Stocks To Consider September 2022

Below are some of the stocks we are considering for the new purchases in September 2022.  We may adjust this list but it represents some current focus items of varying industries, geographic locations (US and non-US) and scale (very large and large cap).

US Companies

  • Lockheed Martin (LMT) – LockheedMartin is a US company that has a market cap of over $100B and a dividend of 2.7%.  This is an aerospace and defense company that can benefit from global instability and the war in Ukraine
  • Devon Energy (DVN) – Devon us a US company that has a $40B market cap and a very high dividend of over 6%.  This company benefits from high oil and gas prices worldwide
  • Mosaic (MOS) – Mosaic is a US / Canadian company that mines potash and has other fertilizer and agriculture related products.  It has a market cap of $18B and a modest 1% dividend.  Much of the rest of the worlds’ supply of Potash is in Russia or China so it is an advantage to be in the West in the current global situation
  • Ziff Davis (ZD) – Ziff Davis is a small US technology company with a market cap of $3B and no dividend.  They are well run and disciplined and own a variety of internet properties that they acquire

Non-US Companies

  • Akzo Nobel Inc (AKZOY) – Akzo Nobel is a Dutch company that provides coatings and paints.  It has a market cap of $10B and a dividend of 3.7%.  Many European companies have been hit with the fall of the Euro (when you convert their value into US dollars) and the energy situation in Europe, so this may be a good purchase point
  • Subaru Corp (FUJHY) – Subaru Corp is a Japanese company that builds Subaru autos.  They have a market cap of $13B and a dividend of 4%.  This stock too has been declining but may be a good purchase point for a company with solid brand equity and loyalty
  • Puma (PUMSY) – Puma is a German company that makes shoes and sportswear.  They are generally well run and have some niche markets.  Their market cap is $8B and they have a modest 1% dividend.

Mega Cap

Alphabet (GOOGL) has a 1.35T market cap and no dividend.  The revenues grow relentlessly and they are well run and less controversial than other companies in the space.

Stocks To Sell September 2022

These portfolios are medium to long term in nature. That means we typically do not make quick sales in response to market conditions. But it is time to re evaluate these stocks given all the changes since covid and these stocks we are going to sell or strongly consider selling as a result.

  • Vanguard Total Market Bond Index (BND) – with short term cash returning almost nothing, it seemed to make sense to look at the BND ETF as a chance to get a little more yield (interest) on cash with not a lot of extra risk. However, BND has fallen 15% with the rise in interest rates impacting the value of bonds and this is not a good place to park short term money
  • Appian (APPN) – the low code SAAS software company briefly had a price boom with other automation software companies and then fell back to the IPO price. The company is not yet profitable and does not have rapid growth. It is not a bad company and recently won a big lawsuit and damages against the competitor PEGA, but does not seem to have significant upside
  • Activision (ATVI) – Activision makes video games and is currently in the process of being acquired by Microsoft, which has stabilized the price. If the acquisition falls through due to regulatory barriers, the stock will likely fall in price. Given the situation it makes sense to sell
  • Alibaba (BABA) – Alibaba is a Chinese e-commerce giant that also owns thriving financial firms. But trouble with the Chinese government has led to a crackdown and the market in China is just very difficult for stocks and as a result it results in a sell recommendation, even though this is a powerful and seemingly well run company
  • Intel (INTC) – despite a historically good market for chips (the entire supply chain was brought to its knees due to lack of chips), management errors and poor execution have caused this company’s stock to drop significantly. With no near term catalysts on the horizon it makes sense to sell
  • Pinduoduo (PDD) – Pinduoduo is another massive and innovative Chinese e-commerce company that has been heavily damaged by government challenges. As such it makes sense to sell
  • SAP – SAP has a strong franchise in Enterprise Planning software but has struggled with a migration to the cloud and delayed meaningful integration of its major acquisitions. It is also hurt by the rise of the dollar since it has significant overseas revenues. Until management regains credibility and proves it can execute likely it is time for a sell
  • Snap (SNAP) – Snap was seriously impacted by the changes in privacy with do not track driven by Apple and iPhones and the rise of TikTok. The stock is down tremendously and the company is taking aggressive actions including shutting down some products and reducing staff in an attempt to survive. Given this, it is time to strongly consider selling. On the other hand, this also may be a decent price point for entering the stock if you feel that they can survive and / or get acquired by someone who could leverage their large and active user base
  • Block (SQ) – formerly Square, Block is the payments company that serves all the small companies with the card readers as well as owning the Cash App, and also having a major bitcoin presence. The stock has cratered as all these businesses hit the wall and it is time to consider moving on
  • Rocket (RKT) – Rocket is a company that sells mortgages and is a major player in this space. However, the mortgage business is collapsing as interest rates rise and home values fall and the company is going from large profits to likely a net loss. On the one hand, Rocket is going to be a large player in consumer financing and mortgages for many years to come if they can survive the downturn (they are well capitalized) – on the other hand, the stock price is down and many lean years are likely to come of limited profits and likely losses. This is hard because it is a well run company – the question is, can anyone invest in the mortgage industry or is it just a short term boom / bust sector (that’s been the historical challenge)
  • Paypal (PYPL) – Paypal has historically been a great stock, rising with the growth in electronic payments, and also owns Venmo. However it recently crashed with the downturn and faces many challenges, including the rise of Apple Pay. OK to sell even if this is a painful call

Sales by portfolio to consider:

  • Portfolio One – Alibaba (BABA), Pinduoduo (PDD), Block (SQ), consider selling Paypal (PYPL) and Rocket (RKT)
  • Portfolio TwoAlibaba (BABA), Total Bond Market (BND), Block (SQ) (discussed and decided to keep)
  • Portfolio Three – none
  • Portfolio Four – Block (SQ)
  • Portfolio Five – Appian (APPN), Activision (ATVI), Intel (INTC), Snap (SNAP), Block (SQ), consider Paypal (PYPL) and SAP (SAP)
  • Portfolio Six – Intel (INTC), consider Paypal (PYPL)
  • Portfolio SevenAlibaba (BABA), Block (SQ), consider Paypal (PYPL) (kept)
  • Portfolio Eight – Block (SQ), consider Paypal (PYPL)

Portfolio Update September 2022

It has been a confusing ride in the markets across all asset classes. We are now going to 1) go through the portfolios and recommend some sales 2) invest for our 2022 incremental funding and match. We also need to move one of the UTMA accounts from the trustee to the beneficiary because they turned 21.

We began the first portfolio right after 9/11/01, when the markets were at a nadir. There have been other difficult periods, especially the 2007-8 period and the long era of basically static markets.

These portfolios are for the medium to long term, and offer the beneficiaries an opportunity to understand markets, the importance of a long-term outlook, and the need to take control of their own finances.

A Look At the Market – July 2022

This post looks at the state of the market in July, 2022. There have been a lot of significant changes in the last 12 or so months:

  • Rising interest rates – after the largest bull market in history in bonds (when interest rates fell to negative territory, an unheard of historical level), we now have rising interest rates. These rising rates are meant to quell inflation, but they have many other impacts, including a huge impact to the housing market (30 year loans cost much more) and stocks that are selling on future profits (such as SAAS stocks currently losing money but promising to make it in the future)
  • Strong US dollar – a stronger US dollar makes foreign stocks worth less, all else equal, because their value is translated into US dollars for us. The US dollar is now at parity with the Euro, something that hasn’t happened in decades
  • China damages its own market, Russia zeroes out its market – China has taken many steps to reign in their tech stocks and bow them down to the state, which has taken hundreds of billions of value from their markets. Russia effectively ceased to exist as a market; companies that used to be worth billions are now worth almost nothing
  • Fossil fuels and oil / natural gas stage a huge rebound – until recently fossil fuels and oil / natural gas were seen as relics of the past and a focus of dis-investment. With the war in Ukraine, oil prices have skyrocketed and this is having a huge impact on European and US economies. Since the US is a major producer of oil and gas, we have some offsetting gains, but in Europe it is mainly a significant burden
  • SPAC’s fall significantly and the IPO market freezes – SPAC’s offer a less regulated approach to the public markets; almost all the SPAC stocks are trading for less than their issuance prices, often far less. The IPO market is effectively frozen, which generally occurs when markets fall

Let’s look at how this has impacted the S&P 500 first. Using this chart (note – I am reviewing this as of 7/24/22 – if you look at it on other dates, you will see different results since it is updated with the market daily). Note that this doesn’t include the impact of dividends, which is significant on longer multi year time frames.

Top 100 stocks – only the top 100 stocks (out of 500) have gains for the YTD as of late July. Big winners are the oil companies such as Exxon Mobil (XOM) up 42% YTD, and some companies catering to low income consumer staples like Dollar Tree (DLTR) up 22% YTD or Kraft Heinz (KHC) up 7%. Activision Blizzard (ATVI) is up 19%, since it is being purchased by Microsoft (MSFT). Utilities and cigarettes also fall into the small positive percentage category

Stocks 101 – 200 – these stocks are all down YTD, between zero and -10%. You see a lot of less risky stocks here, like Allstate (ALL) – 1% YTD and Berkshire Hathaway (BRK.B) – 4% YTD, and Walmart (WMT) – 9% YTD. One surprise is Twitter (TWTR) down only 8%, due to Elon Musk’s bid which moved the stock up significantly.

Stocks 201 – 300 – these stocks are all down between -10% to -20% YTD. Here you see CME Group (CME) down 10%, Medtronic (MDT) down -12%, Apple (AAPL) down 13%, many of the banks like Goldman Sachs (GS) and Northern Trust (NTRS) and others. This is where the best performing tech stocks ended up (like Apple) and most of the financials.

Stocks 301 – 400 – these stocks are all down 20% – 28%. This is where the “better” performing tech stocks ended up, like Amazon (AMZN) down -27%, Alphabet (GOOG) down 25%, some of the worst performing banks like Bank of America (BAC) down 25%, TESLA (TSLA) down 22%, and a lot of the health care like Baxter (BAX) down 23%.

Stocks 401 – 500 – these stocks are down 27% to 63%. They include some former high flyers like Netflix (NTFX) down 63%, Paypal (PYPL) down 57%, Facebook (META) down 50%, Nvidia (NVDA) down 41%, Moderna (MRNA) down 35%, Nike (down 35%), ServiceNow (NOW) down 31%, Accenture (ACN) down 30%, Dominos (DPZ) down 29%, and some of the worst performing banks like JP Morgan (JPM) down 27%.

Top Foreign Stocks – let’s look at some of the widely held foreign stocks for YTD 2022 performance as of late July. Note that not only are these stocks driven down by many of the same factors (above) that impacted US stocks, they are further impacted by the rising dollar which also makes their value lower when translated back into US dollars (for our purposes). Broadly speaking, the non-US stocks traded similar to US stocks, with the better performing tech stocks down 33% for instance for TSM and SAP, 5o% for Alibaba (BABA) and 75% for Shopify (SHOP). Their oil companies held up well and industrials generally down but not as badly impacted.

  • Taiwan Semiconductor Manufacturing (TSM) down 33%
  • Shell (RYDAF) up 10%
  • Astra Zeneca (AZN) up 17%
  • Toyota Motor (TM) down 14%
  • Novartis (NVS) down 6%
  • Alibaba (BABA) down 50%
  • L’Oreal (LRLCY) down 22%
  • BHP Billiton (BHP) down 27%
  • Royal Bank of Canada (RY) down 5%
  • Shopify (SHOP) down 75%
  • HSBC Holdings (HSBC) up 10%
  • Unilever (UL) down 14%
  • LVMH (LVMUY) down 22%
  • SAP (SAP) down 33%
  • Allianz (ALIZY) down 26%
  • Siemens (SIEGY) down 39%
  • JD.com (JD) down 10%
  • Canadian National Railway (CNI) down 6%
  • Airbus (EADSF) down 19%
  • UBS Group (UBS) down 11%
  • Vodaphone (VOD) flat

Portfolio Performance May 2022

Markets have fallen aggressively during 2022. Our total investment is back to where it was in 2020, after adjusting for contributions.

The stocks that have done well so far in 2022 are energy (oil, gas) and utilities have done OK. Unfortunately, we have few of these stocks in our portfolio (unless you have an index like the S&P 500) because they are viewed as bad for the climate and on ESG measures. Technology stocks have been hit very hard, and a lot of the other stocks that did well earlier in the market like consumer stocks have also fallen quite a bit.

In addition, over the last year the dollar has risen 12% compared to a basket of world wide currencies. This makes our investment in overseas stocks (Europe, Japan, China) worth less as a result (even if their investment performance was flat, they’d be down an average of 12% in our US dollars). This also hurts a lot of multi-national companies who have significant overseas sales, because those revenues are “less” when converted back into US dollars.

As a result, we are at a point where we need to re-look at the construction of our portfolio and decide which stocks we want to continue to hold onto and what to sell. And of what we sell, where do we re-invest that cash, or do we hold it in our portfolio to reduce risk?

Portfolio Performance as of March 2022

Portfolio As of March 2022

Our portfolios have gone down with the market since the highs in November 2021.  We had an aggregate decline of 16% and the market has gone down about 8-10% during that time, depending on which benchmarks you use (US / Europe).  We had some stocks that were hit particularly hard, so let’s go through them.

The Chinese stock market has been hit hard.  We have two stocks in the portfolio, Alibaba (BABA) and Pinduoduo (PDD).  China has cracked down on big tech and foreign listings in particular, although recently these stocks have done better since the government has now reversed and promised to support these companies (likely because they started laying off thousands of workers in China).  Rather than trying to understand the Chinese market, it is time to sell unless you are in it for the long haul (Alibaba in particular is a large and successful company).

There were a number of technology companies whose prices went down a lot.  These include Meta (FB), Snap (SNAP), Cloudflare (NET), and Okta (OKTA).  Meta and Snap were tied to a broader issue on social networking and the fact that Apple changing its tracking made ads less accurate.  Cloudflare is trading for a very high multiple of revenue (not profits) so any bumps along the way in forecasted growth can cause a significant drop in the stock price.  Okta was also hit and tied to an acquisition but the core numbers remain strong.  The story behind these stocks generally remains strong but they will likely continue to face a lot of turbulence.

PayPal (PYPL) was maddening.  This is a well run company whose price went down an unprecedented amount without a significant challenge to their business model (unlike SNAP and FB who were impacted by the Apple tracking change).  They did announce reduced future guidance but I was surprised by the fall. 

We have other stocks that have gone down for various reasons, including Appian (APPN), Rocket Mortgage (RKT), Block (SQ).  Block seems like a long term holding but APPN and RKT may be for those willing to ride out volatility.

We use the Vanguard Total Bond Index ETF (BND) rather than the money market fund which essentially returns almost zero.  But with interest rates rising, we actually lost money on BND – about 3% (after netting out the interest we received) – so perhaps it is better to go back to the money market (VMMXX) instead and get maybe a .5% – 1% return with no risk of loss.

 It wasn’t all bad news.  Many of the portfolio stocks did well, especially the non technology stocks such as manufacturing and commodities.  We had a buyout offer for Activision (ATVI) from Microsoft, so we might as well sell at that price.

Many of the core stocks bounced around and were down but not as significantly, including Mastercard (MA), Nvidia (NVDA), Tesla (TSLA), and Taiwan Semiconductor Manufacturing (TSM).  We likely got in too early for Intel (INTC) but that seems to be a solid long term play at this price.

We are going to update the individual portfolios and as we do we will consider which stocks (if any) to sell per the above logic.

Portfolio Updates for 2021

During 2021 the markets had a lot of ups and downs, but overall it was a great year for stocks.

Portfolios_1-4-22

Our portfolios in aggregate returned about 18% (adjusted for contributions in the fall of 2021 and amounts that were essentially un-invested in cash) during 2021. This compares roughly equivalent to the US markets that returned about 25% in aggregate and foreign markets that returned about 8% (by comparing against Vanguards VEU ETF which is large-cap stocks not including the USA), since our portfolios are a mix of them.

These portfolios are tracked in Google Sheets in two ways:

  1. a single consolidated portfolio tracker in google sheets, which has the shares by stock for each portfolio and the cash associated with each portfolio, to get the total value. I take “snapshots” of value at different types of the year, as you can see in the graph above. This google sheets doc is pretty easy to keep up to date and lets me see the markets at a glance; I notice when it seems odd and often it is a stock split which needs to be reflected in the underlying data. Buys and sells only take a few minutes for me to update in the sheet. I then reconcile the portfolios against the records online from our financial records
  2. 8 unique google sheets documents, one for each portfolio. These sheets have all the details for each portfolio, including the price of each stock purchase and the sale price for those that have been sold, as well as matching dividends to each stock over time (to get total return). I also have the cash flows over the years to calculate total return (gains / losses) as well as an annual return adjusted for the timing of cash flows

I typically update the individual google sheet documents periodically when we do buys and sells, usually around the fall of each year when we have contributions, but we often sell individual stocks due to unique circumstances throughout the year. All 8 of the google sheets are aligned to the consolidated sheet and the brokerage records as of now.

Portfolio Eight Updated January 2022

Portfolio eight is 6 years old.  The beneficiary contributed $3500 and the trustee $7000 for a total of $10,500.  The current value is $18,548 for a gain of $8,048 or 76%, which is 14% / year adjusted for the timing of cash flows.  Go here for a summary or to the link.

This year we sold Baozun and Sumo Logic and bought Nike, Square / Block and Tesla.  Nvidia also split shares.

The portfolio is doing well.  There are gains in Nvidia, Mastercard and Paypal (even though Paypal is down recently with hits to the software companies and payment processors).

Remaining Stock Selections

We have some outstanding investments to consider for 2021.

Portfolio Five

There are stocks in this portfolio to strongly consider selling.

  • SUMO – while the SAAS / analytics sector has seen strong performance, SUMO has performed poorly.  This is a stock to strongly consider selling
  • Baozun (BZUN) – Baozun is a Chinese e-commerce enablement company.  Whether due to China market / regulatory challenges or company growth, it is time to sell this stock
  • Alibaba (BABA) – Alibaba has gone down significantly.  Unlike the other stocks on this sell list, I think Alibaba has a very large and important business for the long term, as a leading cloud platform / e-commerce platform.  They also own a valuable financial business.  Can keep or sell

There will be up to $10k – $11k to invest depending on the sales up above (there was $9k in the cash account due to our selling of Appian (APPN) earlier this year when it hit a brief peak).  This could be 5 or 6 stocks depending on the size, or a stock with a double purchase.

  • Tesla (TSLA) and / or Toyota (TM) – the best run / most profitable companies in the space are Tesla on the electric car space and Toyota on the gas / electric combination play.  While almost all other car makers in the world are betting almost solely on electric cars with the next generation moves, Toyota continues to believe in a future for gas powered vehicles which makes sense because it will be decades or longer before a reliable electric infrastructure girds the globe (think Africa / Asia, for instance)
  • Pinduoduo (PDD) – the Chinese stock market has been pummeled with regulatory changes and cold-war rhetoric.  This may also be an opportunity to buy a valuable and innovative e-commerce company at a discount
  • Rocket Mortgage (RKT) – Rocket was briefly a target of a meme-stock rally and then fell but this obscures that this is a “real” company with a 7% dividend and a solid position in the US mortgage market.  This may be a long term stock to buy at a decent down price
  • Kraft-Heinz (KHC) – Kraft-Heinz fell and had a significant write off.  The company is well run and has a new plan and solid dividend.  They provide essential food staples around the world
  • Taiwan Semiconductor Manufacturing (TSM) – this stock is an essential company in the middle of a global chip shortage but also tied to bellicose behavior from China.  May be an opportunity to purchase it at a discount
  • Nike (NKE) – the global footwear leader just released earnings and said that the global supply chain difficulties would hit revenues temporarily.  Seems like an opportunity to buy a solid company at a discount
  • Uber (UBER) – the ride sharing company had missteps in the past but has changed management and is well positioned to go on a big run of earnings as the economy opens up
  • Square (SQ) – a well run and very interesting company in the financial space that is also moving into deferred payments (essentially loans) and bitcoin

Portfolio Seven:

There are stocks in this portfolio to strongly consider selling.

  • SUMO – while the SAAS / analytics sector has seen strong performance, SUMO has performed poorly.  This is a stock to strongly consider selling
  • Baozun (BZUN) – Baozun is a Chinese e-commerce enablement company.  Whether due to China market / regulatory challenges or company growth, it is time to sell this stock
  • Alibaba (BABA) – Alibaba has gone down significantly.  Unlike the other stocks on this sell list, I think Alibaba has a very large and important business for the long term, as a leading cloud platform / e-commerce platform.  They also own a valuable financial business.  Can keep or sell

If these stocks were sold there would be funds available for 3 purchases.  Here are some ideas:

  • Nike (NKE) – the global footwear leader just released earnings and said that the global supply chain difficulties would hit revenues temporarily.  Seems like an opportunity to buy a solid company at a discount
  • Tesla (TSLA) and / or Toyota (TM) – the best run / most profitable companies in the space are Tesla on the electric car space and Toyota on the gas / electric combination play.  While almost all other car makers in the world are betting almost solely on electric cars with the next generation moves, Toyota continues to believe in a future for gas powered vehicles which makes sense because it will be decades or longer before a reliable electric infrastructure girds the globe (think Africa / Asia, for instance)
  • Uber (UBER) – the ride sharing company had missteps in the past but has changed management and is well positioned to go on a big run of earnings as the economy opens up
  • Square (SQ) – a well run and very interesting company in the financial space that is also moving into deferred payments (essentially loans) and bitcoin
  • Chevron (CX) – a fuels company that is well run and has taken over the lead company in this space from Exxon Mobil (XOM)
  • L’Oreal (LRLCY) – the French cosmetics firm has a global footprint and has really embraced digital and modern methods during the pandemic

Portfolio Eight:

There are stocks in this portfolio to strongly consider selling.

  • SUMO – while the SAAS / analytics sector has seen strong performance, SUMO has performed poorly.  This is a stock to strongly consider selling
  • Baozun (BZUN) – Baozun is a Chinese e-commerce enablement company.  Whether due to China market / regulatory challenges or company growth, it is time to sell this stock

If these stocks were sold there would be funds available for 2 purchases.  Here are some ideas:

  • Nike (NKE) – the global footwear leader just released earnings and said that the global supply chain difficulties would hit revenues temporarily.  Seems like an opportunity to buy a solid company at a discount
  • Square (SQ) – a well run and very interesting company in the financial space that is also moving into deferred payments (essentially loans) and bitcoin
  • Chevron (CX) – a fuels company that is well run and has taken over the lead company in this space from Exxon Mobil (XOM)
  • Pinduoduo (PDD) – the Chinese stock market has been pummeled with regulatory changes and cold-war rhetoric.  This may also be an opportunity to buy a valuable and innovative e-commerce company at a discount
  • L’Oreal (LRLCY) – the French cosmetics firm has a global footprint and has really embraced digital and modern methods during the pandemic
  • Uber (UBER) – the ride sharing company had missteps in the past but has changed management and is well positioned to go on a big run of earnings as the economy opens up

Stock Performance September 2021

Stock Performance September 2021
Stock Performance September 2021

Over about the last 6 months, net of $30,000 in contributions from the trustee and the beneficiaries (some beneficiaries are making additional contributions beyond the normal $1500 / year), the funds in total have gone up by approximately 5% annualized. Net of cash and cash-like instruments (which reduce money in equities), we have returned about 6-7% annualized.

The indexes in the US on the other hand have gone up by between 10-15% annualized, depending on what you are looking at (S&P, NASDAQ, MGK performance, etc…). One of the reasons for our different performance is that we have a decent basket of foreign stocks, including some Chinese stocks which have gone down about 40% during the last 6 months (some of which have already been sold).

Since we are looking at the long term, we’ve historically selected a mix of US and foreign stocks. Foreign economies make up a majority of the worlds’ GDP, but US stocks have turned out to be the best bet recently for a variety of reasons. Chinese stocks, for instance, were hit by changes in government policies. We will continue to monitor the mix and the options for investments.

July Stocks to Consider

The following 16 stocks (plus gold) have been solid in our portfolio and are recommended for consideration if you don’t have them or wish to add more.

  1. Accenture (ACN) – well run consulting company growing and also acquiring smaller companies in niche areas
  2. Alibaba (BABA) – Chinese Amazon equivalent has been battered by regulators but seems to be turning a corner, still enormous and critical to their economy
  3. Cloudflare (NET) – an innovative, fast growing tech company with a service for internet connectivity and security
  4. Electronic Arts (EA) – Major video game firm in a giant and growing industry
  5. Facebook (FB) – Fast moving and innovative firm seems to have minimized regulatory scrutiny and can monetize world-wide
  6. Gold EFT (IAU) – an ETF that tracks the price of gold, traditionally a hedge against uncertainty
  7. Kraft Heinz (KHC) – a global food and beverage firm that has reworked its operating model after recent underperformance
  8. Mastercard (MA) – a well run player in payments
  9. Nvidia (NVDA) – a rapidly growing player in chips and innovation
  10. OKTA (OKTA) – a well run enterprise software firm
  11. Paypal (PYPL) – a growing and innovative payments provider
  12. Procter & Gamble (PG) – iconic consumer product firm
  13. Starbucks (SBUX) – ubiquitous coffee shop pivoting post pandemic
  14.  Tesla (TSLA) – high priced but rapidly growing electric car firm led by Musk
  15. Taiwan Semiconductor (TSM) – global chip producer that continues to perform well
  16. Union Pacific (UNP) – well run US railroad

Other US companies to look at for July, 2021:

  • Fiserve (FISV) – Fiserve provides services for payments and banks and is well run and has grown for many years
  • Chevron (CVX) – While Exxon-Mobil (XOM) led the US oil and gas industry for years, Chevron has been rising and moving faster and has a very similar market cap today
  • Snap (SNAP) – the company continues to attract users and innovate with video which continues to grow in advertising impact

Other foreign companies to look at for July, 2021:

  • ABB (ABB) – ABB is a global leader in engineering and electrification, which will grow as the world seeks to move from carbon energy sources
  • Pinduoduo (PDD) – Pinduoduo has an innovative commerce model for aggregating buyers and has had incredible growth in China
  • L’Oreal (LRLCY) – L’Oreal is the French makeup firm which has responded extremely effectively to the pandemic and gone extensively digital

June Performance Summary

Stock_Performance_July_2021

Our portfolios continue to perform well, like the overall market.  We are up about 30% over the last year, net of contributions.   US markets are up around 40% during that period, but our portfolios are about 20% cash / gold along with non-US stocks so it is roughly equivalent.

There are a few stocks that haven’t performed as well as the market as of late; Alibaba (BABA) the Chinese internet giant, SUMO Logic (SUMO) the cloud analytics company, and Baozun (BZUN) the Chinese e-commerce fulfillment company.  However, the performance wasn’t terrible for these 3 companies, just not nearly as good as the overall market.

We are looking at companies to consider buying for the summer investment round.  I am performing research now on candidates.

This year we moved three of the accounts over to “limited agency” status from trust funds; this has become necessary as the beneficiaries get older.  This is a one-time effort that took some time given that the steps are not simple nor clearly laid out.  Even today I noted that many of the individual stocks were set to reinvest dividends, which I turned off because it causes challenges in tracking and is minor in the grand scheme if you reinvest cash regularly (as we do with new investments).

April Performance Review

Performance_April_2021

Since our last updated in mid-February (approximately the market “top”), the value of our positions has declined by about 5% overall, with some portfolios hardly moving and others declining over 10%. The differences were driven by:

  • What percent of the portfolio is in cash or bonds – 25+% portfolio two, 30+% portfolio three, 20%+ portfolio four, with the heavier the cash and bond weighting the lower the decline
  • Amount of high growth stocks in portfolio – certain stocks that have been great performers that are considered “growth” and generally trade as a multiple of sales (say 20-30x sales) such as Tesla (TSLA) and Cloudflare (NET) and Sumo (SUMO) fell as the market moved from growth to value in the first quarter

Given that these portfolios represent a log-term investment for each of the participants and would be a portion of their total net worth (i.e. they often hold other cash in savings or other accounts), we try to be reasonably heavily invested in the market, but each participant has their own risk tolerance.

During this rotation into value stocks, some sectors which had been battered such as energy (Exxon-Mobil and Chevron) and Financials and some general retail have come back strong. There are many of these stocks in the portfolios (such as Coca-Cola, Procter and Gamble, and many others) but they generally represent a lower portion of the total “value” because the tech stocks have risen so much that their position size is much bigger.

We also see variances by region, with Chinese stocks rising and US stocks generally rising (at least in some sectors) but European stocks stagnant. Since these portfolios seek to choose both US and overseas stocks, we also will see changes in value based on changes in currencies and country-specific dynamics. We do not intend to “predict” which ones will rise and fall, but we encourage a balanced mix of stocks by sector and region / currency where possible.

Some specific stocks have fallen and are “on watch”, including:

  • Alibaba (BABA) – a well run Chinese company with huge cloud presence (like AWS) and a giant financial arm (called ANT), this group has run afoul of regulators and Chinese politics.  It is down about 25% from its high
  • Cloudflare (NET) – Cloudflare runs an advanced online system and trades for more than 30x revenues… making it susceptible to falling when it doesn’t perform exceedingly well in revenue growth or when interest rates increase.  It is down about 20% off its high
  • Tesla (TSLA) – the grand-daddy of all stock high flyers is down about 20% from recent peaks
  • Sumo Logic (SUMO) – SUMO has lost about half its value from peak recently.  While SUMO is still growing quickly, it recently acquired a company and is not exceeding expectations
  • Baozun (BZUN) – Baozun, the Chinese e-commerce support company, is down about 30% off recent highs.  The company was part of a short squeeze and impacted by US / China relations overall, but core operations are solid
  • Gilead (GILD) – this large pharma stock has lost about 20% of its value, despite having high earnings and dividends.  It does not play significantly in the covid space and is a bet for focus on other drugs and treatments in the post-covid era.

By portfolio:

  • Portfolio one -BABA, NET
  • Portfolio two – BABA, NET
  • Portfolio four – TSLA, NET
  • Portfolio five – SUMO, NET, BABA, BZUN
  • Portfolio six – BZUN, GILD, SUMO
  • Portfolio seven – BABA, BZUN, SUMO
  • Portfolio eight – BZUN, SUMO

Additional Stock Picks April 2021

Recently there have been some sales and a few of the portfolios are looking at possible incremental investments.

Note that there are very few “bargain” stocks out there. One that I thought was a relative bargain was Rocket Mortgages (RKT) and then it was pumped up so we ended up taking some short-term profits which we normally don’t do. Some stocks we are considering:

US Companies

  1. Nike (NKE) – the global footwear and clothing retailer saw significant price increase in 2020 but has fallen about 10% off its all-time high.
  2. Etsy (ETSY) – the platform for twee e-commerce also had a recent drop after a big run-up and it is down about 17% off its all-time high.
  3. Twitter (TWTR) – Twitter recently owned up to its poor performance (like Kraft Heinz) and started a new plan to become more profitable and “win over” the market. There was a run up earlier in the year but it is down about 17% from 52 week highs
  4. Chevron (CVX) – the giant energy company is attempting to take over the lead position from Exxon Mobil (XOM) in the energy space. Their stock is trading near 52 week highs
  5. Microstrategy (MSTR) – Microstrategy is a company in the data analytics space that has been around for many years and is not growing. However, they recently decided to borrow money on the bond markets and invest it in Bitcoin and today that makes up about $5B of their $7B market cap. This is an interesting way to play the crypto markets
  6. Honeywell (HOM) – Honeywell is a US controls manufacturer that is benefiting from “edge” and “quantum” computing. As a result, their stock is near a 52 week high
  7. Berkshire Hathaway (BRK) – the holding company controlled by Warren Buffet has been under-performing the S&P 500 for over a decade but may be positioned to rise as value stocks come to the fore. The stock is at an all time high

Non-US Companies

  1. Sea Limited (SE) – is a Singapore internet, mobile and gaming platform. It has also pulled back recently and is down about 17% from highs (this is the US ADR of the foreign stock)
  2. L’Oreal (LRLCY) – the global makeup brand has embraced digital and direct sales and is doing well despite covid (the is the US ADR for the foreign stock). The stock is trading near its all-time high
  3. Kraft Heinz (KHC) – the global snack company was selected as a value stock previously and although it has increased in price may still have room to increase. The stock is trading near its recent 52 week highs

Previous Holding Candidates

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:

  1. Electronic Arts (EA) – videogames
  2. Mastercard (MA) – electronic payments and credit cards
  3. CME Group (CME) – financial services
  4. Alibaba (BABA) – Chinese e-commerce giant
  5. Nvidia (NVDA) – semiconductors
  6. OKTA (OTKA) – SAAS provider of security services
  7. Paypal (PYPL) – electronic payments
  8. Procter & Gamble (PG) – iconic brand company
  9. Taiwan Semi-Conductor (TSM) – Asian chip giant
  10. Union Pacific (UNP) – railways
  11. Facebook (FB) – social media platforms
  12. TESLA (TSLA) – electric cars
  13. Wal-Mart (WMT) – massive retailer
  14. Cloudflare (NET) – new cloud stock with potential
  15. Gold ETF (IAU) – tracks price of gold