Some Year End Thoughts

Hello dear readers! Let me be the first to wish you a Happy New Year! Let’s hope 2023 sees an end to the war in Ukraine, and the end to a bear market. I’ve started my latest round of portfolio updates and I wanted to bring up a couple issues with this Magic Portfolio Investing strategy.

Over the Counter Stocks (OTC)

As I sold Co-Diagnostics Inc (CODX) for a huge loss I used my random stock picker for a replacement. Unit Corp (UNTC) came up. Unit Corp is an Over the Counter (OTC) stock. My MF Portfolio is in a Vanguard retirement account that doesn’t allow OTC stock purchases. I rolled the dice again and came up with Alpha Metallurgical Resources (AMR). An advantage with using retirement accounts for your portfolio is you don’t worry about taxes when selling stocks or receiving dividends. One downside is there are some restrictions like the prohibition of OTC stocks. This issue has only come up once or twice since I started this gambit back in 2017.

A Temporary Lack of Replacement Funds

Take another look at my portfolio before I started this latest round:

The red dots indicate the first stocks to sell. The average value of a stock in my portfolio was just over $2,400, so you can see that most of these initial sales were for huge losses. Furthermore, note the big cash cushion: $5,543.80. It’s gone. In fact, this morning, after selling Fulgent Genetics (FLGT) for a huge loss, I was about to buy it’s replacement when I noticed that I don’t have enough money! I have to wait for the next sale next week. If you’re trying to keep the portfolio balanced, as per the strategy laid out in Joel Greenblatt’s book “The Little Book that Beats the Market”, this will happen. I wrote an article a while back on keeping your MF Portfolio balanced. It’s not a big deal, just a minor hassle of following this strategy.

Happy New Year!