H1-2018 Wexboy Portfolio Performance

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Applegreen, benchmarking, blockchain, Brexit, crypto, cryptocurrencies, Donegal Investment Group, investing, KR1 plc, MAGA, portfolio performance, reality TV star, relative performance, tariffs, Trump, Zamano

Looking back, the first half this year seems kind of inevitable now…

In the wake of last year’s momentum – possibly even euphoria (see my FY-2017 performance review) – H1-2018 was an unwelcome cold shower for investors. But such is how the market gods operate… And in reality, momentum was limited mostly to US investors (in particular, FAANG fans), who enjoyed 19-25%+ returns last year. Spare a thought for (unhedged) European investors: A weak dollar (down 14% vs. the euro) diluted away most of their US stock returns, while locally they earned a fairly pedestrian sub-8% return. So it’s clearly galling for European investors to now see their local markets down year-to-date (vs. a small US gain)…particularly when most of the ‘blame’ (if there is such a thing) for recent market wobbles arguably belongs to America.

But surveying other markets, we’ve seen more savage reversals of fortune elsewhere this year. Emerging & frontier markets investors enjoyed 32%+ returns last year, but were blindsided this year as markets plunged across the board, with negative returns exacerbated by local currency weakness (high current account deficits being targeted in particular). In fact, quite a few individual markets entered bear market territory. And yes, I mean actual 20%+ declines…not the feeble 5-10% ‘bear markets’ the financial media breathlessly reports these days!

Of course, the real disaster bear apocalypse happened in the crypto market – remember this table?

Take a moment & marvel once more…seems like an awful long time ago now, eh?! While Bitcoin peaked mid-December (rather unfortunate for all those kids who persuaded their folks to buy in over Xmas!), Ethereum & the rest of the market’s incredible momentum carried right into the first/second week of January. Since that peak, the entire crypto market has collapsed almost 70%, with its end-June market cap now barely exceeding $250 billion. Clearly, my #CryptoFOMO theory hit a brick wall: Despite noting a possible crypto-wobble (as I published this post mid-Jan), I argued that new money might not be ready to dive into crypto, but last year’s crypto gains would surely inflame & elevate investors’ risk appetite in the equity markets. Obviously, at the time, I didn’t quite envision such a horrific crypto collapse…or the subsequent schadenfreude.

However, I’d still argue there’s a significant asymmetry here, in terms of potential risk/reward: Crypto euphoria could well re-emerge & spill over into equities…but on the other hand (hopefully, I’m not being too blasé here!) the popping of an asset class/bubble that can be measured in the mere hundreds of billions isn’t all that relevant or serious in the global scheme of things.

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Wexboy Portfolio Prospects – Part II

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Alphabet, Applegreen, bubble thesis, Donegal Investment Group, GARP investing, Google, growth investing, KR1 plc, Kryptonite 1, portfolio allocation, portfolio performance, QEInfinity, Record plc, stock picks, stock tips, value investing

Ugh, collywobbles!

Sure, we can all breathe easier now, but still feels a little bumpy out there, eh? Though maybe you should ignore the incipient nausea…just relax & embrace the ride! ‘Cos I’m perversely encouraged by these fresh mini-bouts of panic we’ve been seeing this year. They’re a useful reminder investors still have a real wall of worry to climb here. Which is probably the most important & necessary pre-condition underwriting the durability of today’s bull market. [And yes, it’s only a bull market…when investors (esp. the man in the street) go from hoping they’ll make money, to knowing they’ll make money, that’s when we enter bubble territory]. However, we still need to see whether my macro investment thesis eventually plays out here – a thesis I express via a question:

Globally, we’re still conducting a truly unprecedented monetary (& fiscal) experiment…could we end up ultimately inflating the most incredible bubble ever?

If you think that’s ridiculous, we really don’t need to debate it here. Or rehash a complete litany of facts & figures which prove history must repeat itself – the ever-flattening US yield curve being the latest bogeyman. But I have to ask, what’s so bloody alarming about entirely average market P/E ratios…when interest rates are still anything but average?! And despite their trajectory, we’ll obviously continue to enjoy ultra-low long & short-term rates in absolute terms, while central banks (in aggregate) also continue to print money:

Yep, there’s the real boiler-room of this market – in every sense of the word – as this chart nicely demonstrates:

Wexboy Portfolio Prospects – Part I

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growth investing, portfolio allocation, portfolio performance, Rasmala, Saga Furs, stock picks, stock tips, Tetragon Financial Group, value investing, VinaCapital Vietnam Opportunity Fund, Zamano

With the dust hopefully having settled here, it finally seemed like the right time to give this post one last polish & get it out! Maybe now, readers are  in the mood again to actually contemplate a potential new buy or two? As for me, almost inevitably, my top holdings tend to be my favourite buys…

Okay, maybe that’s not strictly true – each & every day, I’m still distracted by siren stocks I pine to own! But buying a new stock is equally about selling an existing holding*, one you (should) already know far more intimately. [*Unless you’re hoarding piles of cash…which would be pretty silly, right?!] And that’s an important & valuable hurdle for any investor. Because anything that might help reduce portfolio turnover is invariably a good thing! Which is no damn excuse for hanging on to losers…but it is a compelling incentive for really understanding the stocks/businesses you currently own. In particular, because learning how not to sell potential multi-bagger growth stocks is ultimately the biggest challenge most (experienced) investors will have to face, as I lamented in my last post.

So let’s crack on: For each of my disclosed holdings, I’ll comment briefly on its 2017 performance, then focus on its current prospects & valuation. NB: All share prices & market caps are cob Feb-27th, but individual stock allocations are listed as of year-end 2017 (essential to my 2018 portfolio performance tracking). Of course, any questions/comments you may have about these holdings are always welcome here (& by email):

i) Zamano (ZMNO:ID) (or ZMNO:LN) (1.8% of year-end portfolio):

Share Price:   EUR 0.04

Market Cap:   EUR 4.0 Million

2017 Portfolio Gain:   (25)%

Yeah, unfortunately they can’t all be potential multi-bagger growth stocks…

FY-2017 Wexboy Portfolio Performance…Crackin’ The Code

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annual review, benchmarking, blockchain, bubbles, bull market, cryptocurrencies, Fortress Investment Group, GARP investing, Kryptonite 1 plc, Newmark Security, portfolio performance, relative performance, Zamano

Hello. Why yes, it’s me…

Happy New Year!

Admit it: You thought I’d bloody well scarpered, to become the Wild Eyed Crypto-Boy from Freecloud – didn’t you?!

Well, not quite…

Though I did a mini-grand tour of Xmas dinners & meetings, and was bemused how often the conversation ended up in crypto-territory. Ha, so it’s not just me!? And even though I enjoyed some lighthearted crypto debate (best to avoid people who get too emotional about investing), I’m also left wondering how high #CryptoFOMO levels are running out there right now?! My new portfolio mantra may be dead on target:

Doesn’t everybody deserve a little crypto pixie dust?!

But anyway: I was actually 100% committed to an incredibly brutal training regime – preparing for my first naked solo New Year’s Day Iron Man Triathlon. Yeah, I know, just about anything to get out of the house…

Haha…again, not quite.

In reality, life simply got in the way, as it has a habit of doing…albeit, sometimes in great ways! But after all, isn’t that precisely what my life’s designed for & supposed to accommodate? Next time you fear dying chained to your office desk, keep your eyes on the prize & remember money isn’t really about buying things – which is just another form of indenture – what it really buys you is freedom!

And more recently, I’ve taken advantage of that freedom to meditate on doing…absolutely nothing! To explain: Over the last couple of years, I’ve executed a sloowww but steady transformation of my entire portfolio: Far less value, far more GARP. [The nay-sayers will insist this is simply an excuse to pay up]. And in 2017, I finally felt like this huge effort had come together beautifully…

Kryptonite Even Superman Could Love…

Tags

blockchain, city discipline, cryptocurrencies, dot-com bubble, Ethereum, flipping, George McDonaugh, ICOs, KR1, Kryptonite, Kryptonite 1 plc, multi-bagger, token sales, venture capital

As some of you suspected, my last post (& related comments) were intended as an essential intro here, so it’s worth revisiting:

Cryptocurrencies & Blockchain – Longs, Shorts, or Trading Sardines…

[And since I ducked providing some kind of primer, let me highlight the best introductory books I’ve read in the past year: ‘Digital Gold’, ‘The Age of Cryptocurrency’, ‘Blockchain Revolution’, ‘The End of Money’…nor would I under-estimate the ‘For Dummies’ books. And this is new: Hash Power. And finally, here’s an interesting news/research resource.]

After highlighting some of the risks & challenges investors face if they’re considering direct investment in cryptocurrencies & blockchain (via mining, buy & hold investment, initial coin offerings, and/or blockchain VC investment), I concluded the safest & most practical approach for the vast majority of investors was inevitably via:

Listed Investment Companies

But while I detailed metrics for 16 core listed sector plays (& highlighted another 23 potential plays), I offered no recommendations. In fact, in terms of such nascent technology/innovation & the listed sector’s $2.6 billion market cap (just 2% of the $144 billion cryptocurrency market…which is another rounding error globally), I question if valuation’s even a relevant filter at this point. Same for management – many of which don’t necessarily match the typical CEO profile investors expect, or boast a prior/public track record.

[Not suggesting you abandon all (valuation) rationale. Or ignore management: Companies/projects will ultimately live or die by their management & they still need to be evaluated in their current role (at the very least). Focus particularly on what they actually do & achieve, not just what they say…]

In reality, the main challenge (& best framework) now for investors is to develop a real view on the entire sector – long, or short – one strong & personal enough to hopefully steer you towards the best investment opportunities, and help you sleep through the inevitable volatility & reversals to come. Thinking about cryptocurrencies & the blockchain separately is a great place to start, as people still confuse/conflate them*. Ultimately, they’re very different beasts…a negative view of one shouldn’t preclude a positive view of the other.

[*Even crypto-warriors have decided (or at least conceded) they’re trading Ethereum…but they’re actually trading Ether!]

Cryptocurrencies & Blockchain – Longs, Shorts, or Trading Sardines…

Tags

Bitcoin, blockchain, crypto, cryptocurrencies, dot-com bubble, Ether, Ethereum, ICOs, initial coin offerings, investment companies, trading sardines, venture capital

Over the last few months, I slowly added lines here & there to this post in my head. Well, the original: It soon evolved into a bear of a cryptocurrency & blockchain primer. One which, anticipating an eventual audience, kept dragging me down an endless rabbit-hole of what about & what if questions…

It’s astonishing such a new innovation has attracted so much passion & opinion so fast. [In reality, its key components – cryptography, a distributed ledger (i.e. a peer-to-peer network), digital money – have existed for decades. The genius of Satoshi Nakamoto was applying them in such a radical & elegant new way]. We’re barely outta the gates here, but it seems like everybody’s already adopted a fervent position of advocacy, denial, or just plain old ignorance… Take your pick & damn the facts – close your eyes & you’d swear it’s politics, not technology.

But maybe this is no surprise – after all, we find it harder to talk (rationally) about money, even more than sex!? ‘Cos it’s personal. And emotional…nothing evokes those familiar demons, fear & greed, more easily than money. And that deeply personal relationship’s become even more fraught & anxiety-ridden – particularly in the West, with more to lose – as we live in a post-financial crisis world, with increasingly meagre economic growth prospects, relentlessly climbing public & private debt burdens, ever more polarised voters, and with even the future of work threatened by technology.

And then, Bitcoin: A new paradigm, uber-money, a stateless & entirely digital currency. Which only served to ratchet our fear & greed even higher. Too many struggle with the apparent irrational exuberance, and even more so the sheer intangibility, of cryptocurrencies. Which inevitably invokes a much deeper fear, of the same intangibility inherent in our fiat currencies, our fiscal obeisance to governments who seem dead-set on printing & spending their way into oblivion, the fragility of our financial assets & markets (which now exist only as electronic blips on hackable centralised repositories), and our economic future & security itself. Hence, that recent primal scream of denial:

‘But they’re not real!!!!!’

[Yes, I counted – Howard Marks really did use five exclamation marks.]

But we also flog ourselves into a real frenzy of greed: How did we miss out so completely on Bitcoin’s incredible & stupendous gains over the last few years (even this year!)? We wonder if maybe, just maybe, this is still the beginning…could a cryptocurrency (or two) ultimately scale up to match the gold market, or even a major global currency? [So why didn’t the media swarm Murray Stahl, as they did Marks or Jamie Dimon? Here’s Stahl’s incredibly bullish take. Ironically, he helped inspire Marks’ next letter, a rather grudging & half-hearted mea culpa]. We even speculate whether investing in the blockchain is a chance to go back in time & actually get in on the ground floor of the internet itself?!

New Portfolio Snapshot & Allocation

Tags

agri-business, alternative assets, asset allocation, bubbles, cash, diversification, emerging markets, Europe, Event Driven, frontier markets, Ireland, luxury goods, macro investment thesis, mobile, natural resources, Nifty Fifty, portfolio allocation, property, smartphone revolution, UK, US, volatility

Welcome to the dog days of summer…

A good time to pause & take stock of my portfolio. Following on from my recent H1-2017 portfolio performance post, here’s my Top 10 Holdings today:

In fact, the table lists all of my current disclosed holdings. And just to add some overall context, only five of these holdings actually feature in my Total Portfolio Top 10, while Newmark Security doesn’t even make the Top 20 any longer.

I won’t add new commentary here, since I last focused on my big H1-2017 winners & losers, and covered all my disclosed holdings in this January Top Trumps post. Not to mention, the rash of new investment write-ups this year: Alphabet (GOOGL:US), Record (REC:LN) & Applegreen (APGN:ID). But for your reference, I will provide corporate website & Bloomberg links, links to relevant historic posts & write-ups (remember, good investment theses tend to evolve slowly!), plus the latest share price & market cap for each stock:

i) Alphabet (GOOGL:US, or GOOG:US)   (9.5% Portfolio Holding):

‘So Why Not Google It..?’

Share Price:   USD 940.08

Market Cap:   USD 648 Billion

H1-2017 Wexboy Portfolio Performance

Tags

Alphabet, Applegreen, benchmarking, bull market, Fortress Investment Group, GARP investing, Newmark Security, portfolio performance, Rasmala, Record plc, value investing, Zamano

Benchmark Performance:

Let’s jump right in, here’s the H1-2017 performance for my usual benchmark indices:

Move along, nothing to report here…but that’s exactly what we should focus on! Of course, the financial media’s become more & more hysterical about the markets – de rigueur in an ADHD world – but cooler & more logical heads have also been sounding the alarm bells so often, I’m sure I’ve gone deaf. But sacrilegious as it may sound, a +8.2% YTD gain for the S&P 500 isn’t all that extraordinary… Sure, it’s within spitting distance of the market’s average annual return, but that doesn’t mean much – history confirms annual returns tend to rack up in just a few months, with the market faffing around for the rest of year.

And looking back, I’m hard-pressed to find this outrageous bull market everybody’s yammering about. In reality, the S&P soared a massive 6.6% pa over the last three calendar years (2014-2016). Seriously…that’s it!? [How many readers are reacting with disbelief right now?] Even my blind maiden aunt couldn’t get her knickers in a twist over that kind of return…

Of course, the nay-sayers will argue the S&P’s trajectory is irrelevant – we should really focus on how expensive it is today, in absolute terms. Hmmm…maybe if you cherry-pick the most damning P/E multiple comparison!? But taking a longer-term perspective, the Nifty Fifty actually peaked at 42x in 1972, while TMT stocks peaked at 60x in 2000 (with the S&P hitting 29x). Except isn’t that just a greater fool approach…shouldn’t we be evaluating the market vs. normal P/E multiples? Well, again I fail to understand the alarm: The S&P today actually sports an 18.8 forward P/E, a mere 9% premium to the average 17.2 forward P/E over the last 20 years (which included the dot-com bubble, but also the financial crisis).

And absurdly, the doubters choose to ignore gravity (i.e. interest rates)! Whereas I’m perfectly happy to defer to Buffett here – aside from secular earnings growth itself, interest rates are arguably the equity market’s greatest single driver (& valuation benchmark). This one 10 Year UST chart effectively tells you more than a dozen books could about the US equity market’s trajectory over the last 50+ years:

Applegreen – Just Grab & Go!

Tags

APGN:ID, APGN:LN, Applegreen plc, Bob Etchingham, convenience store, fresh food, gas stations, Irish value investing, Joe Barrett, maintenance free cash flow, owner-operators, petrol forecourt retailing, petrol stations, retail float, retail growth story, Topaz Energy

And yes, with the blog turning six this year & a tsunami of retail apocalypse headlines recently, it’s ironic I’m only now posting my first retail investment thesis ever! But rest assured, this isn’t some soggy chewed-up cigar butt. Nor some story stock priced & pitched for perfection. Though, almost inevitably, the retail sector only seems to come in those two flavours nowadays… Whereas Applegreen plc (APGN:ID, APGN:LN) is that rarest of beasts:

A bona fide long-term retail growth story trading for a value price. 

And since it’s a retailer, first let’s focus on Applegreen’s story – its history, its people, its offering, its prospects – we’ll home in on the numbers later. If you’re a story person, I hope you enjoy the videos along the way. As for the numbers people…I definitely encourage you to circle back & watch ’em later! Let’s begin:

Applegreen is a major Irish petrol forecourt* retailer, with a significant & growing presence in the UK, and an emerging footprint in the US Northeast. [*As the Irish would say, a fillin’ station. To translate: A gas station, gasoline stand, gasbar, petrol station, petrol garage, petrol pump, service station, servo, etc….selling petrol, gas, or gasoline (& diesel)]. Bob Etchingham (CEO) founded the business as (Petrogas) in 1992, after working at Esso for 10 years, and was joined a year later by Joe Barrett (COO) (ex-Tesco & John West Foods). They’ve been described as ‘chalk & cheese’, and it’s obvious they play to their respective strengths & personalities in their roles. Growth was gradual at first, but from the outset management focused on developing its retail proposition & establishing a quality food offering. Which led to the launch of the Applegreen brand in 2005, heralding a distinctive retail-led proposition for customers built on a ‘Low Fuel Prices, Always’ price promise, ‘Better Value Always’ convenience shopping, and high quality own brand/international food & beverage offerings.

Love That Record…Give It A Spin!

Tags

Alpha FX Group plc, alternative asset manager, Brexit, currency manager, forward rate bias, FX hedging, FX market, James Wood-Collins, Neil Record, owner-operators, REC:LN, Record plc, volatility

Record plc (REC:LN) is the world’s largest independent currency manager. Based in Windsor, it was founded in 1983 by Neil Record, winning the world’s first stand-alone currency overlay mandate two years later. Record is still majority-owned by its directors/employees, with no proprietary business of its own – it focuses solely on being a ‘trusted advisor’ to an institutional client base (pension funds & foundations), providing (bespoke) passive & dynamic currency hedging and currency for return strategies, with AUME now at $58.2 billion (£46.6 billion). [Record only manages currency risk, so AUM is notional – i.e. it doesn’t manage underlying client assets – therefore, it uses the term Assets Under Management Equivalents]. This (old) video is still worth your time watching:

But unfortunately, after listing at 160p a share (a £354 million market cap) in Nov-2007, its long-term chart is none too pretty:

Ouch…

By early 2012, investors were so convinced Record’s AUME & business were heading to zero, its shares had collapsed 94% & were trading for net cash. [Which was pretty irrational, as Record’s operating margin was bottoming out at 32% at the same time!] Any investor brave enough to buy it sub-10p has a tasty four-bagger at today’s 43p share price (a £93 million market cap). [As did Jeroen Bos, see the final chapter of his book]. Even buyers six months ago have a near-60% return. But noting an average share price of 31p over the last 5 years, gains have been limited for most investors, while long-term shareholders continue to nurse big losses.

Maybe the financials look better?