Portfolio Four Updated October 2014

Portfolios Four and Five are each 5 years old, with the beneficiary contributing $3000 and the trustee $6000, for a total of $9000.  The current value is $10,856 for a gain of $1856 or 20%, or about 5% / year adjusted for the timing of cash flows.  Check the detailed spreadsheet here or on the links to the right.

We will watch the new holdings Coca Cola FEMSA (hit by rising US dollar) and LinkedIn (hit by recent turmoil in internet stocks).  We also have seen some declines lately in oil stocks caused by drops in the price of oil (there are three in the portfolio, Devon, Statoil and Shell).  Finally, Nucor came above our purchase price after years of waiting and has dropped 15% recently on fears of a global slowdown.

Portfolio Three Updated October 2014

Portfolio three is our third longest lived portfolio, at seven years.  The beneficiary contributed $4000 and the trustee $8000, for a total of $12,000.  The current value is $13,638, for a gain of $1638 or 15%, or 3% / year adjusted over the life of the portfolio.  Go here for the spreadsheet detail or click on the link on the right.

The portfolio has almost half turned over in the last year, as 5 new stocks were added, out of the 11 total.  A recent purchase LinkedIn has had some turmoil with the tech stock issues but is a good longer term play, but we will watch it.  We are also watching Weibo, a Chinese internet stock hit by the same tech turmoil.

From the more traditional stocks, Siemens has been hit as the Euro has fallen vs. the dollar recently.  We will also watch Yahoo to see what happens with the Alibaba stock they own post IPO.

Of the stocks we’ve sold, mostly it is good riddance.  In particular Cliffs’ Resources went off a cliff since we sold it, down from $18 to $7.  The stock perhaps could be a good candidate for a purchase in the future as a value play.  We are trying not to ride stocks like that too far down.

Portfolio Two Updated October 2014

Portfolio Two is our second longest lived portfolio, at over ten years.  The beneficiary contributed $5500 and the trustee $11,000 for a total of $16,500.  The current value is $25,036 for a gain of $8536 or 51%, which works out to about 7% over the life of the fund when adjusted for the timing of cash flows.  See the details here or the link on the right.

We will be watching a few stocks.  Transalta has declined and has a dividend that might be unsustainable.  Yahoo went up on the Alibaba IPO and we will watch what they do in the future.  Both Diageo and Siemens have been hit by the fall in the UK Pound and the Euro vs. the dollar and we will keep them on watch as well.

Portfolio One Updated October 2014

Portfolio One is our longest lived portfolio, at 13 years.  The beneficiary contributed $6500 and the trustee $14,500 for a total of $21,000.  The current value is $34,188 for a gain of $13,188 or 63%, which is approximately 6.6% / year.  You can see the portfolio details here or click on the link on the right.

Generally stocks have been in trouble recently so I updated the portfolio to check on everything.  We may put a stop loss on Trans Alta (TAC) soon because it has dropped about 12% in the half year or so that we’ve owned it and they have a high dividend which may be unsustainable (it is currently paying out 6.7%).

Another one to watch is eBay.  eBay has been a good performer and they recently bowed to activist investors and are going to spin out fast-growing PayPal into a separate company.  We may sell or just hold on to PayPal shares depending on how it works.

We will also keep an eye on the Norwegian energy company Statoil (STO).  They had a run up this year but gave it back recently.  They have a good dividend and are in Norwegian currency which provides a hedge against the US dollar but also which falls when the dollar rises (as it has been doing recently).


One goal of a portfolio is for it to be “diversified”.  In layman’s terms that means that the stocks are from different industries, in different countries, or otherwise significantly different from one another.  The thinking is that trends that impact one stock, for better or worse, won’t hit all the stocks in your portfolio, so losses in a subset of your shares won’t have a significant impact on all of your other stocks.



Unfortunately, however, stocks often exhibit high “correlation” with one another, meaning that even though the stocks are from different countries and in different industries, they all move the same direction.  This is great when the trends are in your favor (a rising tide lifts all boats) but is hard to swallow when every single stock in your portfolio declines at the same time.  Today was a bad day for stocks but it was amazing that all 18 stocks in Portfolio one had declines and not a single one “bucked the trend”.  It is true that they all move to different degrees, with some just a “bit” in the red and some losing 2-3% on a single day.  In fact every stock except for one single Japanese stock across all 6 portfolios dropped today, which is almost perfect correlation (heading the wrong way, though).

According to news reports, Apple had a bad report, and there was some other economic news, and everything fell and kept falling.  We have bad days like this, and we also have good days when everything rises, too.

Ideally, however, if you have diversified stocks you hope to move up in a good way, with some rising a lot, some a little, and some falling.  But some days are just bad.

Sign of a New Peak for Stocks?

Back in the woeful years of the dot.com boom and bust I worked for a company with a dubious distinction. The value of that company in the stock market was less than the value of the cash we had on our books. What the market was essentially saying is that the sum total of all our efforts as employees was NEGATIVE – we would be worth more if we just shut down immediately and gave back the cash to investors. The fate of that company, of course, was to go bankrupt.

Today there are some other major signs of froth in the market. Yahoo is a classic web / advertising / technology stock with a solid market capitalization of $40 billion. Yahoo’s CEO, Marissa Mayer, was a Google alumni and has been receiving a lot of press for her intelligence and drive to change the company, as well as her good looks.

Screen Shot 2014-09-20 at 8.43.59 AMHowever, all is not as it seems.  The primary value for Yahoo isn’t its online advertising, email, or users – it is the stakes that they amassed in the hot Chinese e commerce company Alibaba (NYSE: BABA) and also Yahoo Japan.  In fact, the value of Yahoo is less than the value of these stakes, which are approximately $45B, partially due to the reason listed in this Bloomberg article:

While the market value is large for Yahoo’s Asian assets, that doesn’t necessarily reflect the value available to investors and the company because of taxes, said Ben Schachter, an analyst at Macquarie Securities USA Inc. Yahoo, which would have made $8.3 billion by selling Alibaba shares at the IPO, only reaped around $5.1 billion after taxes.

Taxes are ‘‘one of the big issues,” Schachter said.

While it is true that $45B in investment value isn’t worth $45B because of the after-tax implications, it certainly implies that the market isn’t valuing Yahoo at very much at all.  It is also possible that the market thinks that Alibaba is over-valued at its current price of near $100 (after a huge run-up from its IPO price of $68, another huge sign of froth in the market) but the two stocks will generally track closely together now.  Yahoo is sort of a broken “tracking stock” for this value.

Another sign of froth is “spec companies”.  Spec companies are stocks of companies that are created “from scratch” and their value is based on the promise of management to do certain things in the future with money contributed or raised from investors.  Generally you can’t create a spec company – you need to take over an existing listing and then you promise returns to investors who in turn value your company.  Brazil was on a tear earlier in the decade and a flamboyant billionaire created a company OSX whose IPO in 2010 was discussed here:

(Reuters) – OSX Brasil (OSXB3.SA) slashed its initial public offering as investors balked at paying a high price for a start-up company with no revenue.

This too recently came to an end as the company OSX filed for bankruptcy protection, but the ability of a firm to launch a start up planning to build a port and various oil and other assets and receive a high valuation should raise eyebrows.  Like many other similar plans this one ends up in dust with a recent bankruptcy filing.

I don’t have any sort of unique forward looking view on stocks but the eye-popping valuation and initial one-day jump of Alibaba and other signs have been correlated with declines in the stock market in the past.

Cross posted at Chicago Boyz

Using Google Finance To Track Portfolio Performance

I created an account in Google Finance to allow the beneficiaries to see how their stocks are performing and get an integrated view of news on their stocks.  It includes the purchase price for each of the stocks so that it shows gains or losses overall as well as gains in the current day.

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This is the view of the “apps” under google and the green Finance one on the lower right brings up this application.  You need to sign in with a name and password (which you can then save) in order to reach it.

Here is a view of Portfolio 5 with a view of the stocks.  you can see the name, ticker symbol, last price, shares, cost basis, today’s return, and overall return.  This is under the “performance” tab.  You can also see news for the portfolio below; this is useful because if there is a major story that is impacting the price of your stock you can just go into the story directly from this page.

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Another useful view is the “fundamentals” view.  This view shows the market cap (value of all the outstanding stock), the 52 week high and low stock price, EPS or “earnings per share”, and the P/E ratio which is the price to earnings ratio.  Beta is an indication of risk vs. the market.

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Hopefully this allows for the beneficiaries to watch their portfolios and learn about their stocks.



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