trading plan: buy dividends, sell hi-beta:
Yesterday, I went long KLIC at $8, and then sold it when that support level briefly failed. I realize, given current macro and sector conditions, I am unwilling to be long stocks like KLIC. Currently, I'm guessing an 80% chance the semi-equip cycle has peaked, and a 50% chance of a double-dip global recession. KLIC went to $1.11 in the last recession; therefore, any potential upside isn't worth the risk, at this point. But I want to do something; I'm sitting on 90% cash, which earns zippo nill nada interest, and getting bored. So...
I've decided to start accumulating my quality dividend portfolio (on dips, in increments), beginning with INTC and KMB. At current prices, they pay dividend yields of 4.2% and 4.5%. I will add others, when they are paying at least a 4% yield. I'm comfortable holding these dividend stocks (when I can get them cheaply), basically forever.
On rallies, I will short equal-$ amounts of hi-beta quality-not stocks, like KLIC, UAL, JPM, NFLX. Even if I have equal $ long and short, this amounts to a bearish bet, since the shorted stocks are far more volatile. I'm comfortable that, no matter how high they soar, they will give it all back eventually.
Long INTC and short KLIC, is the equivalent of buying puts as downside protection for a LT long position. KLIC stock is as volatile as an option, but it never expires.
disclosure: 90% cash. Bought INTC at $20 today, entered orders to buy more every $2 on down. Entered orders to buy KMB beginning at $60, and every $4 on down. Left in place orders to short KLIC at $9.10, and probably every $0.50 on up (depending on how much INTC and KMB I get on this dip). |
