Small Town Investor First Quarter Report

Another excellent month with our reduced exposure portfolio. GG, NNN, and ERF were our biggest profit makers this month producing solid premium income. We traded only 9 positions this month which is down from last month  Since this the quarter end we will report only quarterly results. The net result for the quarter was goosed by another large long term put option position opened this month in FTR.  As with our last long term FTR option we placed it off balance sheet since it is a long term position. Our quarterly results also include our carry forward loss in ERF since we own the stock and have the loss on our balance sheet. It is not a realized loss and could recover before year end when we normally cull losses from the portfolio.  Our first quarter annualized net yield was 17.69% or just under our stated goal of 18%.  Slow and steady with low risk exposure is winning the race this year as we had expected.  Actual results without the deficit in ERF was 20.60%.  The first quarter of 2012 was the largest net cash flow in the fund's history.  Not bad for our low exposure positions. 

We had no realized losses this month and only a small one for the entire quarter, much lower margin interest and lower fee expense than normal helped make the month and quarter a success as well.   During March the positions we opened again for the most part were in the money enough to give us some margin for error during the coming 5 week trading period. We feel confident in our approach and will continue this path for the foreseeable future. Since our portfolio remains exactly the same as posted for the first quarter 2012 we will not be posting an update going into the second quarter.  

Looking to April trading we will have all 9 trading positions open. That should offer continued opportunities for cash flow and profits. As noted in earlier reports we continue to look for long term option opportunities as well.  Our long term option scenario is 6 to 8 annually going forward. We consider an long term option generally 6 months out of more.