FY-2018: What The Market Gods Giveth, They Also Taketh Away…

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absolute return, annual review, Applegreen, benchmarking, blockchain, bubbles, cryptocurrencies, Donegal Investment Group, KR1 plc, portfolio performance, Rasmala, relative return, shareholder activism, Trump, Zamano

Back in much happier days (last July!), faced with indices that were (on average) broadly flat, I sagely accepted that:

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

Of course, this now haunts me as absurd understatement. And an unfortunate reminder the hardest time to sell is…inevitably, when you should sell! But after a crackerjack 2017, I did see 2018 as more of a market time-out, than anything else – as reflected here, consciously or not, in the lack of blog posts & commentary. My bad…but sometimes it’s better to take stock & just enjoy how wonderful real life can be!

The same is true of my disclosed portfolio – my only reported activity was to: i) top up my Record (REC:LN) holding (which I still prefer to call bad timing, vs. an actual bad decision), and ii) re-establish my Donegal Investment Group (DQ7A:ID) portfolio allocation, after management redeemed over 50% of its outstanding shares. Elsewhere, after enjoying rapid/substantial price run-ups on certain undisclosed holdings (the main reason they never quite made it onto the blog), I focused on positioning myself for a rough October. Pals will back me up on that…but obviously it wasn’t visible here, it’s never enough when you’re right (cheap buys won’t offset damage in the rest of your portfolio), the market proved far worse than I expected, and only fools believe in all or nothing market timing anyway.

[Forget the guy who pissed you off the other day – you know the one, that dude boasting only an idiot wasn’t all in cash & set for the crash – because he’s also the guy forgets how many other times he (wrongly) went to cash, plus all the gains he’s missed out on over the years].

So let’s just go ahead & survey the actual market carnage – here’s my FY-2018 Benchmark Return – as usual, it’s a simple average of the four main indices covering most of my portfolio (& my readers’ too, I expect):

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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.

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…

H1-2017 Wexboy Portfolio Performance

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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:

Top Trumps For 2017…

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Donegal Investment Group, favourite stock, Fortress Investment Group, Newmark Security, portfolio allocation, Rasmala, Saga Furs, stock picks, stock tips, Tetragon Financial Group, Trump, VinaCapital Vietnam Opportunity Fund, Zamano

So, bet you thought this was about Trump…and/or his Inauguration?

Nope, sorry…just my little bit of fake news! I meant something much better – who remembers this childhood classic: Top Trumps! To know the game is to love it…though if you don’t, it probably seems impossibly quaint in today’s digital world. I still remember the De Tomasa Pantera was the best card by far in my Supercars deck – what are the chances you’ll remember a detail like that about your latest app in the years/decades ahead?! Anyway, it’s still that time of year…and yeah, I’ve cheated a little. Pretty much everybody’s finished with their Top Tips & Picks for the New Year, so now I’ll swoop in & hog your undivided attention! Well, at least ’til your next tweet…

Regular readers will know what to expect from my Top Trumps for 2017 – yep, I’m sticking with my disclosed holdings. I mean, what could be better?! [Well, except some undisclosed holdings..?! No more teasing, I swear: I’m just about finished with the (very) slow accumulation of positions in half a dozen new stocks, soon I’ll line ’em up & start work on some proper investment write-ups]. Though I should remind you, in my last post I deliberately focused on the negative aspects of my 2016 Losers…hopefully, I offer a more balanced perspective here. Or at the v least, highlight how ridiculously cheap some of these stocks have gotten!? So, let’s crack on:

[NB: i) With the near-liquidation of Alternative Asset Opportunities (TLI:LN) this month, it’s no longer a disclosed holding, ii) I highlight my current portfolio allocation (as of CoB Jan-26th) for each holding, but will use my year-end allocations (which are similar) for 2017 performance reporting purposes, and iii) I include relevant corporate/IR websites & Bloomberg tickers, but avoid posting previous write-ups, in an effort to present each holding afresh – but feel free to reference last year’s portfolio commentaries (here & here), plus it’s easy to search/find original investment write-up(s) on the blog also.]

i) Newmark Security (NWT:LN) (2.4% of current portfolio):

Share Price:   GBP 1.45p

Market Cap:   GBP 6.8 Million

A special situation…which actually obscures an underlying growth story. While these trading updates (here & here) have crucified the share price, Newmark’s electronic division still looks like the real problem here. For almost a decade now, revenue’s unchanged, while divisional margins declined relentlessly – from 20-23%, to a £(0.5) million loss today. Poor return on capital was bad enough, but losses kill any argument for keeping the division. And after 4 years as CEO, shareholders presumably have little confidence Marie-Claire Dwek can still deliver a turnaround – and her hands are now full dealing with the larger asset protection division. Noting Chairman Maurice Dwek always ran a tight ship here, the situation appears untenable – something’s gotta give…

2016 – Not Missing You Already…

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absolute return, annual review, benchmarking, Brexit, Newmark Security, NWT:LN, portfolio performance, relative performance, survivorship bias, track record, Trump, US vs Europe, Zamano, ZMNO:ID

Yes, it’s that time of year again…

But I must confess mixed feelings – for me, a year-end review’s just the annual conclusion to the (auditable) tracking of my ongoing portfolio performance. More generally, though, I suspect it can be disheartening for readers – as with much of the internet, the result’s often exciting at first…but ultimately demoralising. Have a tough year & there’s nothing worse than hearing about other investors chalking up block-buster returns left, right & centre.

But that’s the nature of the beast. Gone are the days when your one & only competitor was that insufferable git down the pub each Xmas, who always boasted he’d bet his chips on yet another ten-bagger (so why’s he still in your boozer?!). But today, we have the internet…now you compete with countless investors across the globe, no matter how experienced, gifted, or born lucky they are! And most laugh in the face of home bias – so inevitably, there’s a multitude who just surfed their killer local market & totally crushed your puny performance, esp. if you were running a sensibly diversified portfolio. Not to mention how little performance can actually be tracked, or who has any real skin in the game – don’t we all start out as great traders/investors, making big bets on paper, much like gamblers always start lucky!?

[And yeah, we all know that Twitter guy who spent all year flailing about, then bounces back with a breathless ‘Up +50% again this year…my leveraged Brexit shorts & US Prez Election longs worked perfectly, bro!’. Um, why are you even reading his tweets?!]

This is not to denigrate some great investors out there, who have clearly delivered spectacular results (& who genuinely appear to owe more to skill than luck). The internet is the problem here – namely, its ephemeral & anonymous nature – how many (tens of) millions of blogs, pages, discussions, user names & identities are abandoned over the years? As for investing, there’s a far more insidious self-selection process…we tend to only ever hear about the best investors (& the best returns). I mean, how many investors just get bored, discouraged, make (the same old) mistakes, lose money, blow themselves up? Who knows – in all likelihood, they’re long gone! The blog posts cease, the messages end, the tweets trail off, they move on (or start afresh)…and that’s precisely why the internet keeps beating you: Survivorship bias.

So, take heart, mes braves – if you really must, evaluate yourself vs. the indices & the fund managers who’ve actually built a long-term track record (through thick & thin). As for the internet, exploit it for data & potential stock ideas…not to beat yourself over the head, or get led astray. Let’s not forget, passive can beat active can beat truly active for long periods (hence the more recent performance of ETFs vs. mutual funds vs. hedge funds)…as frustrating as it can be, it’s important to remember there’s little correlation between the work you put into your portfolio & your actual short-term returns. As they say: In the short run, the market’s a bitch, but in the long run, it’s a weighing machine.

November-9th…What An Historic Day!?

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absolute return, benchmarking, Brexit, diversification, Donald Trump, portfolio allocation, portfolio performance, relative performance, track record, value investing, Zamano, ZMNO

Trump.

Trump..?

Donald Trump..?!?!

No, just no, it can’t be…

How did he…how could they?

This isn’t what anybody expected…

Who does he think he is trying to steal a place in history from…

ME?!?

Because Nov-9th was destined to be MY day…which, I’m assuming, faithful readers already knew? ‘Cos five years ago, to the day, I first clicked the Publish button & launched the Wexboy blog into the wild blue yonder of the internet! And at the time, who in their right mind would ever have imagined the Donald being announced as President-elect to celebrate the 5-year anniversary of this blog?!

Though I’m sure he’d approve of my first post – a real estate investment write-up on Nov-9th, 2011: Sirius Real Estate (SRE:LN). More recent readers will marvel this post was a trifling 1,300 words long (note the last para of the post!?). Not to mention my insane pace initially – I clocked an astonishing seventeen more posts for the rest of that month – I guess I was finally learning, like many writers, to channel the rage in a more creative & productive manner…

If you’d asked me to look five years ahead to this day, I’d have laughed. And if I’d actually envisioned publishing hundreds of thousands of words since, maybe I’d have mapped out a killer-trilogy of bondage, vampires & bad metaphors, and lived off the royalties instead! [Though I suspect I’d have then started a blog to document my investments…so perhaps this was my destiny all along!] Ask me last year, and I’d probably have promised a rash of posts – some serious, some frivolous – to mark such an anniversary. But now we’re here, the urge to celebrate seems to have dissipated – I have to wonder if the Brexit referendum vote, followed by a Trump election victory, has something to do with that? In their wake, the blog certainly feels more like an unfinished story…

But looking back, I have to admit I’m amazed at this body of work to date. The investing advice I’ve offered along the way still (pretty much) makes sense to me – in fact, there’s little I’d change at this point, let alone go back on. As for the macro perspectives & investment themes I’ve elaborated on over the years, I’ve always tried to focus on the longer-term horizon & filter out the current market noise – the fact that much some of it still appears to offer a useful macro framework, plus a road-map for some interesting secular investment opportunities, would hopefully suggest I’ve achieved that.

H1-2016 Wexboy Portfolio Performance

Tags

Alternative Asset Opportunities, Argo Group, benchmarking, Brexit, Donegal Investment Group, Fortress Investment Group, JPMorgan Russian Securities, KWG Kommunale Wohnen, Newmark Security, portfolio performance, Rasmala, Saga Furs, Tetragon Financial Group, value investing, VinaCapital Vietnam Opportunity Fund, Zamano

Benchmark Performance:

Yeah, it’s that time of year again…and hopefully a chance to step back from some of this recent Brexit insanity. Let’s jump right in – here’s the H1-2016 performance of my usual benchmark indices:

Of course, what jumps out immediately is the UK. Brexit schmexit…the FTSE’s performance is actually bang in line with long-term averages! Which reflects its predominantly international exposure, but the much-cited FTSE 250 certainly wasn’t much of a disaster at (6.6)%, while the AIM All-Share managed to limit its decline to (4.2)%. [Sterling took the real walloping, trading down 10-12% vs. the dollar & euro]. Unfortunately, this is a sad reminder the real risk of home bias for investors may not be portfolio return. It’s the fact they wake up to a shrinking portfolio…and suddenly realise their currency’s dumped, their housing market’s locked up (& their house value’s probably dumped too), not to mention their employment & economic prospects may also have dimmed substantially. [At least Brexiteers won’t notice the currency impact, since they seem to think only in terms of Mighty Blighty & The Pahhhnd In Your Pocket]. Only a fool would question (or ignore) the benefits of greater/global diversification in the face of such potentially existential risks – particularly as there’s no obvious long-term cost(s) to such a strategy.

At first glance, Europe has borne more of the Brexit brunt, with the Bloomberg Euro 500 significantly trailing the UK indices – down over 10% (which must delight the Brexiteers!). However, it’s worth noting escalating NPL/capital issues in the Italian banking system (& a mounting EU-Italy war of words) have been overlooked by the media recently (hat tip to The Economist though)…I suspect this is responsible for a significant portion of the index decline. Despite efforts to date, this crisis will require an expensive & long-drawn out resolution, and will probably continue to exert a significant drag on sentiment. Fortunately, it shouldn’t pose any kind of existential threat to the European banking system ultimately, at least for stronger banks & countries…Draghi & the ECB will presumably continue to do ‘whatever it takes’. But the ongoing compression in European banking valuations is puzzling – who the hell wants to bet & sweat over sub-0.5 P/B banks, when the cream of the crop remains on sale at 1.0 times book (or less)?! [And the US banking situation isn’t much different].

Perhaps the real Brexit victim here is Ireland, with the ISEQ suffering a 17% decline. Then again, with the market clocking an impressive multi-year string of gains (& a late-2015 double top), a correction was overdue…regardless of Brexit. [Hmph, so why didn’t I dump my Irish shares?!] Of course, now we have to figure out the medium/long-term consequences for the Irish economy & market – a challenge which I think nobody, no matter how authoritative, is qualified to tackle at this point. But anyway, let me throw my (initial) ten cents into the ring:

Zamano – Time For A Dividend & Your Support…

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dividend coverage, dividend payout ratio, dividend yield, Irish value investing, John Rockett, Pageant Holdings, Ross Conlon, shareholder activism, shareholder value, Zamano, ZMNO

Here’s a recent letter I sent the board of Zamano plc (ZMNO:ID, ZMNO:LN) – it proposes the company now commence paying an annual dividend. I’m also now actively seeking the support of my fellow shareholders:

‘27-Feb-2016

FAO:   John Rockett, Chairman
            Ross Conlon, CEO

Cc:      Pat Landy, NED
____- Colin Tucker, NED
______Fergal Scully, NED

zamano plc
3rd Floor
Hospitality House
16-20 South Cumberland St
Dublin 2

Gentlemen,

Pursuant to my last Zamano post, I want to thank Ross for responding to the shareholders who contacted the company regarding my annual dividend proposal. A number of shareholders have also contacted me directly to confirm their support – I now speak for 13.1% of Zamano’s outstanding shares. Noting this support & the upcoming Mar-10th release of Zamano’s final results, this is a good opportunity to write to you more formally & reiterate my dividend proposal:

– Zamano’s been profitable for the past four years now. Since 2011, the company’s revenue has increased by 55% to a €23.3 million annual run-rate, annual EBITDA has averaged €2.6 million, while annual free cash flow has averaged €2.5 million (for FYs 2012-14). This has now resulted in net cash of €5.4 million on the balance sheet, versus €4.4 million of net debt in 2011, a near-€10 million swing in the company’s financial position.