The portfolio rose 5.96% in November while the benchmark gained 3.28%.
*Returns are pre-tax, include franking credits, and assume dividends are reinvested. The SPAX2F0 is simply the total return of the S&P ASX200 Accumulation Index adjusted to include any franking credits received. N.B. I do not account for cash in the portfolio. The net result is that my returns are somewhat overstated (although I am nearly always close to fully invested). I unitised the portfolio to assist in calculating performance.
I added three new positions this month.
While I'm very happy with the month's gain, it could have been much better. Shortly after I purchased my position in Tomita, the stock spiked up about 60% on no news. Instead of selling — which in hindsight would have been advantageous — I held on and the stock came crashing to Earth. While this appears to be a classic pump and dump, I can't be sure exactly what caused the price action — which is one of the difficulties of investing in overseas stocks with a language barrier.
While the best course of action is rarely clear in these moments, my feeling is that I should have been prepared to take the gain and move on. Japanese stocks can languish well below their asset value for years, and these spikes are few and far between.
At the time, there were a few factors that caused me not to sell my stake. Firstly, I was concerned there was some information in the market that I wasn't aware of. (There was no official announcement from the company, and I couldn't find anything searching through Google or social media.) The other risk was that I would be leaving some money on the table by selling too early. (Many of these net-nets trade at such low valuations that they can rise far more than 60 per cent.)
On top of that, there were two other things I was thinking about. Firstly, because my net-net strategy is based around a one-year holding period, I was reluctant to sell a stock I'd held less than a month; the second reason is that had I sold, I would not get the long-term capital gains tax discount. (Like David Dodd, I often tell people not to let tax factor into their selling decisions but I don't always take my own advice.)
My feelings about these events are obviously coloured by what happened subsequently. Had the stock continued to rise, or if it remained elevated rather than falling back, I would likely be patting myself on the back in this month's blog. Nevertheless, I think at least sometimes, especially with some of these Japanese stocks, I'd be better off to sell on the spikes — especially when, like Tomita, they happen without any apparent reason.
Finally, I recently stumbled across this fascinating YouTube video showing some of the excesses in the US stock market in 1997. We're told how Sharon, a retail investor, has put the majority of her family's net worth into a stock that she doesn't know the name of. It's a small reminder of some of the crazy things that happen in markets and how we can be our own worst enemies.
August 3, 2017
|
November 30, 2019
|
Since July 1, 2019
|
Since Inception
|
Annualised
| |
G&W Portfolio*
|
1.0000
|
1.4840
|
4.27%
|
48.40%
|
18.50%
|
Benchmark (SPAX2F0)
|
61,250.80
|
83,521.68
|
6.97%
|
36.36%
|
14.26%
|
*Returns are pre-tax, include franking credits, and assume dividends are reinvested. The SPAX2F0 is simply the total return of the S&P ASX200 Accumulation Index adjusted to include any franking credits received. N.B. I do not account for cash in the portfolio. The net result is that my returns are somewhat overstated (although I am nearly always close to fully invested). I unitised the portfolio to assist in calculating performance.
I added three new positions this month.
- Boustead Projects (SGX:AVM) is a Singaporean property developer.
- Tomita Electric Co. Ltd (TYO:6898) is a Japanese manufacturer of soft ferrite cores trading below NCAV.
- I also bought a minuscule position in RFM Poultry (NSX:RFP), an NSX-listed poultry producer which is subject to corporate action.
While I'm very happy with the month's gain, it could have been much better. Shortly after I purchased my position in Tomita, the stock spiked up about 60% on no news. Instead of selling — which in hindsight would have been advantageous — I held on and the stock came crashing to Earth. While this appears to be a classic pump and dump, I can't be sure exactly what caused the price action — which is one of the difficulties of investing in overseas stocks with a language barrier.
While the best course of action is rarely clear in these moments, my feeling is that I should have been prepared to take the gain and move on. Japanese stocks can languish well below their asset value for years, and these spikes are few and far between.
At the time, there were a few factors that caused me not to sell my stake. Firstly, I was concerned there was some information in the market that I wasn't aware of. (There was no official announcement from the company, and I couldn't find anything searching through Google or social media.) The other risk was that I would be leaving some money on the table by selling too early. (Many of these net-nets trade at such low valuations that they can rise far more than 60 per cent.)
On top of that, there were two other things I was thinking about. Firstly, because my net-net strategy is based around a one-year holding period, I was reluctant to sell a stock I'd held less than a month; the second reason is that had I sold, I would not get the long-term capital gains tax discount. (Like David Dodd, I often tell people not to let tax factor into their selling decisions but I don't always take my own advice.)
My feelings about these events are obviously coloured by what happened subsequently. Had the stock continued to rise, or if it remained elevated rather than falling back, I would likely be patting myself on the back in this month's blog. Nevertheless, I think at least sometimes, especially with some of these Japanese stocks, I'd be better off to sell on the spikes — especially when, like Tomita, they happen without any apparent reason.
Finally, I recently stumbled across this fascinating YouTube video showing some of the excesses in the US stock market in 1997. We're told how Sharon, a retail investor, has put the majority of her family's net worth into a stock that she doesn't know the name of. It's a small reminder of some of the crazy things that happen in markets and how we can be our own worst enemies.
