Quiet Contrarian. Ep 12: Half Year Portfolio Update 2020

Portfolio Performance

Portfolio has done well again, managing to outperform my benchmarks by ~9% depending on which one you want to look at. Here’s a bit of background on the Benchmarks I’ve been using:

• VAS – Vanguard Australian Shares ETF – Tracks the S&P/ASX 300 Index – Best for comparison to the Australian market
• VOO – Vanguard S&P 500 – Tracks the United States S&P 500 Index, in USD – This is best for a direct comparison of USD stocks.
• VDHG – Vanguard Diversified High Growth Index ETF – This is a composite ETF tracking a number of indexes. – This is meant to be a globally diversified “all-weather” option. One of the favourite fire and forget/DCA options for the /fiaustralia reddit group.

I lost a bit of ground in November/December as the market rotated and a number of my holdings fell out of favour, while other holdings came around. Overall I’m happy with the continued outperformance.

Best and worst performers

• The top 3 profitable holdings for the half year were: Nick Scali, Fiducian Group, and Gale Pacific
• The best performers in % terms were: Pilbara Minerals, Gale Pacific, and Mineral Resources.

Interestingly there was alot more disparity in the best performers from a profit perspective (i.e. dependent on the size of the holding, and the % gains) and the performance of the share (i.e. just dependent on the % gains) relative to my last performance report. The two most profitable positions were still “High Quality”, whilst the third (GAP) was a “Turnaround” and was ironically on my worst performers list 6 months ago. PLS and MIN are both Lithium miners, that have started a turnaround, amidst renewed interest in Electric Vehicles.

• The worst 3 loss making holdings have been: Regis Resources, Appen, and Retech Tech Co.
• The worst performers in % terms were the same three: Retech Tech Co., Regis Resources, and Appen

The worst performers, are all over the shop. RRL is a gold miner that fell out of favour when their hedge book failed to allow them to capture the crazy increases in the gold price earlier in the year. RTE is a Chinese tech company focused on elearning, that the market doesn’t trust. Appen provides AI training data, and was on my best performers list 6 months ago.

Goals and positioning review

These were my goals and comments from the EOFY. Notes on my progress in italics

• Reduce my US holdings – In line with Long Term Debt Cycle, and the coronavirus economy hit, plus the all time TMC/GDP highs, I feel like the next few months will be a good time to reduce US holdings. – Have been moving on this. Transferred about 60% of my USD holdings back to Australia. Have left a few small positions in some of my favourite companies, have a plan to reduce US holdings to Zero if the US TMC/GDP crosses 200%
• Monitor the Australian market, and some of my holdings, look for opportunities to take profits if things continue to go well. – Took some profit. Feel like the AU market hasn’t gone anywhere near as crazy as the US. Happy with my current position. A few positions are quite overvalued. So I’m monitoring for opportunities to take profit.
• Gold and “defensives”? – If the economy is going to go through a period of underperformance it may be good to look at stocks that will do ok through that period. Is it acceptable to accept lower quality for less loss? Is sitting on commodities/cash a good idea? – This seems to have died out in favour of the speculative bubble in the US. Took the opportunity to add a bit, but currently sitting at around 10% gold. Would be happy to raise this to 15% on some of the best players. But otherwise happy with the position.
• Re-developing my valuation and allocation method to determine how much of a stock’s returns come from dividends vs how much comes from Capital Growth. These two factors will result in different buying and selling thresholds. – Definitely redefining my methods for this. Currently leaning more to qualitative descriptions and learning more about business models.