In addition to the new financial statements and updated trading plan, I also have some changes to my current open positions.
Back in April, I replaced several of my holdings with companies that are members of the Dividend Champions, which is more in line with my new trading plan. At that time, I also used an alternative, and somewhat controversial, accounting method, of consolidating the positions using the original cost basis of the old positions, rather than starting with the new cost basis. I did this so I could track the Cash Return on Invested Capital (CROIC) using my existing spreadsheets at that time. However, with my new financial statements and data from IB, this alternative accounting method is no longer necessary.
So, I've modified the consolidated positions to reflect their actual cost basis at the time they were established in April/May, rather than the consolidated cost basis I used before. As a result, these positions have a much lower cost basis. The loss on the original positions were/are already reflected in the Net Asset Value (NAV) of my portfolio, so there's no change there.
Another change I made was to breakup positions in the same underlying by their cost basis. Each time the cost basis changed, either through the purchase of additional shares or the sale or change in strike of a cash secured put, I separated it into a new position, and in some cases closed the old position.
From now on, whenever additional shares are purchased or additional cash secured puts are sold or change strikes, on the same underlying, a new position will be established. This will limit each position to a single cost basis, which will make it easier to manage and easier to track annualized return.
Managing each position by cost basis also allows me to sell different strikes on the same underlying, since I'll have a different break even price for each position. Of course I've always had that ability, but it was harder to track as a single position.
Over the next week or so, I'll be posting all the modifications to my open positions, in addition to the closed positions that resulted from the cost basis conversion.
This may seem like a lot of changes in such a short amount of time, but I've been planning this for 5 weeks while I was on vacation. It really gave me time to think and reevaluate my investment strategy.
The biggest impact came when I re-read "F Wall Street" and "The Essays of Warren Buffet". Those two books made me refocus on value investing, the importance of cash flow and the importance of net asset value. I was already focused on the first two, but less focused on the later. I paid more attention to generating income and not enough attention to capital appreciation. But I'm refocused now and these changes will help me achieve my goals. It's never to late to re-evaluate! :)
