Current Portfolio Snapshot & Allocation

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agri-business, averaging, cash, correlation, distressed, diversification, emerging markets, Event Driven, frontier markets, Ireland, luxury goods, mobile, portfolio allocation, property, UK, US, volatility

OK, the Olympics are over – time to focus, focus!

And these pleasant late summer markets might soon grow stormy…

So it’s as good a time as any to offer up a current snapshot of my top holdings & portfolio allocation. Let’s begin with my Top Nine holdings, which follows on from my recent H1-2016 Performance post. [In this post/tables, since I made no incremental H1 buys/sells, the average stake for each holding actually equated to my year-end 2015 holdings…so eight months later, an update’s clearly overdue!]:

[Current:  As of CoB 24-Aug-2016]

For your reference, in my last post, I included a paragraph (or two) of updated commentary for each individual holding. I also completed a similar exercise in my Top Tips post back in January. And just for completeness here, I’ll again provide corporate website & Bloomberg links, links to relevant posts/write-ups (remember, good investment theses tend to evolve slowly), plus the closing share price & market cap for each stock:

i) Zamano (ZMNO:ID, or ZMNO:LN) (9.3% Portfolio Holding):

‘Zamano…So, What Now?!’      (NB: First link = most recent post/write-up)

‘Zoom, Zoom…Zamano!’

Share Price:   EUR 0.113

Market Cap:   EUR 11.2 Million

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Stock Picking…Art, or Science (Part III)?!

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art vs. science, asset allocation, correlation, debt, diversification, growth vs. value, home bias, illiquidity, stock picking, stock selection, stock valuation, volatility

Well, it’s not ideal publishing another post in this series two months+ after my last post…but I’m obviously no post a day pleaser. And life, Xmas, stocks & markets, and sneaking off to the movies, all tend to get in the way! 😉 A quick (re-)read of Parts I & II might be in order, if you’re so inclined? But to recap, very briefly: In Part I, I stressed stock picking is really two distinct & independent activities:

a) Stock Valuation, and

b) Stock Selection

And all too often, investors confuse & conflate the two…

But presuming your quantitative stock valuation process is nailed down, then stock selection is obviously a far more qualitative process…it’s certainly not about ranking & selecting stocks purely in terms of their upside potential. Fortunately, there’s plenty of stock selection filters you can employ – for example, to help protect against the risks posed by home bias, bottom-up stock picking, and/or a concentrated portfolio. Of course, the overall objective here is to:

i) Ensure stock selection is as much science, as it is art, and

ii) Always strive for greater diversification & superior risk/reward in your portfolio.

Here are some other filters you may find particularly useful. No doubt, as you read, they’ll strike you as perfectly obvious…the trouble is, applying them consistently is easily forgotten when you’re considering individual stock holdings & potential buys, let alone when you’re trying to manage the overall risk/reward of your entire portfolio:

Wexboy Portfolio – H1-2014 Performance

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alternative assets, benchmarking, Bloomberg Euro 500, correlation, diversification, FTSE 100, FTSE AIM All-Share, Irish shares, ISEQ, portfolio allocation, portfolio performance, quantitative easing, S&P 500, stock ideas

OK, that’s enough TGISVP (though rubbing resource muppets’ noses in it is lots of fun) – time for the rubber to hit the road: So how did the Wexboy Portfolio make out in H1-2014?! Well, first you may want to reference my FY-2013 performance – now, let’s turn our attention to my benchmark indices:

[NB: I’ve dropped the FTSE Eurotop 100 – I can find it elsewhere, but I’m used to seeing it on Bloomberg.com & I can’t find it as a ticker any longer. I could use the EURO STOXX 50 (SX5E:IND), but that’s a ridiculously small universe of stocks, so I’ll opt for the Bloomberg Euro 500 (BE500:IND) instead – not as well known, but functionally it gets the job done.] [btw Bloomberg’s fantastic, but they have some annoying habits – on the one hand, they abruptly discard useful features, while they also add awesome new features which they barely ever highlight!? Check this out:  Bloomberg Industry Leaderboard].

A +3.4% benchmark gain isn’t too inspiring – quelle surprise, the S&P’s the only index which really makes the grade! And the individual indices don’t bode well for my own portfolio, since it’s particularly focused on the UK. In my case, that’s more about UK-listed stocks (& funds), rather than UK-exposed stocks – but in my experience, a poor FTSE performance usually weighs on both. As for the US, I suffer from the inverse – I have a decent allocation to US-exposed assets, but little exposure to US-listed assets! I also opted for the UK & Ireland as an attractive substitute for a European portfolio weighting – again, that focus may hurt me (though the ISEQ’s performance was only marginally worse). This is a fairly typical stock-picker problem:

Why make it so bloody complicated…when the simple & most obvious strategy is so often the winner?!

2013 – A Game of Two Halves

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AIM stocks, Alternative Asset Opportunities, Asta Funding, benchmarking, correlation, fear and greed, hedge funds, home bias investing, KWG Kommunale Wohnen, Petroneft Resources, portfolio allocation, portfolio performance, Richland Resources, Saga Furs, Tetragon Financial Group, Titanium Asset Management, US Oil & Gas

Yup, it’s that time of year again… [For reference, here’s my mid-year 2013 performance report, plus my FY-2012 report]. Right off the bat, I have to admit assessing annual performance isn’t my most favourite of activities (as I’ll explain). It also reminds me how easily our (personal) fear & greed equation can magically transform itself as we finish an old year & head into a new one. While most traders tend to start a new year cautiously, investors often set out brimming with over-confidence – which can prove pretty hazardous…

The UK’s AIM market, for example, has enjoyed significantly positive returns in 14 of its last 18 Januaries. This annual love-fest is even more remarkable when you realize the AIM index has declined 17% since its 1995 inception. [Growth and value investors, take note!] My favourite muppets provide a more ludicrous example: Shareholders of US Oil & Gas (USOP:G4) (I’m presuming no new suckers are buying at this point) hailed the new year by immediately buying/running up the price 60% from its yr-end close! Sure, hope springs eternal…but with most USOP investors having lost 95%+ of their investment to date, this kind of new year exuberance is wildly irrational.

Thinking about & tracking your stocks (& portfolio) on some kind of calendar basis is yet another fixated version of tracking individual stock gains/losses. And that’s how fear & greed grabs hold & encourages you to play the ‘if…‘ game. I’ve already recommended you Forget Your Purchase Price – now I recommend forgetting your Year-to-Date Gains. Free yourself of those deadly anchors, and you’ll be forced instead to look afresh at your holdings every single day. For each stock, that’s an exercise in assessing upside potential (i.e. current share price vs. your latest estimate of intrinsic value), and then weighing that reward against the level & range of risk(s) involved. Which boils down to one simple question for each of your portfolio holdings:  Should I buy, sell or hold this stock today? And your cumulative or calendar gains/losses on a stock are irrelevant to that question – no matter how small, large or goddamn painful they might be…

Mid-Year 2013 – Performance Update

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Alternative Asset Opportunities, Avangardco, checklists, CLOs, correlation, European Islamic Investment Bank, FBD Holdings, Fortress Investment Group, German property, home bias investing, KWG Kommunale Wohnen, Petroneft Resources, portfolio allocation, portfolio performance, quantitative easing, Richland Resources, risk aversion, Sirius Real Estate, Tetragon Financial Group

I remain (somewhat) uncomfortable with performance reviews. Inevitably, they produce a pretty meaningless snapshot…but we just can’t help ourselves, eh? 😉 [I covered this whole topic in greater depth here, in my 2012 Performance Review, so that may be worth another look]. OK, once more unto the breach, dear friends, once more…

Let’s first check how the indices performed in H1-2013:

The performance of Ireland & the UK nicely supports my theory that the northern periphery (inc. Scandinavia – lots of interesting stocks there right now) offers some of the best (& lower-risk) plays on Europe. Then we have the US, which continues to demonstrate how much further along it is (vs. Europe) in the cycle – as Bernanke reminded the market recently, to its (feigned?) consternation! [And to the genuine consternation of the ECB & BoE – oh boy, there’s going to be plenty of playing chicken, on all sides, in the months & year to come]. I’m profoundly suspicious of the US market now – it’s not that rising bond yields can cause much damage, they’ll obviously remain low in absolute terms for a v long time. But the market’s a discounting machine – when buying stocks gets easy & the economic outlook starts to look rosy for the average investor, that’s when things turn dangerous: Because how much of that’s already been priced in? Too many times, this scenario leaves you at break-even for a couple of years (if you’re lucky), or much worse…

And if you think this time is different – well, I actually agree, but not in a good way! There’s no free lunch – you can’t just print your way to prosperity & expect to escape scot-free, there are always (unpredictable) consequences. So, has that been priced in also..?

Portfolio Allocation (XIV – Emerging & Frontier Markets)

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agri-business, correlation, corruption, developed markets, Donegal Creameries, emerging markets, Europe, financial crisis, frontier markets, German property, Japan, portfolio allocation, portfolio performance, QE, US, volatility

Continued from here. Wow, it’s been a leisurely journey – spanning a full year – is this really my last post of the series?! Hmmm, we’ll see… Here’s my portfolio allocation pie chart one more time:

[NB: This is from Jun-2012, but since then the only major changes (funded mostly from my Hedge Fund allocation) are: a) an increase in Property from 10% to 13%, as I continue to scale up my German property exposure (see Parts I to V – also here), and b) a large jump in Agri from 5% to 11%, due to my purchase of Donegal Creameries (DCP:ID) & its subsequent hefty appreciation. Note I don’t classify DCP as an Irish stock – after all, the company feeds people (potatoes, mushrooms & yogurt) and animals, what could offer a more ideal uncorrelated exposure?!]

Portfolio Allocation (XIII – Alternative Investments)

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activist investors, Alternative Asset Opportunities, alternative assets, Argo Group, asset managers, catalyst, CLOs, correlation, distressed investing, Event Driven, hedge fund seeding, hedge funds, hedge funds of funds, Livermore Investments Group, mortgage hedge funds, portfolio allocation, proprietary trading, Raven Russia, Tetragon Financial Group, thematic investing, volatility

Continued from here.

For now obscure reasons, this series was originally called ‘Hitting the Century‘. At this point, I’ve bowed to the inevitable & given it a more sensible name. It’s still a v leisurely stroll through the topic of portfolio allocation. I usually touch on stocks I actually own quite briefly, as the main objective is to expand on the logic (& attractions) of my specific portfolio allocation. Also, since my approach to investing is better described as thematic rather than (say) geographic, I generally highlight a selection of stocks which may exploit particular theme(s). As a reminder, here’s the allocation pie-chart I’ve used for the series:

Hedge (7%):

Hedge funds were a far larger component of my portfolio. This reflected a gradual migration over the years from open-end funds (many moons ago), to closed-end funds & investment trusts/companies, and finally into hedge funds. This was accompanied by an increasing reluctance to delegate my investing & investments. [Which may surprise you, as investment companies still play a significant role in my portfolio. However, this tends to now reflect my delegation of a specific/specialist investment theme – or simply the selection of a fund itself as an attractive investment, due to the presence of a large discount/catalyst/etc.]. Hedge funds, however, appeared to potentially offer the magic combination of lower volatility/correlation & better long-term returns. Sure, maybe they’d under-perform a bull market, but who cared – they simply ignored down markets, right?!

Hitting The Century (XII – The Distressed Consumer)

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ATMs, consumer receivables, correlation, credit checks, debt agreements, discount stores, distressed assets, distressed consumers, distressed investing, European sovereign debt crisis, gold, healthcare, home shopping, life settlements, litigation, marijuana, Mosney, pawn shops, payday loans, pre-paid cards, scratch cards, student loans, sub-prime, trailers, unsecured loans, vice stocks

Continued from here (& here). In this post, we’ll turn our attention to the distressed consumer.

You may just consider this exploitation of the great unwashed – but in reality, they’re often the most expensive customers (pro rata) to acquire & service. (Illegal) immigrants also fall into this category – a fairly unavoidable cost of freight they pay in light of their status. [As US-listed Hispanic plays become increasingly touted & expensive, distressed consumer businesses are a cheap back door play on a sub-set of that population]. Also, the amounts involved with these customers is (inevitably) small. Actually, businesses are really targeting a much bigger & more lucrative opportunity – the democratic exploitation of an enduring human frailty:

Financial stupidity…

The obvious place to start here is with the usual vices – drinking, smoking, gambling, luxury goods… 😉 But these sectors are huge & everybody’s doing ’em – I’m going to skip anything so mainstream (but I’m fascinated how highly rated they are!). I probably should consider drugs too, with marijuana access now increasingly legal & convenient across the US – but the real stupidity here might actually be investing in marijuana stocks!?

While I’m at it, we could make a case for including healthcare – people who make poor financial decisions surely make even worse decisions about their long-term health? [Especially with the communist approach to healthcare in the US & most other developed nations: All good deeds go unrewarded, and the worst 20% consume 80% of the resources… Which simply encourages everybody to race to the bottom (of the ice-cream tub). Look, I’m all for providing a safety net, but not when it’s stuffed with cheese burgers!] Let’s skip healthcare as a whole other mess… In similar vein, a trillion dollars of US student debt could have mutated into the biggest distressed consumer play around – since everybody seems to have now decided they can’t/won’t pay any longer – but that’s underwritten by a suckered population also.

Right, let’s move on – picture you’re an average distressed consumer:

Catalysts – A Summary (Part I of II)

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Alternative Asset Opportunities, asset allocation, catalyst, correlation, dividend tax treatment, Event Driven, Expected Value, fighting the Fed, Investegate, IRR, Liquidations, Margin of Safety, offer premium, portfolio allocation, QE, Recommended Cash Offer, Risk Arbitrage, risk-on risk-off, takeover offers, Takeover Panel, VIX, volatility, wind-down

My 10-part series on catalysts last year (stretching from Jan to Dec!) was well received, judging by the readership & links. I vaguely promised a summary to wrap up the series – as we’re well into the new year (already?!), it now seems appropriate to deliver that post (& hopefully it proves useful).

By the end of last summer, I concluded there’s little point fighting the Fed… A fortunate decision, as the market’s been decidedly risk-on since then! Though I must say, the power of central bank liquidity still surprises me. If you recall, last summer, we appeared to face a pretty bleak outlook both sides of the Atlantic: The fiscal cliff in the US & the sovereign debt crisis in Europe. [Hmmph, different stories…same destination!] Personally, I considered the cliff to be just like those periodic kerfuffles over the US debt ceiling – no genuine threat, but divisive political rhetoric could certainly roil the markets (& perhaps prompt a rating-agency response). On the other hand, the European crisis…er, what happened, where the hell did that go..?!

This risk-on attitude’s left my portfolio light on investments with shorter-term/lower-risk catalysts (i.e. event-driven investments). However, I still strive to pick new investments which (ideally) possess at least one longer-term/higher-risk catalyst. That type of catalyst doesn’t necessarily mean you avoid downside risk, but hopefully it stacks the deck in your favour vs. what the average value investment (complete with margin of safety) might offer. It may also accelerate the time-line for a stock’s realization of its intrinsic value/upside potential. Anyway, much of my event-driven exposure was ultimately re-invested in Alternative Asset Opportunities (TLI:LN) – so I simply exchanged a low return/relatively uncorrelated risk for a cheap/high return/totally uncorrelated risk! Go on, you might want to give it a try..! 🙂

Hitting The Century (X – Distressed)

Tags

asset allocation, Asta Funding, ATM fees, Colony Financial, corporate-media-retail complex, correlation, credit card debt, debt collectors, distressed assets, distressed consumers, distressed investing, Fortress Investment Group, hire purchase, pawn stores, payday loans, pre-paid debit cards, Rent-A-Center, rent-to-own, Sex and the City, student loans, stupidity, Tetragon Financial Group, unbanked, vice stocks

Continued from here.

Remember this series? Yep, I’m spending an unconscionable amount of time getting through it. FFS, I started last June, promising a closer look at my portfolio construction, allocation & metrics. [‘Hitting The Century‘ as it was my 100th post. And ‘Pretty Panties‘ because I was so bemused by the prior response to the phrase]. Instead, you get a bloody epic – like The Hobbit. Oh well, blog rules…how ’bout I try finish by next June?! 🙂

Honestly, I expected it to turn out like this. But I’m delighted at the great reader response – I guess I’ve been trying (ad nauseam) to pound the message home that portfolio construction/asset allocation is just as important as stock-picking. [Studies suggesting asset allocation accounts for 90% of returns have been debunked, but more recent studies certainly confirm an average/minimum 50% of returns are derived from this source]. Unfortunately, this is forgotten/ignored by a lot of investors, even great stock-pickers… Admittedly, they may (occasionally) practice some kind of ex-post allocation – better than nothing, but an ex-ante approach is vital if you really want to end up with a safer, more diversified & higher return portfolio.

OK, let’s trot on – here’s a familiar pie-chart as a quick reminder (sure, it’s a little out of date – but have you noticed my portfolio turnover?!):