Improving the Quality Investing Framework
If you’re reading this, chances are you’re already familiar with The Compounding Tortoise, our research newsletter focused on enhanced quality investing. That’s where we share deep-dive analyses, earnings recaps, discussions on serial acquirers, and much more.
A research hub on fundamental analysis as it were.
But for many investors, quality investing is just one part of the puzzle. You likely hold other asset classes like bonds, cash or cash equivalents, and real estate.
And you’re likely looking for more defensive strategies. That’s where “The Theta Tortoise” has you covered.
Do you have any questions? We’re here to help; feel free to reach out to us: info@thecompoundingt.com. As a reader of and/or subscriber to our research, you’ve read and agreed to our disclaimer.
Boring is Beautiful
Low-volatility quality stocks have lagged the market, but they continue to produce steady free cash flows. But with today’s momentum around AI, upside potential may be limited. One of such defensive strategies we’ve recently implemented and shared with our premium members is on McDonald’s. It has the following pay-off (12.5 months).
The benefit of the strategy is that we’re investing just 1/3 of the cash that’s required to own 100 shares of stock in this options combo, meaning that half of the cash can earn a 3% interest (that’s the percentage we’ve used). All while keeping 20% in cash that’s readily available to take advantage of some shorter-term basic strategies.
As such, the above pay-off reflects the return based on a 29,100 USD investment/portfolio holding MCD. Our expectation is for MCD to deliver a mid- to high single-digit total return, which we’re looking to double or even triple by benefiting from time decay and protecting our downside risk.
What if the stock were to down for whatever reason (E. coli outbreak, virus, consumer confidence taking a hit and pulling all stocks down, financial crisis)? Our 1-year downside risk will be limited (5-7%, depending on the drawdown’s severity).
And if the stock plunges by more than 30% with increasing volatility, we’ll be making money! An implicit hedge, while benefitting from a decent return if the stock goes up bit, goes down a bit, or simply zigzags.
The above charts are based on the pay-off at expiration for the shorter-term options. But we’re not obligated to stay on board for 12 months. After 10 months, the return would be as follows.
There are many ways to play a sideways or moderate market environment based on one’s personal expectations and risk appetite, while keeping excess cash in case of opportunities.
“The Theta Tortoise” - Services
On this new Substack, we’ll provide you with the following information:
💡 Educational Content
Deep-dive articles on options strategies, key factors to consider, and practical examples to help you make informed decisions. Simulations, calculators, discussing all kinds of strategies
📅 Bi-Weekly Webinars
We’ll break down our strategies, discuss quantitative research, answer premium members’ questions, discuss overall market sentiment, review our live positions.
💬 Private Discord for Annual Members
Gain exclusive access to live portfolio updates, market sentiment analysis, and in-depth discussions with a community of like-minded investors.
💎 More Than Just a Subscription - A Partnership
We treat our members as Partners, offering:
Transparent insights into our portfolio
Objective, research-backed strategies
Discussing our calculators and simulations
If you’re keen to expand beyond quality growth investing and learn how options can complement your financial goals, this is the perfect place to start.
Become a Premium Member
Join for just $14/month or $110/year, and unlock the full experience.
💡 Don’t miss this opportunity to access actionable insights, an exclusive community, and educational resources tailored for the savvy investor.
Sign up today and take your portfolio to the next level!
