Continued from Part III.
OK, so here’s an end-June snapshot of my current portfolio allocation:
[NB: And here’s my portfolio a year ago (from this post) – the majority of subsequent changes are obviously due to sales/purchases & the share price appreciation/depreciation of (mostly disclosed) holdings. Notably, my minor Hedge & Nat Resources allocations are now eliminated on sales of holdings, while my new US & Undisclosed (a new asset class I’m still working on) allocations reflect undisclosed new holdings. I’ll also highlight my Cash allocation’s pretty minimal, with the priority on Fixed Income (which is how I basically consider my Alternative Asset Opportunities (TLI:LN) holding) & Event-Driven (essentially, my NTR plc holding…noting, in particular, last week’s announcement of a return of capital/wind-down) :-) ]
Some big & small changes, obviously – but in the scheme of things, it certainly isn’t a radically different portfolio. But what were you expecting…did you really think I’d turn on a dime & completely transform my portfolio? Um, maybe if I was some hard-charging hedge fundie. But for the average investor, the more rapidly & radically one’s portfolio changes, the more likely it’s the result of poor/faulty decision-making! And I suspect this is even more true of thesis-driven investing – the biggest & most rewarding theses tend to develop/evolve over a long period of time, and likewise so should your portfolio…
Now, let’s consider some potential portfolio allocation implications, in terms of my current macro investment thesis. [Keeping in mind my recent Four Feds commentary]:
Emerging/Frontier Markets: My underlying emerging/frontier markets thesis hasn’t changed a jot since I wrote this post (& its follow-up). But sentiment remains negative, with investors/commentators focusing on specific country surprises & disappointments, and the narrowing growth gap between developed & emerging/frontier markets. Currency weakness, esp. against the dollar, hasn’t helped either. But emerging/frontier markets are still the world’s growth engine, and will continue to trounce developed markets in terms of absolute growth. And the narrowing growth gap’s mostly due to starkly differing fiscal/monetary policies…investors might well ask themselves which policies are more sustainable? As for currency weakness – yes, it’s a short term hit, but it also improves their terms of trade substantially.
But doubters question whether a new export-led growth surge is even possible, citing lower developed market growth/demand. Which strikes me as a remarkably stupid argument…if you expect lower Western growth, surely it strengthens the case for high growth emerging/frontier markets investment?! Many which now appear to be reaching an inflection point, where domestic middle class/consumer demand’s emerging as a new growth driver, reinforcing or even supplanting existing export-led growth.