samedi 15 juin 2019

Size of your portfolio

Here’s a little survey that will be interesting for me if a lot of people participate and are honest. Don’t hesitate to use another name if you want to be anonymous. I just want honest answers, i don’t need to identify anybody.

So, what’s the size of your portfolio? I’m talking here about all your money invested in stocks or bonds.

A- 0 to 50 000$
B- 50 000 to 100 000$
C- 100 000 to 200 000$
D- 200 000 to 500 000$
E- 500 000 to 1 million $
F- more than 1 million $

29 commentaires:

  1. Fair enough Penetrator...I am in class C

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

  3. My portfolio is in low C.

    Cash/GICs and stocks is all I own. I do not own any property, life insurance, car, businesses, or other valuables. This is quite shameful since the average networth in my city is apparently more than 8x of what I own. What about you Master?

    I am still more than 50% in the red in my RRSP (thanks to my own stupidity of averaging down on CXR, VRX, CPH, CMG, and a few other gems). Overall, I am still about 6.4% negative for all of my net worth book value, but I am slowly trying to climb out of the hole (even though I recently averaged down in LNR and HCG/EQB to try to get back in black). My YTD performance has been only about 16%.

    Here are my holdings and weights (all on TSX). Please, feel free to criticize, roast, and make suggestions or fun of me. For my whole investment lifetime, I have only ever sold HLF, EFN, CXR, and my bank's mutual funds. Everything else I ever bought or that got spinned out is still there, unless it got acquired and de-listed.

    cash 15% CAD and short-term GICs
    HCG 11% alt mortgage bank
    EQB 10% alt mortgage bank
    CSU 9% software verticals
    ENGH 5% software / telecom
    NFI 5% bus manufacturer
    DOL 5% dollar store
    LNR 4% metal manufacturer
    CCL.B 4% packaging
    LAS.A 4% juice bottler
    GIB.A 4% software consulting
    ECN 4% loan underwriter/service
    MTY 4% foodcourt franchise
    CNR 3% railway
    WPK 3% packaging
    SJ 3% tar wood products
    BAM.A 2% asset management
    RCH 1% screws and metal trinket wholeseller
    ALA 1% gas utility
    CMG 1% oil reservoir software
    BHC 1% contact lenses and drugs
    CEU 1% oil chemical consumables
    BDI 0% shed and accomodation rental
    BBU.UN 0% private equity holding company
    CPH 0% niche drug marketer

    Note, there is some overlap in industries since I bought different comparable companies in different accounts - for e.g. WPK & HCG & CSU & LNR in TFSA while CCL & EQB & ENGH & NFI in my non-registered account. I need a bigger cash buffer since I do not have a steady job or place to live.

    Good luck everyone!

  4. Thanks for sharing, and really appreciate the honesty. Why not own some usd stocks? If buy and hold is your game consider Motley Fool as this is their approach and could give you some better tips. I’ve bought and sold and while it saved me from devistating losses in CXR and VRX, I’ve missed out on some monster gains in MA and CSX if I had held. I’ve held Shopify without trading from a 10 percent to now 25 percent position over the last 2.5 years. I’m stuggling to decide if I bail on everything, somethings, or take a buy and hold approach and stay the course no matter how much uncertainty lies ahead. I know I should adjust the shopify weighting but I think this becomes a 100 billion company in 10, 20 years and ignoring the short term will lead to much larger gains that I probably can’t time.

    1. I ask myself that one often over the last 8 years and the answer is why buy when the CA$ is .75 ish. If the dollar goes up it erases any gain i might have in say JNJ. It's a phobia i have, is it wrong thinking? Love to hear the other side :-)

    2. marketman, in Dec 2018 I decided not to buy more USA stocks because of the exchange. Those stocks have gone up 10-30%. USA stocks is where most of the money is. The selection and quality in Canada just isn't that great most of the time. I transfer my CAD to USD and then buy a stock. That way, when I sell my stock I don't have to deal with the currency exchange until I transfer back to CAD.

  5. Dear Twotime,

    Thank you very much for your response. I guess the overarching answer to your questions is that I am too cheap, which creates a bit of a mental block when making more rational decisions.

    1. I am still learning and plan on diversifying into US/globally listed companies when one of the following will happen: A) the CAD/USD will become closer to parity (which might take a while) and/or B) I will have at least 100k USD equivalent in my non-registered account to qualify for a "no maintenance fee" account with Interactive Brokers or similar more affordable global stock broker. In the meantime, most of my holdings derive majority of their revenue from countries other than Canada. In fact, a few have no Canadian business at all. Canada might not have the best companies, but it seems too expensive to me at the moment to venture out, even when factoring the opportunity cost.

    2. I would like to have lower portfolio turnover but I do not intend to be purely buy and hold. I am too cheap to spend $9.95 to sell a single unit of a $40 stock I got as a spin-out from a parent company. Similarly, I decided not to contribute new money to my RRSP, since I am in the lowest tax bracket at the moment and do not like the RRSP rules, especially if I might need to withdraw money for a larger purchase in the next ten years. RRSP holds most of the stocks whose value fell below 1k and so even if I were to weed them out, it might cost me a large percentage of principal just in the transaction fees, let alone maybe not having enough money in the end to initiate a more meaningful position in a better company. I have considered selling all my RRSP holdings and just buying a Canadian SP500 ETF to perhaps store value until I will earn more money to take advantage of RRSP in the future.

    3. I have looked at Shopify and other similar companies many times in the past few years but I never quite understood the investment thesis (especially after getting burned on a number of other high-flyer no/low income stocks). Could you, please, explain why you decided to invest in them and continue to hold them even after making substantial gains? I am genuinely interested because I don't understand it and their rocket-like performance speaks for itself. How do you value a company with persistent losses? I believe Shopify does not even have gross operating profit. For an asset-light business with limited competitive advantage and many years of being in business, this seems to be quite concerning to me. I am also not sure Shopify qualifies as a critical-size-network-type business (like social media etc.). The whole multi-level marketing aspect and exaggerating management scares me too. What prevents companies like Intuit, Facebook, or other giants to simply offer a better shop-in-a-box from a much more trustworthy provider with synergies with their existing product offering or network of users? I am also concerned of not buying the next Valeant or Nortel. I have noticed that even some value-oriented mutual funds started buying Shopify. Is it because of fear of missing out? As a retail investor who got burned in the past, I do not want to become the last sucker stuck holding the rotten potato. I was sold on the whole adjusted earnings etc. a few years back when I gobbled up pharma and energy stocks. Why is it different this time? Is low/no debt level the difference? Am I just too simple minded to recognize the potential and the "new" economy?

    1. I follow Chris Umiastowski's approach of buying what excites me. I bought Shopify because a family member was an early employee (pre-ipo, now multi millionaire) there and I bought some to invest along. I paid $33.85 for 50 shares in June 2015 and added along the way. Got lucky and became more convinced over time that this company is going to be huge just based on their product and how expandable it is. Just seeing how much people buy online and how malls are dying just confirms this thesis. No math involved, just luck. This stock has basically carried my portfolio.

      I'm excited about Great Canadian Gaming. Love their casinos and think that investments now will pay off in the future. Volatility doesn't bother me and I just keep adding shares. Won't get the returns like Shopify but I really doubt it'll be lower or below market returns over the next 5 years.

  6. I have missed the boat on even less high flying stocks thank Shopify like Boyd and for a few years also CSU and many other smaller software companies (Descartes, Altus, Solium, etc.). I struggle with doing the quantitative valuation on most of these expensive stocks and I do not understand why investors like them so much (especially since management is often unfriendly to shareholders and keeps diluting them). I hear that people value them with private equity multiples etc. but once the cheap credit will run out, these will substantially contract as well.Perhaps MasterPenetrator and the rest of us could share our approach to how we determine fair value and decide when something is a good buy or a good sell.

    I look around and make lists of interesting companies (over time I see how they are doing, read their presentations, listen to conference calls, see which funds and at what price buy them etc.). Then, when I have some excess money to invest, I make a spreadsheet with their historical financials (rolling average ROA/ROE/ROIC, operating and net margins, net debt to free cash flow, price to earnings, price to cashflow, etc.) from yahoo, TMX, and morningstar. Then I make aggregate normalized score based on profitability (long-term margins and returns), quality (beta, per share growth in revenue and free cash flow etc.), and price (per earnings, per future projected earnings, per cashflow, their historical average multiples). Then I look how the companies rank based on the cumulative score. What financial metrics I put into the rankings evolves over time. Then I pick one of the top few (or top in a certain industry) and buy extra shares of that company if it seems to complement the portfolio. I want the portfolio to have as high profitability and buy companies only if they sell at least with a 5% profit or free cash flow yield. I also prefer smaller companies which might have room to grow and expand. The process isn't very good since it mostly leads to identifying falling knives... (LNR is probably highest scoring company right now), but I am trying to refine the list and metrics which I use. Eventually, I would like to also start trimming lower scoring positions and create watchlists to give me notification if there is some large price movement throughout the year, to take advantage of cheaper valuations. As I have said before, I am still learning.

    Good luck everyone!

  7. Very fortunate to be in the F category. Investing for 20+ years with a mix of individual securities and ETF's

  8. I'll chime in on the fair value discussion as I've been doing a lot of work on this front of late. My impression is that too many people focus on the 'value' of a company without paying as much attention to the 'profitability' or at the very least putting the two pieces together. If a company is trading at PE ratio of 40, and the general market is trading at a PE ratio at 20, they'll take a quick glance and say 'nope; too expensive for me... I'll pass.' This is the biggest mistake an investor can make and I'll explain why.
    Joel Greenblatt wrote a book called "The Little Book that Beats the Market" where he proposes the 'magic formula.' If you haven't read it, stop reading my post and buy it now. It's a short book and will change the way you look at companies. In this book he proposes a ratio that is effectively ROE/PE. He suggests the higher the ratio the better and in my experience anything over 2.0 indicates an attractively valued company. I have put my own spin on this and created what I call the 'spice metric' which I will share below. If you break down the ROE into three terms (via the DuPont analysis) they are: profit (net income/revenues) x turn (sales/assets) x (assets/shareholder equity). So this is... how profitable you are selling your product or service times how many times you can sell your product or service in a given period of time times the amount of leverage you employ in your business. There is however an inherent problem in using ROE. The first is it uses 'Net income' and net income is an accounting term. It's much better to use a profit term that is cash based. Such as operating cash flow, free cash flow. I use adjusted EBITDA (aEBITDA) which is EBITDA + stock based compensation. So my 'profit term is 'aEBITDA + stock based comp' / revenues. Sorry; not easy to show equations and such in this blog format. The other problem with ROE is you can't screen for stocks that have negative equity. Think Dollarama and Dominos. So I actually drop the leverage term when screening for stocks. It's not that debt/leverage isn't important but at this stage I don't want it because I'll miss companies with negative equity... and some companies with negative equity are real gems... and because others are missing this they can fly under the radar. For the 'value' term I use EV/aEBITDA.
    So... putting this all together the Spice Metric is ('aEBITDA/Revenue' x Asset Turn) / (EV/aEBITDA).

  9. Generally, a ratio over 2 suggest a company is undervalued. Rightmove has a spice of 12.1, Great Canadian Gaming 4.46, Intel 4.11... you mentioned Linamar... it's 3.35. Some 'expensive' companies... Boyd 0.84 and CSU 1.37. So, IMO one must look at the value of a company in the context of their profit markers... which as noted above, I find the spice metric to be a great tool in doing this.
    Lastly, it's not enough to simply look at the value of the ratio to make a judgement call on buy/sell/hold. You also have to look at the value of the metric in the context of the value of this metric for a given stock over the past 5-10 years. Let's pick on CSU. If you graph this metric over the past 10 years you'll notice that it has been as high as 4 (late 2009) and as low as 1 (early 2014 and mid 2018). However, it has fluctuated between 1 and 2 since 2014. I would therefore submit that when the ratio gets close to 2, CSU is a buy and when it drifts down to 1, it's a hold or sell. So; CSU at 1.37 is a bit pricey but nothing too crazy. When DOL got to $30, the spice metric was over 3 and was a screaming buy. It's now 2.23 which is still quite attractive based on my analysis.
    I'm in the process of having a piece of software written for me that will automate the screening and analysis of companies that meet our criteria as I used to do all this work manually; the idea being to free up time for me to spend more time analyzing the non quant aspects of companies... and spend less time doing work a monkey could do. I should note that I also look at 'net debt / aEBTIDA' to give me a sense of how much leverage a company is using. Great companies don't use a lot of debt so I generally require this ratio to be below 3.

    Hope this helps... it's taken me a long time to get to this point and I'm continuously refining the process but this is the gist of it.

  10. Love the approach Jason... The only thing wrong with it is the name. A decade from now when your performance is multiples of the market, you do not want the 'spice factor' to be the reason why. It needs to be the JDV factor, the Hillside Factor, the Penetrator factor (as your new software penetrates the financials like a master, while you pay tribute to the laughs had while reading the blog).

    Terry Smith at FundSmith has put a lot of effort into showing how over time high ROE/ROCE trumps starting valuation (assuming the ROE/ROCE is sustainable). An example: Take company A, who has a ROCE of 20% and trades at 4x BV versus company B who has a ROCE of 10% but trades at 2x BV... and compare them over 40 years. Even if you assume the price at end is halved for company A (2x BV) and doubled for B (4x BV), company A gives you a 18% CAGR, versus B at 12%.

    Simple math but powerful outcome!

  11. Haha... that’s amusing. When something is rad I’m well known for it being referred to as “spicy”... I come by it honestly but your point is well taken. It is what it is... I am who I am! Cheers.

  12. Hey Vicario, change your nickname and answer the question with some random name.

  13. With all due respect I think size of portfolio is unimportant. In my travels I have found people who have $10k and $10m that don't have a clue how to manage money and I've also found people with $10k and $10m who get it.

    I just e-mailed you something I found on Twitter... post it. It speaks exactly to what Mike and I were referring to above. If you run concentrated portfolios of companies that possess above average financial metrics and you spend less than what you make, you'll have more money than you'll know what to do with. Enough said.

  14. It's probably important to include your age.

    Someone with 400k at 25 years old, is much more impressive than someone with 700k at 65 in my opinion.

    Either way, I currently fall into group "D"