Hello to all readers. As you may have noticed, I haven't been regularly updating the blog. There are three real reasons. Firstly, I've been busy. Secondly, there's not been much activity to report. Finally, I've come to realise that reporting on a month to month basis is excessive for an investment strategy aimed at outperforming over the long term. In future, I'm planning to report the portfolio's results at least each quarter.
I'm also weighing up whether to post stock ideas. On the plus side, it's helpful to have a public track record of decisions. It also could help some of my stocks appreciate towards their intrinsic value. The problem, of course, is that some stocks could become more attractive investments over time, and in those cases it is in my interests that others don't know the full story. This is something Norbert Lou has discussed with regard to Quinsa, a stock he wrote up for the Value Investors Club in 2005. (As an aside, I think this is one of the best stock write ups I've ever read.) The profile of Lou by Santangel's Review notes:
Punch Card kept buying shares [of Quinsa], bringing the position to over 20 per cent of capital. Norbert liked Quinsa enough to write it up … a decision he later regretted when the stock subsequently rose, forcing him to pay more for his future shares. "I shouldn't have written it up," he later said. "The situation kept improving."
I'm no Norbert Lou but this is something I think about. Some of my positions are very illiquid, so even relatively small inflows of capital could push up prices.
I'm also in the process of setting up a SMSF. (For readers overseas, this means "self-managed superannuation fund". Basically, I am setting up a vehicle to invest my retirement savings myself.) In previous updates, I have briefly discussed a position in a basket of unlisted companies. My intention is to transfer all of these positions to my SMSF as soon as is practicable. These positions have acted as a sort of ballast for the portfolio: they have tended to underperform the rest of the portfolio when the market appreciates while reducing mark-to-market losses when the market is falling. Without these positions, there will be more volatility in the portfolio, but — at least based on the experience of the last few years — potentially better returns. I still like these stocks, and think they offer great risk-adjusted returns, which is why I will continue to hold them in a more tax-efficient entity.
When the SMSF is up and running, I intend to start reporting its results in my quarterly updates. I imagine I will hold similar positions in the SMSF vs. my regular portfolio but the compositions (and therefore results) could be quite different. (I intend to approach the SMSF and my personal account as one large pool of money and size positions accordingly.)
With all that out of the way, it's time to give an update on recent performance. The results of the portfolio and my benchmark since the end of March are summarised below.
Since the end of March, I have not added any new names from the portfolio. I did dispose of one holding, Mo-BRUK SA, which was essentially a misguided trading idea. It was a very small position, and I quickly realised my mistake and sold on April 12 for 398 PLN. I realised a loss of 4.34% in a holding period of 55 days. I have also added to a number of existing positions in the quarter.
Lately, just about any asset you can imagine seems to be in a bubble. Nevertheless, I continue to have more good ideas than capital. I think my portfolio remains cheap, though nowhere near as cheap as it was this time last year.
At this time of year, I also like to reflect on the portfolio's annual performance. For the year to June 30, the portfolio returned 45.34% while my benchmark, the S&P/ASX 200 Franking Credit Adjusted Annual Total Return Index (Tax-Exempt), returned 29.44%. While there were mistakes and clear opportunities for improvement, I'm very happy with this result. I felt it was achieved with minimal risk but I did have luck on my side.
August 3, 2017 | June 30, 2021 | Since July 1, 2020 | Since Inception | Annualised | |
G&W Portfolio | 1.0000 | 2.2397 | 45.34% | 123.97% | 22.91% |
Benchmark (SPAX2F0) | 61,250.80 | 94,739.21 | 29.44% | 54.67% | 11.80% |
My results for each financial year since the portfolio's inception are summarised below.
I will add my usual disclaimer here — These figures have not been audited. Additionally, I do not account for cash in the portfolio. The net result is that my performance is likely somewhat overstated, although I tend to be fully invested. The S&P/ASX 200 Franking Credit Adjusted Annual Total Return Index (Tax-Exempt) is simply the pre-tax total return of the S&P ASX200 Accumulation Index adjusted to include any franking credits received. I have unitised my portfolio to assist in calculating performance.
P.S. Apologies for the dodgy formatting of the tables!
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