March portfolio update

The portfolio had a great month in March, returning 1.22% compared to the benchmark's -3.77%. While I don't expect this level of outperformance will be regularly repeated, I am confident the portfolio will turn in its best months relative to the benchmark when the broader market is down.

This month, I sold one of my holdings, Global Construction Services (ASX:GCS). I bought the stock in October for $0.785 and was able to sell it for $0.81. (I also received the 2 cent fully franked interim dividend, which was paid out at the end of the month.) Including franking credits, I received a return of 5.16% on my investment over that period, which equates to 13.96% annualised. If you are unfamiliar with GCS, I suggest you read Tony Hansen's blog post about the company.

As a general rule, I don't intend to make short-term gains from stocks, expect in special situations — and GCS is not one of those. My reason for selling was simple: an opportunity with a more attractive risk-adjusted return presented itself. I thought I would be able to make the investment in this new opportunity this month, but it turns out I will have to wait at least until May. Because of this, I bought a new stock during the month with the proceeds. This stock is a special situation: it is subject to corporate action due to complete about the time the other investment should become available. If things proceed as I think they will, I should end up substantially ahead compared to the alternative, which is holding the proceeds from the sale in cash.

My stocks held up better then the benchmark during the month and I received a substantial dividend from one of my other holdings, which accounted in large part for the gain.

	August 3, 2017	March 31, 2018	Since Inception	Annualised
G&W Portfolio	1.0000	1.0483	4.83%	7.34%
Benchmark (SPAX2F0)	61,250.80	63,658.89	3.93%	5.98%

As of the end of March, the portfolio consisted of eight securities. Since inception, the portfolio is 0.9% ahead of the benchmark.

A note about my performance calculations

I have decided to slightly change the way I account for my investment returns. In the past, I had been registering the "purchase date" of non-ASX stocks as the date the stocks were issued to me. (For ASX stocks, I recorded the date of the transaction.) From now, I will record the "purchase date" for non-ASX stocks as the date when the cash flow to purchase the stocks occurred. This change does not significantly affect my results — but it brings them closer to reality. If you are concerned — as you should be — that I am "moving the goal posts", please take a look at the table below, which records the original results for posterity. (I will edit the previous posts to reflect the change.) You will notice that, had I not made the change, I would have reported a 5.57% cumulative return as of the end of the month. The difference is due to an investment paid for in late February, for which I haven't received a holding statement. Under the old regime, it was not counted as part of the portfolio; under the new regime it is.

Interested readers should also note that I have not accounted for cash in the portfolio since inception. The reason is because my money flies around between my brokerage accounts, my savings account, general day-to-day expenses and other investments, such as managed funds, which would complicate accounting. What this means is that, even after my accounting change today, in reality, my returns are still likely somewhat overstated. While I am nearly always close to fully invested, during the early days of the G&W portfolio, for instance, I had a substantial sum of cash in a brokerage account, which was later used for something else.

	Revised	Initially stated
August 3, 2017	1.0000	1.0000
August 31, 2017	0.9976	0.9976
September 30, 2017	0.9970	0.9993
October 31, 2017	1.0146	1.0146
November 30, 2017	1.0340	1.0340
December 31, 2017	1.0676	1.0676
January 31, 2018	1.0597	1.0597
February 28, 2018	1.0356	1.0427
March 31, 2018	1.0483	1.0557

Until next time…