Portfolio

  1. 14,318 Posts.
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    @Dejavoo,

    Following the discussion on the PTG thread,

    I don't mark-to market very often - maybe once every 6 weeks - and because I have been doing a bit of travelling in recent months, I haven't been doing too much thinking about it.

    So your question is well-timed because it prompted me doing a bit of calibrating.

    And I have to say that I was quite surprised at how much things had changed since I last ran the exercise (which was before the last reporting season) and just how badly out-of-shape my portfolio had become in such a relatively short space of time. So thanks for the prompting; it was time for a update.

    For what it's worth, here is the breakdown by sector and stock, updated for Friday's closing prices:

    portfolio_Mar22.JPG

    As can be seen, I currently have an oversized Energy position, almost one-quarter of my invested capital (!) is now made up of Energy (Oil and Gas, 14% and Coal, 11%).

    That certainly surprised me (in my mind, I had thought it may have been somewhere in the mid-to-high teens).

    So that's something that I have started addressing this morning, especially that degree of Coal exposure which has got away from me a bit - no matter how bullish I can get on Coal, having one dollar out of every ten of may family's money in coal stocks is something I may have countenanced as a 25-year old, but not at my current stage of life (to be fair, AZJ isn't a Coal stock per se, so my real direct exposure is ~7.5%, which is still a bit too hairy-chested for my liking).

    My biggest position is effectively WPL, because the BHP investment I made is effectively a tax-effective entry into WPL. So, at almost 7%, that's also an outsized position for a 53 stock portfolio.

    The other notable feature is the big technology exposure I have, which has been a bit of a performance anchor in recent months, but I wouldn't change much there because I am perfectly happy with the stocks I own in this sector, and in fact I have been adding to my holdings in JAN, SMP and PTG

    Notable, healthcare I own very little of; that's despite my affinity for the ageing thematic in the developing world. It's just that most of established healthcare businesses are not attractively valued, and are likely to continue de-rating in the face of normalisation of bond yields, which I don't think has run its course yet.

    So while that is the current snapshot of the portfolio, it doesn't mean, if I was to design it from scratch, that it would look like that.

    I am reducing holdings in WPL, NHC and WHC and will most likely use some of the proceeds to add to AMP and MND, and one or two other existing holdings, at the margin.

    But there is not too much else that I can see, since I've returned to look at the market in recent days, that I'm chomping on the bit to buy.


    PORTFOLIO "ORPHANS"

    We all have them, so it is worthwhile spending some time discussing them (even if only to learn from our mistakes, or to be ready for the investment decision that is to follow).

    Needless to say, it is usually small companies that have short operating lives and financial track records, which are likely to end up as orphans if one isn't vigilant. Which is why I try to set clear milestones and to exercise strong sell discipline whenever those milestones are breached.

    SCL - which you referenced in your post - was one of them. As were CBL, COO, IME, M7T, SKF and UBN

    In aggregate, I made very little money on my investment these stocks (or I probably even lost money overall), but by golly, I saved myself a world of hurt by being absolutely mercenary in selling the minute my investment thesis was broken.

    You were also asking about CHL: I sold CHL because I thought it had re-priced too quickly to be within what I envisaged was some sort of reasonable valuation range.

    Similarly, these are some of the other micro-cap stocks that I sold over the past 12-18 months on full-valuation grounds: AER, AVA, BWF, KME, MXI, XRF, SP3

    For me, the "orphans" I still retain are: ALC, BMT, KNO, LPE, QFE

    The reason I am still hanging onto these particular "orphans" is because I don't believe my initial investment case for each of them has been busted; rather that some extraneous factors have caused it to be deferred (or to be altered, maybe, but not broken).

    It isn't lost on me that I now have "nothing" positions in these stocks, so either I need to pee, or get off the pot.
    If you held a gun to my head and asked me to guess which it will be, then I think my next investment decision in relation to these will be to buy them:

    ALC - Business model is sound; management botched a capital raising which caused and extended bout of stock indigestion. Gloss has come off management, but their crime is not knowing the nuts and bolts of their business, but rather because they are capital market rookies. I think they are sufficiently brutalised and scarred to have learnt from the events of recent months.

    BMT - Again, sound business model but marketing and on-boarding new customers has been hamstrung due to Covid

    KNO - Tiddler of a company - $19m Mkt Cap. But I have to be totally honest here: I don't understand the Revenue model 100%, but what I do know is that what this company does it does quite well, having barely skipped a beat despite Covid headwinds.
    Note: Beware that, for cash flows, March quarters are seasonally much weaker than the other three quarters, so some sticker shock on the part of those who are unaware of this, might provide a fat pitch buying opportunity next month.

    LPE - Goodness. Where do I start with this one? Massive and fast-growing revenue base (and cost base to match, given it makes no money). If they sliced just a teeny sliver off CoDB, the bottom-line would explode into profitability. But for reasons known only to the founders/management, they keep matching the top line growth with growth in expenses, even if it means that they need to consistently raise capital (and dilute everyone - themselves included - in the process).

    QFE - Attractive product and service offering. Trouble is, being an unconventional lender, the lending requirements of QFE's client base - and hence demand for QFE's products - are being diminished by the kind and populist governments in the US, who are scattering hundred dollar bills from helicopters money every time the citizenry bawls "Waaaah!"

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