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.Portfolio Performance May 10 2020

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.

Portfolio April 12, 2020
Portfolio April 12, 2020

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.

Portfolio Performance March 2020
Portfolio Performance March 2020

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

 

Portfolio Six Updated February 2020

Portfolio 6 is 7 1/2 years old.  The beneficiary contributed $4000 and the trustee $8000 for a total of $12,000.  The current value is $14,858 for a gain of $2,858 or 24%, which is 4.7% / year when adjusted for timing of cash flows.  See details here or at the link.

During 2019 we had 2 sales for a long term capital loss of ($307) and dividends of $221 for tax purposes (see 1099 for exact values these are estimates).

The stocks on watch for this portfolio are

  • Exxon Mobil (XOM) – while this oil and gas company is well managed and has a high dividend, the stock price has not improved in many years and the large oil companies were hit recently with the reduction in commodity prices.  Will be painful to give up on this stock but am considering it
  • Royal Dutch Shell (RDS.B) – like Exxon Mobil, this integrated oil and gas company pays a very high dividend but has not improved in many years.  It also was hit by recent commodity price drops
  • Baozun (BZUN) – Chinese e commerce company is well run but has been hit by recent geopolitical events

Portfolio Five Updated February 2020

Portfolio 5 is 10 1/2 years old.  The beneficiary contributed $5500 and the trustee $11,000 for a total of $16,500.  The current value is $22,877 for a gain of $6377 or 39% which is 5.3% / year adjusted for the timing of cash flows.  Go here for details or to the links on the page.

In 2019 we had 3 sales for a long term loss of -$430 and $367 in dividends.

Right now we have a few stocks we are looking at:

  • Baozun (BZUN) – Chinese e-commerce enabling firm keeps getting hit by headwinds.  Well run but may sell
  • General Motors (GM) – hit by labor unrest and now Chinese issues.  Holding up OK.