GOGL Dividend Avoidance/Capture Strategy — 1Q2022

It's that time of the quarter again. As you may or may not know, I hold a sizable chunk of GOGL and I look to min/max my profit however I can with the position.

Previously during 4Q2021, I traded out/in of GOGL to “avoid” the dividend payout, seeking to capture a greater profit than if I had held the stocks past the ex dividend date. All told, I profited 20% more than had I held for the dividend. Note that my execution was anything but flawless, I missed both the top and the bottom by a significant margin yet I still manage to profit, which means that the avoidance strategy has quite a bit of margin of safety in execution risk.

See the link for my previous trades: https://www.reddit.com/r/BurryEdge/comments/t4lnzx/gogl_dividend_avoidance_strategy/

Note though, that you could have also made as much profit as I did by selling on the ex-dividend date because the price action was very favorable for GOGL on 3/2/2022 (ex-dividend date 4Q2021). But this would have been a gamble with less favorable risk-reward profile imo compared to avoiding the dividend last quarter. This was not a viable strategy for 3Q2021 as the price action post-dividend was very unfavorable during that quarter.

Now, for this Q, I don't know what to do yet primarily because Idk how market will treat this stock post-dividend. In fact, I might do the opposite, which is to hold the stocks through and possibly sell on or after the ex-dividend date. Two reasons:

1. BDI is on an uptrend due to both secular and seasonality reasons. As is well-known in shipping, from Feb to June/July/August is the time when BDI is heading upward. The secular risks for an upward BDI has also increased due to the Ukraine war and the great reshuffling of dry bulk shipping, which has created numerous shipping inefficiencies and profits for shipping companies (see GOGL recent earning call). What this means is that any extended period where I stay out of this stock, I can miss the upward movement of dry bulk stocks that correlates heavily with BDI. Further, you have to go back as far as 2014-15 to see this kind of revenue/share for GOGL.

   1. GOGL has been on a tear recently, rising as much as 50% since the price at last ex dividend date ($12.15) and 100% since ex dividend date of 3Q2021 ($8.84). I have made a surreal return on this position during a bear market. Psychologically, this is the easiest position for me to take profit and run.

2. Macro-wise, market is on a solid downtrend. If and when a recession comes, nothing is safe, including shipping. Aside from O&G, GOGL is one of the very few positions that I still have significant exposure to. Right now the stock is being insulated due to the upcoming dividend, but once that protection wears off post-dividend, it will likely fall with the market (but still have the protection of an uptrend BDI). Intellectually, I can't help but think that this will roll over with the rest of the market (eg., ZIM which has 40% drawdown from peak to trough post dividend, albeit with a much larger dividend payout) with the dividend effect gone btw 5/31 and the next ex dividend date.

   1. Related to the upward BDI, GOGL will continue to deliver hefty profits and dividends in Q2, 3, and 4, again unless a recession comes. If anything can hold their stock price in this environment, it's hugely profitable companies like GOGL paying close to 100% of its FCF. I can't help but draw this similarity to the market during the Great Depression as described by Ben Graham in Security Analysis.

So, what market will do to this stock post-dividend is very difficult to predict. I will be looking at price action between now and ex dividend date (5/31/22). I expect that the stock will continue to rally between now and then, so that's plenty of time for me to decide. The most recent highs post-earning was around $16.40, which is usually where the stock will at least cross again before ex-dividend date, so I expect that if I want to sell, that would be a good exit point. Ofc, if market gets euphoric about this stock between now and 5/31, that will add to my avoidance thesis.

I will update regardless of whether I make or lose money on this action/inaction.