Friday, January 6, 2017

Allocations for 2017

At the start of the year 2017 our portfolio was allocated as follows:

Stocks 98,1%
Gold 1,6%
Cash 0,3%

No bonds. We simply substitute bonds with quality dividend payers in our portfolio.


Geographical Allocation (stocks):

Europe 53,3%
North America 35,6%
Emerging markets 11,0%

Actually, place of incorporation is pretty meaningless for most corporations we have invested in.
Most operate and sell globally.


Sector Allocation (stocks) - in order of weight in portfolio:

Information Technology (significantly overweight compared to even split across all chosen sectors)


Other
Oil & Gas Production
Low Emission Power Generation
Forest Industry
Health Care
Metal Industry
Mining & Exploration (significantly underweight compared to even split across all chosen sectors)


Top 5 positions - in order of weight in portfolio:

Siili Solutions (Finland)
Berkshire Hathaway (USA)
Fortum (Finland)
UPM (Finland)
Nokia (Finland)


21,0% of all stock positions are done via ETFs.
None of those positions made it to top 5 though.

Sunday, January 1, 2017

Portfolio performance 2009-2016


Let's review how our portfolio fared in the year 2016 against passive index investing.

Our "benchmark investment" is an imaginary passive ETF that closely tracks the performance of MSCI all country world (ACWI) index in euros.

First half of 2016 was absolute horror show (vs. index and in absolute terms even more so) and we were behind index most of the year - until December came along and several of our positions gained manyfold compared to index so we ended up beating our benchmark in the past year.

The result for the year 2016 was our portfolio 14,9% vs. benchmark investment 10%.

Note: "Difference" column uses exact values as input rather than figures rounded to 1 decimal that are displayed.

The "beat" is mostly due to our positions in U.S that fared very well.

Euro continued it's decline agains USD from 1,086 to 1,054, which created small headwind for us as our portfolio is significantly more titled to Europe than the ACWI index.

Cumulative gains of our portfolio (blue line) vs. benchmark investment (red line). 31.12.2008 = 100.

It's continues to be amazing how closely we overall track the benchmark given that our portfolio has very different region & sector allocations compared to ACWI index.

While I would naturally like to beat the benchmark we have set for ourselves, the performance so far isn't that bad given that over 70% of the actively managed investments funds fail keep up long term (10 years) with their benchmark index (according to Morningstar - as I wrote last year for 2015 review).

To be fair, I don't track our performance purely against the index (below), so we are trailing cumulatively the pure index to some degree. If you want to know more about our "bechmark investment" against we track and the way above comparisons are calculated, please read the latter part of portfolio performance update from 2014.
 


 Our benchmark index 2009-2016 (based on data from MSCI All Country World Index; Net; Euros)


Friday, December 9, 2016

Avoid costs

Actively managed stock funds charge yearly fees of 1-3%. Some take management fees even north of 4%. Yet, most of them fail to beat their benchmark index.

It's easy to think yearly cost of 1-2% does not matter much.
Big mistake.

The difference between paying 2% of yearly management fees vs. none is 189.000 in lost capital gains over 30 years for 100.000 initial investment with annual 5% gain. See below.



The difference gets even more staggering if just one parameter is changed. With annual gain of 10% you would miss gains of 739.000.


In long run, it's not the profits alone that matter - also cost of holding matters a great deal!


Tuesday, November 29, 2016

Exit from Telia

Decided to exit from Telia, which was our last position in the Communication Service Provider -segment. I do not see that segment nor companies in it as attractive from investment perspective as our other focus segments:

  • Information Technology
  • Health Care
  • Renewable energy
  • Low-Emission Power Generation
  • Forest Industry
  • Metal Industry
  • Oil & Gas Production
  • Mining & Exploration

Information technology is heavily overweight in our portfolio currently compared to rest of the segments.


Sunday, October 30, 2016

Helsinki Top 20

I use a service provided by Valuatum.com via Pörssisäätiö to screen stocks listed in NASDAQ OMX Helsinki. I use the screen periodically to check where our holdings stand relative to other companies listed in Helsinki. Naturally I am also continuously screening for new investment ideas.

The results of my personalized screen are disclosed below.

The Top 20 list continues to contain many small companies. Many of them are in investment/banking business (e.g. all in Top 6 are such).

Our positions are marked with prefix ">".

Rank Company (Score)
----------------------------------------
#1 Privanet (3,5)
#2 Investors House (3,0)
#3 eQ (3,0)
#4 Orava Asuntorahasto (3,0)
#5 CapMan (2,8)
#6 Suomen Hoivatilat (2,8)
#7 Incap (2,7)
#8 Technopolis (2,5)
>#9 Citycon (2,5)
#10 Detection Technology (2,3)
#11 Revenio Group (2,3)
#12 Raute (2,2)
#13 United Bankers (2,0)
#14 Sponda (2,0)
#15 Orion (2,0)
#16 Sampo (2,0)
#17 Taaleri (2,0)
#18 Nokian Renkaat (2,0)
#19 Okmetic (1,9)
#20 Ponsse (1,9)

...

>#24 Siili Solutions (1,8)
>#39 Telia (1,5)
>#46 UPM (1,4)
>#58 Fortum (1,3)
>#82 Nokia (0,9)
>#89 Metso (0,8)

Out of my positions Fortum, UPM, Nokia and Metso have gone down in both score and rank significantly since last time I checked (April 30th, 2016). Still, overall the positions seem to be above average rank and score wise.

Except for Nokia, Citycon and Telia my positions are higher than they were in April 30th. UPM is significantly up from where it were. This partially explains the changes. However, I fear also the forward projections have been melting down for some of these companies.

Average Score of all companies in the research database: 1,3
Average Score of our positions: 1,5

Median Score 1,2
Our positions that have higher score than median: 5 out of 7

Worst Score 0,1 (#119 Nextim)


Parameters used in screen (weight):
-------------------------------------------
 P/B estimate current year (13%)
 P/E estimate current year; next year (8%; 10%)
 Dividend yield estimate current year; next year (8%, 8%)
 ROA estimate current year (10%)
 ROI estimated 3 year average ending current year (8%)
 ROE estimated 3 year average ending next year (8%)
 Turnover estimated increase in 3 years ending next year (8%)
 Net Profit estimated increase in 3 years ending next year (8%)
 Gross Margin estimate current year (8%)
 Profit Margin estimate current year (8%)


The used parameters emphasize attractive valuation (31%), profitability in broad sense (26% weight), growth (16%) and dividend yield (16%).


The screen relies on estimates about future. Those combined with volatility of stock prices means that you should not try to chase screens like these (I don't). Ultimately any investment decision should be based on much more than just looking at the current numbers and estimates of future numbers.