Welcome to my portfolio update for November 2019.
Why did I pick November 16 to give you an update?
It is because many companies would have filed their Q3 earnings results (except some retail companies with Jan 31 year end).
My life isn’t action packed. Pretty much living day to day stuff with family, hiking, outdoors, dog, working out, eating, drinks etc.
So earnings seasons which happen 4 times a year present me with something to look forward to.
This is the time stock prices get reset. Regardless how they traded last 90 days, they always get reset.
And my stock picks get tested.
The markets do not discriminate.
I am a Korean immigrant working in white dominated corporate world. I get disadvantaged sometimes. It is just way it is and I learned to accept it.
Entire executive team is white male (except Chief Legal Counsel and HR person who are white female- typical??) but many people at or below director levels from various number related departments such as risk, reporting, accounting and finance teams are mostly people with color and often with distinctive accent.
My CFO is white who was born in Canada.
I report to CFO and am in charge of my accounting team of 10 or so and my team is made up of
3 Chinese
2 Koreans (including me)
1 Pakistani
1 Middle Eastern (not sure where he is from)
2 Indians (one of them was born in Canada)
2 Argentinians in Argentina
Just much cheaper, non complaining, harder working immigrants. I guess I contribute significantly to ethnic diversity in Toronto.
Anyway, let’s go back to the topic. That’s why I like markets. They do not discriminate where you are from, how much money you have and whether you are good looking or not.
They test you equally and reward people who do their home work and often punish people who take shortcuts. Some people get lucky. Some do get unlucky and lose.
Sometimes I get it right. Sometimes I don’t.
Unfortunate Loser Stocks
Let’s talk about stocks that I did not get right or let’s call it unfortunate loser stocks.
1. Lassonde Industries
2. Spin Masters
credit goes to whoever made this paperclip art
Great and well managed companies with industry headwinds.
Lassonde has been facing rising input costs but their price increases have not been able to keep up the speed of the rising input costs.
Revenue has been going up moderately due to acquisitions that they have been making but earnings and cash flows have been decreasing quarter after quarter for last 1.5 years.
Its stock price dropped from all time high of $290 to $163 last 1.5 years. I am holing my position.
Spin Masters has been dealing with Toy’s R Us bankruptcy and their revenue, earnings and cash flows have been decreasing quarter after quarter for last 1.5 years.
Its stock price dropped from $58 to $38. I have reduced the position from 3-4% to around 2% over time.
Companies get hit with bumps.
Do you remember many negative news around Apple last year? The biggest company in the world?
Well, they performed close to 70% year to date. Now it is $1.2 trillion company.
What’s funny about Apple is that they have been dominating from early 2000 when they came out with ipod. People loved its design and high functioning products.
But not many people seemed to held the stock over last 2 decades. Over last 20 years, the stock performed 18,000%…
I was in high school then but certainly cared more about the products than the company behind of the products. A stupid and dumb kid. That’s what I was.
Anyway, if Apple can do it, then others can too.
If the under-performing companies come out of the headwinds successfully then I will be rewarded handsomely but I just don’t know when that’s gonna happen.
I am quite sure they will come out of it well eventually though.
How can I be sure?
At least there are several indicators that I can rely on.
Both companies (especially Lassonde) have been around many decades.
They had similar challenges in the past.
They have pretty low debt.
They have still tones of cash flows.
Great founder led companies (or Founder’s great child is running Lassonde) with huge insider ownership.
Until they steer their ships around, they will be traded sideways… which would be painful.
Lessons?
Buy stocks of companies that can stably increase revenue and cash flows. For that, the business needs to be in niche or have a very strong moat thus dictating the prices of services or products they sell.
Avoid cyclical companies or buy them when they are really cheap and selloff when things look deteriorating. Then buy back when they become cheap again.
Look at Constellation Software. They have 1,000 businesses of niches with high switching cost.
What about Boyd Group? Accidents happen all the time and major insurance companies just love to deal with a sizable company than small mom and pop shops to lower their admin cost.
None of them are cyclical and have durable competitive advantage.
None of Spin Master and Lassonde present what Constellation Software or Boyd Group have, though, they have just as good owner operators with great capital allocation skills.
YTD performance
I have been getting a hit in my performance because of the under-performance of above companies but other winners compensated me pretty well.
Let’s talk about the results now.
Markets did very well since 2019.
YTD results are following
- TSX did 22.08%
- Nasdaq did 28.72%
- Dow did 20.05%
- S&P 500 did 24.48%
The markets absolutely roared.
Even the mediocre TSX did extremely well.
I did 34.12% on one of my brokerage portfolio.
You may be thinking how the heck did it go up from 20-25% in October to 34% in November?
It is because as I said, stock prices get reset every quarter. I had a few bad stocks (but great companies) from September and I have been adding more over time.
Then when the Q3 results are out, the stock prices jumped.
My another brokerage portfolio did 26.64% YTD so far. Not too bad but Nasdaq did better by 2%.
What’s the point of me with all the effort of reading and keeping up with the companies? Why don’t I just stop with stock picking and buy Nasdaq?
This competitive nature of me want to win and prove that I can be better.
It is also pretty fun that I enjoy a lot. That may be why.
That being said, more than 90% of my stocks are being traded in TSX so I should be comparing apple to apple.
Buffett underperformed to the markets for many recent years but still being the top 3 richest person in the world tells me that we should not beat ourselves up.
After all, you don’t need to be that rich. You need just enough so that you don’t need to take shits from others.
Performance since Inception
Since September 12 2014, this portfolio performed 110% so far. This was never a get rich quick thing. Took me more than 5 years to double the portfolio.
Remember my 3 investing goals?
- Beating the markets 80% of time
- Double my capital every 5 years
- Have fun
I think I was able to achieve all of them so far.
Let’s see whether I can continue.
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