jeudi 1 août 2019

Portfolio review

Here comes the moment when you can compare your performance to mine and thus, have some respect or some disdain for my approach. After all, who can have esteem for an investor who gets a worse performance  than the market, year after year? Even if that person gave a kidney to some poor guy and was helping people dying from scorbut in Azerbadjan, I would laugh at him. You are what you achieve. Anybody can give a kidney (we have two), but few people can beat the market. 

Personally, I think some reorientation would do some good to people who can't beat the market. For instance, some guy wasn't good at arts. He became dictator and things went much better for him for many years.  

So, here's a look at my portfolio:

Number of stocks: 20
Cash: 12% of the portfolio
Average ROE: 40
Average Beta: 0,73
Average forward PE: 19
Performance of the portfolio (YTD): 21%
Performance of the TSX/S&P500 (YTD):  14%

I haven't lived that much emotions with my portolio this year. Don't get me wrong, I almost never feel euphoria with my portfolio, but I sometimes feel excited or feel bad after a sudden drop. 

Either because I want to buy more, either I'm mad because I just deployed money and I should have waited 24 hours. 

Actually, I've been waiting for the last 6 months for a substantial drop and I'm still waiting. That's why 12% of my portfolio is cash. I'd like to deploy this cash but I'm willing to wait. Because the best moment to buy is when everything goes down. And very few stocks go down these days.

All the stocks I own were in my portfolio at the beginning of the year. I've only sold two stocks (Lassonde and Enghouse) and I've kept the rest, adjusting some positions and keeping most of them intact. There's not a lot of action but I like it that way. It looks like each stock completes the other and that's the wonder of a well-balanced portfolio. You can own a stock with a PE of 30 but the position is small and is compensated by a bigger position of a cheaper stock. That way, you can stop listening to people saying that this stock is too expensive. 

Yeah, it's expensive, you fucking asshole, but it grows much better than everything else and it's only 2% of my portfolio, so fuck off. In fact, a stock is truly risky when it represents a large percentage of your portfolio. Otherwise, it's probably "riskier" to own only stocks with a PE of 12 than to own some expensive and some not expensive stocks. 

For instance, I own 5 stocks that I would qualify as expensive stocks and they represent 15% of my portfolio. These 5 stocks gave me the best returns among all the stocks I own over the last year or so. They were meticulosely chosen and they fit perfectly among all my other stocks so please don't interpret that as "buy as much expensive stocks as you can and you'll get rich". That's a stupid shortcut. 

Anyway, I'm beating the market by 7% right now. And you?

21 commentaires:

  1. So far this year my portfolio is up 26.93 percent…I’m having a good year after having a bad year last year…so goes the market…

    There are some things I have in common with the Penetrator’s portfolio and there are other things that are very much different…after ten years of investing in the stock market I am finding my approach…

    For instance I run a concentrated unbalanced portfolio…13 stocks, unbalanced in the sense that six of my holdings represent 72.5 percent of my entire portfolio…I believe diversification is hugely overrated, yes you need to diversify to a point but most people are ridiculously over-diversified largely due to the fact that they are unfamiliar with what they own…Like the Penetrator I’m a buy and hold guy…

    I manage my risk by knowing what I own so when the market sells off violently I can hold on knowing that I am a part-owner of good businesses…I also keep track of the momentum of breadth on the NYSE (volume) and the Nasdaq (issues)…this way I can track where the market is in its four year cycle…another way of managing my risk.

    The market is a multi-faceted, multi-dimensional phenomenon where different approaches to making money come and meet and mix with each other…I’m finding that over time I am relying less and less on numbers and instead focusing more on the management team, the business model and the industry in which the company operates.

    Hope this doesn’t sound too arrogant but an investor has to have an investment philosophy he believes in so that when the seas get stormy, he can stick to his guns…

  2. Congratulations on wonderful performance to both of you! Hopefully that means that neither one of you will be embarking on your own European tour instead of pursuing aquarels.

    My aggregate performance:
    YTD === 2019-JAN to 2019-JUL === 27.63% vs TSX 16.22% [but this is quite irrelevant due to big drop last winter]
    TTM === 2018-JUL to 2019-JUL === 12.41% vs TSX 3.87%

    A lot of this was from a big pop in EQB share price just at the end of July. (If I exclude the financials etc., the performance drops to just 17.41% and 3.55% respectively.) I was finally back in black for the portfolio as a whole on Wednesday and now after renewed tariff fears I am back in negative… hopefully soon, I will be able to crawl out from the sea of red and not drown in it. As an aside, I also have <1k in an RBC-recommended mutual fund in my RRSP brokerage account to reinvest stock dividends without having to pay 9.95 for small purchases. I have held this one for a few years and this one is also still in the red.

    Penetrator: Why did you sell ENGHOUSE? I bought it fairly recently as a new position but after today I am also in red in it. Maybe I should buy the opposite of what I want to buy for the future – I am underwater in most of the purchases from 2019 (LNR, NFI, ENGH).

    Gavin: Why do you like ALTUS? I looked at it several times but it always seems quite expensive and I do not like that the share count (and per share cash flow, book value, etc) is being continuously diluted. Do you do some accounting adjustments when looking at ALTUS?

    1. ($)o($)

      I don’t want to tell you what to do because I don’t want to feel responsible for what other people are going to do based on what I say…I will say this, in my experience investing is 95 percent psychological…If you aren’t emotionally squared away within yourself the stock market can be a dangerous place.

      Copying what other people are doing will do you no good if you don’t have the courage of your own convictions…You have to have some type of investment philosophy in place…something you believe in based on your own experience in the market. And you have to learn how to manage your portfolio based on your financial situation and experience.

      For myself, just blindly looking and believing in the numbers without putting those numbers in some type of context can be dangerous…But for the record I like Altus because they’re in the process of transitioning to a sort of fin/tech company with a business model based on a recurring revenue stream (licensing fees from their software)…Something like what Open Text and Descartes are doing…If your curious about the company go check out their website and maybe read some of the public disclosures (annual, quarterly reports)…see if you can make sense of things and if it feels right for you…I like a management team who are transparent and long term in their thinking…but that’s me…everybody is different and has to find their own way.

    2. Dear Gavin,
      Thanks for the response. I am trying to understand not copy. Hence, my question about why you as well as some other highly respected managers and institutions are confident holding AIF. The dilution has always been a red flag to me, given the relative value and more shareholder-friendly policies in other companies. I have also become increasingly weary of high dividend payout ratios (this destroys compounding) and can cause operating issues and big market swings. You also mention DSG, which is also a little gem but it always seems to rank as very expensive on my spreadsheets. Some companies always pop up through reading and screens, but seems to be always too expensive even though they are really high quality -- for e.g. TEMENOS - a great little, mission critical Swiss company for bank software. I try to not buy anything that yields in earnings or FCF less than risk-free assets. I own 3% short term GICs right now which will be maturing in the fall. In very least, I expect any stock (especially capital light, recurrent revenue business) to earn more money than that and ideally have good potential to earn a lot more a lot faster in the future. My portfolio has a TTM earnings yield of 5.3% now (including cash reserve cushion in the calculation). This is still quite low, but it is a little more than risk-free rate and on-par with real asset yields such as non-levered multi-family residential building cap rates. My big picture goal is to maximize the earnings of my portfolio and hopefully the price will catch up to these in the future. I am not sure if this is easier than the other way around, but conceptually it makes more sense to me.
      Have a wonderful day!

  3. 25% ytd vs 20% for the s&p 500
    I don’t like to compare to the s&p/tsx because the Canadian market has a good proportion of mining and oil and gas company, two sectors that I avoid at all cost, especially because I am working in this sector!

    I have some good winners in my portfolio, but main reason of the good performance is that I have not done a significant investing error this year and avoid now to have a position that represents more than 10% of my portfolio. A better performance with a more conservative appoaxh

  4. Penetrator,

    My investment results in the past year bear out the superiority of your investment philosophy. I have had a really bad year.
    I sat there and observed mining stocks in lithium, gold, zinc...going for multi year lows and down about 75% from their highs. I thought I'd buy aggressively. Afterall, how much lower can they go? You don't want to know. LOL. Anyway, I do not let losses run too much (least of all in crap mining companies). But good luck trying to find steep value in mining. Instead of investing in mining, just throw your money in a hole in the ground and light a match, walk away. Way less frustrating.
    I was also focusing on small cap stocks instead of big cap. The small caps have really underperformed.
    To add insult to injury, my biggest winner of the year was THE TRADE DESK (TTD) ...but I bailed early figuring that if things get bearish even the most high growth stocks will get hammered if they are going for 70x next year earnings.
    Now I sit on a portfolio of high quality companies like Mastercard, Visa, Otex corporation, Amazon, Constellation software...and I'm just waiting for Trump's trade wars to usher in a new era of prosperity (LOL)
    Of course, I feel like such an idiot.

  5. Ce commentaire a été supprimé par l'auteur.

    1. Top3 CPRT (+59%), BYD-UN (+54%) & CSU (+44,5%).
      Worst 3: KHC -25%, WBA-21% & NFI -17.5%
      Missed opportunities after review SBUX (48%) & SUM-T +68%

  6. I'm at 18% so far. Though I too was waiting for a market drop and was carrying 25-35% in cash for a good chunk of the year. Could have been much higher if I would have invested more. I'm still about 20% cash right now....

  7. My portfolio up 28.7% YTD
    400 American Tower
    1000 Aritzia
    370 Five Below
    285 Mastercard
    320 The Trading Desk
    385 Zoetis

  8. I'm up 23.5% in my TSFA. Best performance includes Viemed VMT.T and CGI

  9. Fuck. Almost everybody beats me. Start your own blog and don’t ever come back here.

  10. With a Little less cash you would had the same results than us. With tweeter in chief going in election, you may have good opportunities use it soon...

  11. The long term return is the only return that really counts...when thinking in those terms I'm sure the Penetrator's record far outdistances everybody...

    1. Thank you Gavin but a big part of the growth of my portfolio comes from savings. I’ve had good returns but not exceptional returns.

  12. Thank you everyone for sharing. I think this might also be a good time to reflect on some of the losers in our portfolios. Is any one of you still invested or is actively buying energy stocks? I still have legacy positions (consumable treatment chemicals, temporary accommodation, and export infrastructure) from several years ago (down 50+% TTM and 90+% from 2015) and am wondering what other people's thoughts are on market capitulation. Even ECOLAB is spinning out its oil services unit... and more and more negative public sentiment is putting pressure on institutional investors against any "polluting" or "pollution-enabling" holdings. I am not planning to add any new money into the market until the winter (or an earlier major correction) because of personal reasons but I am curious on what others are thinking. Even though Brookfield did some midstream and offshore oil services deals in recent past, I think there is a vacuum in interest in Canadian energy stocks. Canadian banks are also strangling any consolidation activity attempts by trying to offload energy loans from books by requiring ever stricter covenants.

    1. The whole automobile industry is gearing up to produce electric car. It is still a luxury to own an electric car, but the days of mass production of these machines are there. When an electric car will cost 25k or below, the days of the oil and gas industry will be over and it is soon

    2. Thank you for the comment. This is certainly true in China and Europe but globally electric cars might bit a bit of a red herring. Electric cars will work in rich, urban areas with strict regulations and short-sighted policy makers. The real solution to urban transit issues is diversion to mass transit and not autonomous electric vehicles etc. Rural, developing, and too cold/hot countries cannot implement electric cars with existing technology. The energy density of batteries is too low, they are too expensive, and there is lack of necessary infrastructure. Other options like hydrogen are too dangerous and difficult to store (ie also too low energy density). Globally, I anticipate both demand for internal combustion vehicles as well as fossil fuel demand to keep climbing in our lifetime. If every person in Africa, Latin America, and South Asia who currently has a bicycle will get the cheapest moped or tuktuk (and maybe a lawnmower etc. and more imported consumer goods and plastic), it will not matter what Europe or North America or even China will do (we can all just disintegrate tomorrow and it might not matter) - the numbers of emerging "consumer" class in poorer countries are just so huge and their current level of consumption so low compared to the developed nations. Also remember that the first tier handful of Chinese cities which are advertised to the world and tourists are not representative of hundreds of millions of poor, rural people and migrant workers who are much closer to the emerging "consumer" class that I described above.

      Similarly fossil fuels will have to continue being used for trucking, for flying, and increasingly more also for electrical energy generation (peak-demand / load stabilization powerplants as well as replacement for coal and nuclear), as well as cleaner shipping (no more high sulfur dirty oil for container ships etc). I anticipate most of this demand will be solved by LNG and am not sure batteries or more gravity pump storage can fix this even for the grid stabilization which is necessary for wide-spread use of renewable energy.

      I also anticipate that electrical cars might become a lot less interesting to people once the governments will stop providing all of the subsidies. Remember that in many countries more than half the cost of gasoline and a quarter of cost of new car are taxes which electric cars are often exempt from (and moreover sometimes also provided with generous direct subsidies). The cuts in subsidies and new/higher taxes on electricity will coincide with greater adoption of electric vehicles. Many government rely on consumption taxes and are already heavily in deficits despite or relatively prosperous times and huge unfunded future social expenditures.

      Future is very complex and exciting and I certainly have no clue what might happen. Nonetheless, I think we live in an eco bubble at the moment which is detached from reality. Environmentalism has become almost a mass religion of our era. Hard, emotionless numbers, however, should beat beliefs and delusions in the long term. The whole world cannot pretend to be green by offshoring its manufacturing, garbage processing, and raw material production to developing countries - even if this might have worked for European politicians. If you don't believe dig into the numbers yourself, read the actual climate agreements and see how the reduction targets were calculated, and be frustrated with me about the disingenuous facade that is painted over the gullible public. I am afraid we are not yet at a point where we can get rid of fossil energy and maintain our existing population size and living standards. I am not sure, however, how to invest for the long term with this in mind.

  13. Wow all the super investors are here! Amazing to see this many people decimating the markets!

    My YTD is 26% on one account and 23% on another so simple average makes 24.5% of YTD. Could have been better but a couple losers dragged me down. I am seeing some of stocks that I don't have on my watchlist. Thank you people.

  14. Good job everyone, and thanks for sharing.

    RRSP up 26% (Jan 2019 - July 2019)
    RRSP up 21% (Aug 2018 - July 2019)
    13 stocks half US, half CAD

    TFSA up 11% (Jan 2019 - July 2019)
    TFSA down 3% (Aug 2018 - July 2019)
    Again 12 stocks across US/CAD. Much smaller and riskier portfolio. Sold these securities because they dropped too much: SIS, KAR, AGB, RPI.UN