Trust Funds For Kids

Stock Performance as of August, 2020

Our portfolios have continued to do well, as they are composed of many of the same stocks that are driving the NASDAQ higher. During the months of June and July, our portfolios increased between 5 and 17%, with the primary differentiator across portfolios being the percentage invested in high growth (mainly tech) stocks and the percentage in cash and more conservative investments. We also have seen a fall in the US dollar which could increase the relative appeal of foreign stocks over time (they have generally lagged far behind their US equivalents).

Portfolio Three Updated June 2020

Portfolio 3 is 12 1/2 years old. The beneficiary contributed $6500 and the trustee $13,200 for a total fo $19,700. The current value is $26,476 for a gain of $6776 or 34%, which is 4.2% / year adjusted for the timing of cash flows. See the summary here or at the link.

This portfolio, like portfolio 2, switched to ETF’s. This portfolio has less cash and a higher proportion in BND, which is good since the yield on cash has dropped to a low 0.3% with the return of ZIRP.

Portfolio Two Updated June 2020

Portfolio Two is 15 1/2 years old. The beneficiary contributed $8000 and the trustee $16,200 for a total of $24,200. The current value is $44,019 for a gain of $19,819 or 81%, which is 6.7% / year adjusted for the timing of cash flows. Go here for a summary or click on the link.

Last year we bought ~ $5000 worth of BND and that has returned 9% dividends & share price appreciation (annualized) which is better than the return on cash itself which has dropped from 1.7% a couple of years ago to 0.3% with the (near) return of ZIRP. May want to move more from cash to BND (or even IAU) with the return of ultra low interest rates and the Fed even buying some debt instruments from corporations.

Portfolio Eight Updated June 2020

Portfolio Eight is 4 1/2 years old. The beneficiary contributed $2500 and the trustee $5000 for a total of $7500. The current balance is $10,402 for a gain of $2902 or 38%, which is 11% / year adjusted for the timing of cash flows. Go here for a summary or use the link.

We recently sold GM and are holding the cash to reinvest as part of our fall 2020 reinvestment.

Portfolio Seven Updated June 2020

Portfolio Seven is 4 1/2 years old. The beneficiary contributed $2500 and the trustee $5000 for a total of $7500. The current value is $10,040 for a gain of $2540 or 34%, which is 9.8% / year adjusted for the timing of cash flows. You can see the summary here or at the link.

We recently sold GM and held the cash we will combine it with the 2020 contributions to buy larger stock positions (around $1000 / each).

Portfolio Six Updated June 2020

Portfolio six is 7 1/2 years old. The beneficiary invested $4000 and the trustee $8000 for a total of $12,000. The current value is $15,029 for a gain of $3029 or 25%, which is 5% / year adjusted for the timing of cash flows. Go here for a summary view or click on the link.

We recently sold some legacy oil stocks and have a mix of information technology, consumer goods and other industries.

Portfolio Five Updated June 2020

Portfolio five is almost 11 years old. The beneficiary contributed $5500 and the trustee $11,000 for a total of $16,500. The current value is $22,386 for a gain of $5886 or 35%, which is 5% / year adjusted for the timing of cash flows. You can see a summary here or at the link.

We recently made some portfolio sales, removing some banks and a car manufacturer and European industrial conglomerate. The portfolio is approximately 70% weighted to information technology & fintech.

Portfolio Four Updated June 2020

Portfolio four is almost eleven years old. The beneficiary contributed $5500 and the trustee $11,000 for a total of $16,500. The current value is $22,448 for a gain of 36%, which is 5% / year adjusted for the timing of cash flows. You can see the detail here or at the link.

We recently sold some long time holdings and made new purchases. We exited a bank and some oil stocks. These stocks provided solid dividends over the years but fell out of favor recently.

Portfolio One Updated June 2020

Portfolio one is almost 19 years old. The beneficiary contributed $3000 (net of withdrawals) and the trustee $18,000 for a total of $21,000. The current value is $55,782 for a gain of $34,782 which is 165% or 7.5% / year when adjusted for the timing of cash flows. See the details here or on the link on the right.

The portfolio currently is almost 20% in cash. Of the stocks, almost 80% are from the Information Technology / Payments sector.

Portfolio Performance as of June 2020

Our portfolios have recovered most of the losses and are back near the peaks from February 2020, right before the Covid rout. We also recently picked stocks and made adjustments in many of the portfolios. Since all the sheets are connected in Google sheets, I generally pick a weekend and update all the stocks in the portfolio, and then do the individual “sheets” for each of the 8 portfolios from common data (the files are linked).

It seems strange to show such good stock performance at a time when there is disruption and looting in the streets but often markets are not linked for whatever reason. These stocks are heavily weighted towards information technology and / or “platform” companies (including fintech and payments) as are most portfolios that have held up well.

Portfolio Performance As of May 2020 and Replacement Stock Selections

The stock market has recovered almost all of the losses incurred with the pandemic. From peak to trough (Feb 2020 to March 2020) we lost about 23% of our value. Today, we are down about 7% from peak. Our percentages do not completely align with the market because some portfolios hold up to 20% cash and some bond investments (BND ETF from Vanguard) and Gold (IAU ETF ticker). This performance generally aligns with riding the market down and then back up again.

Whether by luck or design, our portfolios did not hold most of the industries that bore the brunt of the Covid impact, like airlines, hotels, and commodities. We did have some stocks that we recently sold in some of these hard hit areas.

I reviewed the rest of the portfolio and we are continually “pruning down” the list of stocks that we hold. There are about 30 stocks held across the portfolio right now, down from about 40 or so in the relatively recent past. This does not include ETF’s.

The stocks that have driven the most value in the portfolio that are not bought across all the portfolio (because every beneficiary selects individually) are:

Electronic Arts (EA) – videogames
Mastercard (MA) – electronic payments & credit cards
CME Group (CME) – financial services
Alibaba (BABA) – Chinese e-commerce giant
Nvida (NVDA) – semiconductors
OKTA (OKTA) – SAAS provider of security services
Paypal (PYPL) – electronic payments
Procter & Gamble (PG) – iconic brand company
Taiwan Semi-conductor (TSM) – semiconductors
Union Pacific (UNP) – Railways
Gold ETF (IAU) – tracks price of gold

If the portfolios that are selecting new stocks don’t currently own one of the stocks listed above, they may want to consider buying them.

New stocks for May 2020:

Carrier (CARR) – manufacture and sale of Heating and cooling systems (HVAC). Recently spun out from a conglomerate
Facebook (FB) – owner of Facebook, Instagram, and WhatsApp seems to have recovered from past controversies
Cloudflare (NET) – security and edge networking has been growing with the crisis

Stocks To Pick:

Portfolio Four – select three stocks

Portfolio Five – select two stocks

Portfolio Six – select one stock

Portfolio Update April 2020

The markets have moved up and down since the lows hit in March, 2020. The government has taken a number of moves to shore up the market, including reducing interest rates, back-stopping some industries, and even buying some corporate debt instruments and ETF’s. After some incredible moves up and down, the markets are back to about where they were at the end of Q3 2019.

Our stocks mostly went down with the overall market, although some performed better. Specific sectors, like energy and airlines, were particularly hard hit. The Coronavirus is making us reconsider our core assumptions in light of how the market has been performing recently. We may sell out of some sectors to avoid potential further declines.

Portfolio One:

Exxon Mobil (XOM) – while well run and with a good dividend, the energy sector is facing significant challenges with reduced oil prices and this stock has been stuck and declining for a decade. Consider selling.
Toronto Dominion (TD) – this is a well run Canadian Bank with trading exposure. However, banks face unknown challenges with debt defaults and trading commissions have recently evaporated. Consider selling

Portfolio Four:

Oracle (ORCL) – Oracle is famous for being ruthlessly well run and has held up well in the market turmoil. However, they piled on debt to keep up earnings per share through stock buybacks and are generally passed by in most areas of Technology. Consider selling
Nucor (NUE) – A good company with a good dividend that hasn’t risen in many years even in a favorable regulatory environment. Consider selling
Royal Dutch Sell (RDS.B) – large European oil & gas producer hit hard by oil price downturn. Consider selling
Westpac Banking Group (WBK) – large Australian bank hit by recent market turmoil and other issues. Has been stagnant or falling for many years. Consider selling

Portfolio Five:

Baozun (BZUN) – Chinese e-commerce enabling company has been down for some time in terms of stock price. Poised to be successful in future growth. May want to consider selling
Canadian Imperial Bank of Commerce (CM) – Canadian bank with high dividend that has been down more than the market. Consider selling
General Motors (GM) – US car maker hit by reduced demand for cars and fight with the president. Consider selling
Siemens (SIEGY) – German industrial company that is spinning off components and hit with market events. Consider selling. May look at buying pieces of the company later post restructuring

Portfolio Six:

Baozun (BZUN) – Chinese e-commerce enabling company has been down for some time in terms of stock price. Poised to be successful in future growth. May want to consider selling
Royal Dutch Sell (RDS.B) – large European oil & gas producer hit hard by oil price downturn. Consider selling
Exxon Mobil (XOM) – while well run and with a good dividend, the energy sector is facing significant challenges with reduced oil prices and this stock has been stuck and declining for a decade. Consider selling

Portfolio Seven:

Baozun (BZUN) – Chinese e-commerce enabling company has been down for some time in terms of stock price. Poised to be successful in future growth. May want to consider selling
General Motors (GM) – US car maker hit by reduced demand for cars and fight with the president. Consider selling

Portfolio Eight:

Baozun (BZUN) – Chinese e-commerce enabling company has been down for some time in terms of stock price. Poised to be successful in future growth. May want to consider selling
General Motors (GM) – US car maker hit by reduced demand for cars and fight with the president. Consider selling

Portfolio Updates March 2020

It has been a difficult period for markets in March 2020 with the economic impacts of Coronavirus. The markets are generally down about 30% which is reflected in our portfolios, below. Activity is also changing quickly and there isn’t a clear pattern or floor on stock prices. Our total value of $164k is about what it was 2 years ago in mid-2018.

I am now in the process of reviewing stocks that have either performed significantly better than the market or significantly worse. A quick review of the portfolio has some stock categories that are facing major headwinds:

Oil and gas stocks have not only been hit by the market reductions, they’ve been battered by the decrease in oil prices down near $20 / barrel, an unprecedented number we haven’t seen in almost 20 years.
Auto stocks are sensitive to demand and have a heavy capital intensity. They have been hit very hard by this situation
Fortunately we did not have any airlines or aircraft manufacturers in the portfolio, or any hotel or cruise ship operators. These industries may be facing something near extinction in their current forms
Only a few stocks have bucked a near-30% decline – grocery retailers like Wal-Mart and some drug stocks (within our portfolio). Some of the tech stocks are also holding up reasonably well and may in fact be bargains
European and Asian stocks are getting a double-whammy in that the US dollar is increasing in value. This compounds their losses
We did not have a lot of exposure to banks, but did have some Canadian and Australian banks for currency diversification. The governments may intervene but most banks are likely insolvent when you look at the likely level of defaults and decreasing value of their loans and underlying assets

It is important to remember that we started these portfolios literally on September 12, 2001 – the day after 9/11. In the long term, equities and investing have been good to us and the method of the trustee making a deposit and then matching the beneficiary means that in almost all conceivable cases the beneficiary would lose “net” on their contributions.

However, it is time to revisit investment assumptions and refresh approaches to sectors and countries. A 30% reduction in values and an economic reset is an excellent time to re-think for a go-forward plan.

Portfolio Eight Updated February 2020

Portfolio Eight is 4 1/2 years old. The beneficiary contributed $2500 and the trustee $5000 for a total of $7500. The current value is $10,347 for a gain of $2906 which is 38%, or 11.1% / year when adjusted for the timing of cash flows. See the detail here or at the link on the page.

In 2019 there were no sales for tax purposes and we had $91 in dividends.

Right now the portfolio is doing well. There are 2 stocks to keep an eye on:

Baozun (BZUN) – Chinese e-commerce company seems well run but has been hit by Chinese events
General Motors (GM) – world wide iconic car maker has a good dividend but has been hit by recent events in China. They have also been making pre-emptive efforts to cut costs

Portfolio Seven Updated February 2020

Portfolio seven is 4 1/2 years old. The beneficiary contributed $2500 and the trustee $5000 for a total of $7500. The current value is $10,955 for a gain of $3455 or 46% which is 12.9% / year when adjusted for the timing of cash flows. You can see the detail here or at the link on the page.

During 2019 we did not have any sales for tax purposes, but we did have about $107 in dividends.

Right now the portfolio is doing well. There are 2 stocks to keep an eye on:

Baozun (BZUN) – Chinese e-commerce company seems well run but has been hit by Chinese events
General Motors (GM) – world wide iconic car maker has a good dividend but has been hit by recent events in China. They have also been making pre-emptive efforts to cut costs