zoning change, the value of the land and the owner’s rights will immediately increase. The owner of the option would have the ability to sell his rights to the land, or exercise the option, but in either scenario he is taking advantage of the price increase. On the other hand, the loss is limited to the value of the stock option or the agreement to lock in the price of the land.
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