Portfolio Update August, 2019

As of August 2019, our combined portfolios are back to where they were in August of last year. This is mostly in line with VTI (Vanguard US market ETF) which was up about 3% and VEU (non US market ETF which was up about 1%).

Below are stocks to consider selling prior to the new purchases:

Portfolio One:

  • Nnvidia (NVDA) – the once high flying chipmaker stock is hit with slowing growth
  • Equinor (EQNR) – former Statoil is a Norwegian oil company hit by falling price of their currency and anti-oil sentiment in their own country

Portfolio Three:

  • Baidu (BIDU) – Chinese search engine less relevant in mobile era and new investments not yet paying off
  • Nnvidia (NVDA) – the once high flying chipmaker stock is hit with slowing growth
  • ConocoPhillips (COP) – US oil company hit by lower energy prices and relatively smaller footprint

Portfolio Four:

  • Equinor (EQNR) – former Statoil is a Norwegian oil company hit by falling price of their currency and anti-oil sentiment in their own country
  • Nnvidia (NVDA) – the once high flying chipmaker stock is hit with slowing growth
  • Box (BOX) – US SAAS provider not yet acquired by larger company and hit by recent earnings miss
  • Oracle (ORCL) – very well run and doing huge stock by back but trends running against this on premise software stock
  • Westpac (WBK) – Australian bank hit with tough regulatory, business, and real estate impacts

Portfolio Five:

  • Baidu (BIDU) – Chinese search engine less relevant in mobile era and new investments not yet paying off
  • Juniper (JNPR) – US networking company not yet taken over.  Reasonably well run with dividend but in a difficult space
  • ConocoPhillips (COP) – US oil company hit by lower energy prices and relatively smaller footprint
  • Westpac (WBK) – Australian bank hit with tough regulatory, business, and real estate impacts

Portfolio Six:

  • Baidu (BIDU) – Chinese search engine less relevant in mobile era and new investments not yet paying off
  • Nnvidia (NVDA) – the once high flying chipmaker stock is hit with slowing growth
  • ConocoPhillips (COP) – US oil company hit by lower energy prices and relatively smaller footprint

Portfolio Eight:

  • Nnvidia (NVDA) – the once high flying chipmaker stock is hit with slowing growth

Stock Sales Summer 2015

We have been watching the markets and trends and there are some stocks that we will cull prior to the next round of investing.

Coca-Cola Femsa (KOF) – this is basically the Mexican and Latin American Coca-Cola distributor.  Per their last earnings release:

“As beverage transactions continued to outpace volumes across our operations- reinforcing our daily consumer engagement – we are encouraged by our operators’ positive performance in the midst of a challenging environment, marked by weak consumer trends in Brazil, a slowly recovering consumer landscape in Mexico, and currency volatility across our markets. On a comparable basis, we delivered high single-digit consolidated revenue growth and double-digit operating income growth during the quarter.”

What they mean by “comparable basis” is that the currencies of Mexico, Brazil and other countries such as Argentina have collapsed and they are still making a lot of sales but the sales are worth less when they are converted into the US dollar or some other index as they were in prior periods.

So what do we do?  Do we hold on and wait for the dollar to fall and / or their currencies to rise?  The company seems well run (they have growing transactions) and Coca-Cola is never going away, and these countries have a rising middle class and growing populations (unlike most of the world) to consume more goods in the future.

Royal Dutch Shell (RDS.B) – Shell has been pummeled by the commodity price slump.  They are also based in the UK / Europe so they face an additional currency overhang when translated into US dollars.  They also were “acquirers” of a natural gas company in the midst of these events which means they paid a premium price in a time of decline.  The most worrisome element, however, is that they continue their high risk plan of drilling for ice in the volatile and difficult arctic, at a time of reduced oil prices (which makes high cost investments like deep water drilling even riskier).  They also have a relatively higher chance of environmental catastrophe which will be very difficult to clean up given the paucity of local resources and the ferocious environment in the far north.  They are a sell.  If we want to “buy low” in the oil or natural gas business there are better candidates.

Trans Alta (TAC) – Trans Alta is a Canadian power generator.  They have strong exposure to coal and also the Canadian commodity boom / bust which consumes much of their electricity.  They pay a strong dividend (for now) but it has been reduced as the company struggles.  Future dividend cuts would impact the company even further.  Given the combination of the poorer Canadian economy and currency, the dire forecast for coal, and the commodity bust, this is a sell.

Wynn (WYNN) – Wynn is a gaming operator with operations in Macau, the only area of China where their gambling-mad citizens are allowed to play.  There are also many other more subtle elements to this infatuation with gambling including an ability to move currency out of the country, which is otherwise difficult to do.  Recently the new Chinese premier (dictator?) has cracked down on certain types of ostentatious corruption (generally among those who are not politically allied with him, since “corruption” is embedded into all aspects of their command economy) which has hurt gambling.  But Wynn is a shrewd operator and he is expanding capacity and likely this too, shall pass.  It is hard to sit while revenues and profits decline, however.

Exxon (XOM), Statoil (STO), and Devon (DVN) – these energy giants (Exxon is the biggest, but Statoil is unique since it is from Norway, and Devon is smaller but well run) have all been hurt badly by the reduction in oil and natural gas prices.  For now, unlike Shell above, I think it makes sense to stick with them.

Seaspan (SSW) – Seaspan owns container ships that travel between China and overseas destinations and has been investing in a new, fuel efficient fleet.  Seaspan has a very high dividend (8%) which they have been able to sustain so far.  On the one hand they seem to be a good operator but overall Chinese exports are faltering and if there is a general fall in the market they likely will still be able to rent out their newer, fuel efficient craft but the rate that they would receive would be correspondingly lower.  This one is on the edge.

Westpac Banking (WBK), Canadian Imperial Bank (CIB), Toronto-Dominion Bank (TD) – the first bank is Australian and the latter two are Canadian.  These banks are generally well run but all have been hit by the depreciation of their currencies vs. the US dollar, and the fact that they are exposed to real-estate “bubbles” in the Australian and Canadian markets.  As the commodity markets fall, the entire country can be hit with reduced services, demand and an overall high level of debt.  These are on watch.

Portfolio Four Updated November, 2014

Since we updated portfolios five and six in November it made sense to also update Portfolio Four.  The beneficiary contributed $3000, the trustee $6000 for a total of $9000.  Current value is $11,400 for a gain of $2400 or 26% which is almost 7% / year.  Go here for the detail or to the link on the right.

The same stocks Westpac, Garmin, and Wal-Mart have been major contributors to the gain.

Portfolio Five Updated November, 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 $11,175 for a gain of $2,175 or 24%, or about 6% / year adjusted for the timing of cash flows.  You can see the detailed portfolio here or use the link on the right.

Yahoo and Westpac have been big gainers, and there aren’t any big losers in the portfolio right now.  In the past we sold Alcoa (AA) and since then it went up significantly; Alcoa had slashed its dividend and performed poorly over the years, but since has gotten its act together.

Portfolio Five Updated August, 2014

Portfolio Five is 5 years old, with the beneficiary contributing $2500 and the trustee $5000 for a total of $7500.  The current value of the portfolio is $9352 for a gain of $1852 or 25%, at an annual rate of 7.4% / year.  You can see the detailed portfolio in the links on the right or go here.

Strong performers include the Australian Bank Westpac and Sasol the African energy company.  There are 9 stocks in the portfolio and we plan to add 2 more this year to get past 10 which helps us with diversification so that if one stock falls a lot the whole portfolio won’t be significantly impacted.

 

Portfolio Four Updated August, 2014

Portfolio four is five years old, with the beneficiary contributing $2500 and the trustee $5000, for a total of $7500.  The current value is $10,330, for a gain of $2830 or 37%, which is about 10.9% / year adjusted for the timing of cash flows.  You can see the detail in the link to the right or here.

Portfolio four overall is doing well.  There are 10 stocks in the portfolio and we plan to add two more this year.  Big gainers are Westpac, the Australian bank, aided by currency moves (see post below) and Garmin.

Currency Returns Since the Crash

It is important to realize the impacts of currencies on the stocks that you select, and your portfolio in total. If you are a US citizen (as are most readers of this blog), then your portfolio of stocks, bonds and cash is essentially “denominated” in US dollars).

The fact that the Australian dollar is up 50% from the 2009 market nadir (against its’ own performance) is compounded by the fact that the US dollar dropped during the last 5 years, for a “net” impact of over 70%. While this is a simplified example, if you just held Australian dollars (plus their implied governmental interest rates), and then transferred them (plus interest) into US dollars at the end of that period, you’d be up 70% on your money (US dollars).

This is important because we have Australian, European, Japanese and ETF’s from other nations in our portfolio.  The fact that the dollar has overall been declining during this period means that stocks held in other currencies have seen their returns boosted in comparison to US dollar investments (like stocks on the NYSE or NASDAQ or US Treasuries).

While there are many reasons why the US dollar has been a poor performer, past performance is not a good indicator of the future, and currency fluctuations are very difficult to predict.  Many people (myself included) have been mystified by the continued strength of the Euro, but the historical returns are undeniable.

When you are selecting stocks, particularly ADR’s which represent stocks traded on foreign exchanges, currency returns may be just as important as stock returns.  When you view the performance of the stock in US Dollars, both the currency returns and the underlying stock performance are “one” number, since the price of the currency is part of the ADR stock price.  To see the impact of the currency, you need to look at underlying performance in the “native” stock market and view this against the price of the ADR in the US market.

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In this case we’ve graphed WBC (the Westpac Banking Corp stock on the Australian Exchange) against the equivalent US ADR (WBK) that trades on the New York Stock Exchange.  You can see how the two stocks mirror each other, with an additional “kicker” on the US ADR because of the decline of the US dollar against the Australian dollar.  If the Australian dollar underperformed vs. the US dollar, these trends would be reversed.  Note that there are many other additional factors to consider including dividends received (WBK is a heavy dividend payer).  With free graphing and analysis tools available at Yahoo and Google and many other sites, it is much easier to do these sorts of analyses and to spot the impact of currencies on your investments.