Investment Activity-Mid Year Review 2015

We’ve got 6 months of investing in the books now for 2015 and the time has come to review our progress. Let’s go to the board!

Portfolio Performance:

  • Portfolio 1  total return was  4.01 percent year to date. Total costs/fees were 0.08%
  • Portfolio 2 total return was 2.56% Total costs were 0.06%
  • RESP portfolio was essentially flat when no including the Government Education Grant. The portfolio barely cracked 0.1% in costs.
  • Collectively the positions in the portfolio that were actually sold generated a realized return of 12.6 percent.

Transactions:

We made 16 trades that consisted of 11 Buys and 5 Sells. A significant portion of these trades occurred in January and February. We’ve been quiet on execution during the spring months. Keeping the quantity of our trades went a long way to minimizing those nasty transaction costs.

Below are the 5 stocks we sold. 4 out of 5 stocks sold were for returns greater than 20 percent.

Vanguard Emerging Market ETF (VWO +24%)

Gilead Sciences (GILD +2.4%)

Freeport MacMorran (FCX +22.9%)

Coca Cola (KO +23.7%)

iShares Emerging Markets ETF (EEM +25.1%)

3 of 11 buys trades were for new positions (XEH, VCN, V), with the rest being additions to existing positions.

Asset Allocation:

Approximately 69.4 percent of the portfolios were sitting in cash. Again a ridiculously high ratio and much much too high for my liking.  Drilling down into the equity positions, approximately 45 percent of the equity position was short the S&P 500, which again has been a very hard trade to keep. Despite this, I continued to add to the short position on the S&P 500 every few months to average down the position.

Overall it was a decent performance from a return perspective. The high realized returns continue to give me comfort that my investment decisions continue to be productive ones.  Selling stocks for positive gains is always a good thing, and if I’m doing it more times at a profit than at a loss, the portfolio has to be growing in the right direction, especially if I’m keeping my costs in order.  Having said all that, it can go the other way really fast and so it is just as important to have your feet on the ground and to not get  too cocky. I really would like to put more money to work but I am just not comfortable with being aggressive in a market where variables and indicators are telling me it’s overpriced. Investment psychology appears to still be giddy. The same dynamic might still in play and as long as interest rates remain uber low, the incentive for money to gravitate to stocks will remain. In the past 6 months numerous indexes have repeatedly broken record highs.  There have been false starts by the Federal Reserve on when they will begin to normalize interest rates, despite evidence that the US economy is gaining traction and every time it appeared the conditions were right for an interest rate hike, Janet Yellen, got itchy fingers and failed to push the button.  I still think we are closer to a program of rate hikes in the US and at some point that is going to impact stock prices negatively, so I’m happy (my stomach…not so much) right now to wait it out. At the same time, I am always looking to pick up companies that I feel are being mispriced by the market at a discount. The pickings are slim, but I’ve managed to find a few that have borne fruit this year and they have presented themselves as contrarian plays when market psychology was negative on them even though financial performance was still very healthy.

One of the disciplines I am continuously trying to develop is to hold my winning positions for longer.  I’ve on numerous occasions been tested on this with my position in NeuLion  (NLN) which has now almost doubled. At the end of the day, it comes down to 1) how greedy I am and 2) what is my long term strategy for wealth creation (slow and steady or hitting home runs all the time). I have been tempted to sell and bank the stock for a very healthy profit, but I’ve kept it because it looks like the company has now established some traction of generating meaningful and stable cash flow from its service contracts with the various sports leagues. In addition, it is starting to get more visibility at the institutional level which should create a wave up in demand for the stock. Finally, you have to look at the fact that its portfolio and niche focus on developing viable online properties for sports leagues, the last bastion of pure monetization for cable and entertainment companies would be very attractive to a bigger player.  So as of this writing I’m planning to keep riding it.

So far so good, but we’re only ½ way through the year. A lot of clouds are on the horizon (slowing Canadian economy, Greek Drama, Pending interest rate normalization in the US) that can take things in a totally different direction. Right now I’m updating my shopping list and hoping some opporutnities present themselves over the next 6 months. See you in December!