My last post (‘Welcome to the Floating World…’) talked about some of my habitual concerns regarding the markets & my portfolio…and consequently, I couldn’t help but highlight an inherent contradiction of my portfolio:
If I worry so much, how come my entire portfolio’s invested in stocks..?!
The answer’s simple: I have been & continue to be resoundingly bullish on the markets. Except it’s really not that simple…because this immediately highlights another obvious contradiction of my portfolio:
If I’m so bullish, how come my portfolio’s invested so defensively..?!
To illustrate, let’s revisit my Top Tips for 2015 post – which actually listed my Top 10 portfolio holdings (as of year-end 2014). Here they are:
I’d classify eight of these holdings into three (overlapping) categories: Deep value, special situations & (mostly) uncorrelated stocks (vs. the economy, or even the market). Which leaves just two holdings that can be described as growth (or high beta) stocks/funds: Fortress Investment Group (FIG:US) & VinaCapital Vietnam Opportunity Fund (VOF:LN). Granted, a defensive portfolio mix helps me sleep at night, as I’ve boasted before – but in light of my bullish market view, I have to ask if this is really an unnecessary luxury…or maybe even a bloody hindrance?
And in reality, my market view shouldn’t necessarily be that relevant anyway – return to my recent Stock Picking…Art, or Science?! series (esp. Part IV), and we’re reminded that consistent portfolio diversification isn’t just about geographical & asset allocation. Take another look at my Top 10 holdings table – again we see an inherent contradiction of my portfolio:
If I’m so concerned about diversification, how come my portfolio’s so lacking in large cap/growth stocks..?!
[Interestingly, the two growth stocks/funds I identified are actually my largest market cap holdings. My other holdings’ average market cap is just $84 million.]