Thursday, July 2, 2015

Portfolio update: Allocations and Top 5 positions

It has bee quite a ride in the markets past 6 months. First 4 months most of our stocks were performing really nicely. In the last two months aggregate gains have been almost wiped out.


Our portfolio is currently allocated as follows:

Stocks 98,0%
Gold 1,9%
Cash 0,1%

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


Geographical Allocation (stocks):

Europe 54,5%
North America 33,6%
Emerging markets 11,9%

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


Sector Allocation (stocks):

Information Technology 44,6%
Other 21,8%
Health Care 8,8%
Oil & Gas Production 8,4%
Communication Service Providers 6,6%
Low Emission Power Generation 5,8%
Mining & Exploration 4,0%


Top 5 positions:

Company/ETF (place of incorporation -- sector) allocation%

Siili Solutions (Finland -- IT) 9,2%
Western Digital (USA -- IT) 6,8%
UPM (Finland -- Other) 6,4%
Micron (USA -- IT) 6,1%
Nokia (Finland -- IT) 5,9%

21,1% of all stock positions are done via ETFs.
None of those positions made it to top 5 though.

Wednesday, June 24, 2015

Added Micron to portfolio

I recently added Micron to our portfolio. General thesis behind that stock is the same as with Western Digital: amount of data in the world is growing exponentially and will keep on doing that for many years to come.

All that data will be stored on the fly to volatile memory and then for permanent storage to hard disk drive or non-volatile memory (solid state drive or non-volatile memory chips inside device). Micron makes both memory chips (of volatile and non-volatile kind) as well as solid state drives (which essentially come down to bunch of non-volatile memory chips).

The amount of memory chip manufacturers have come down over the years similarly to hard disk drive providers. This should make the overall playing field more healthy as there are less players going for crazy price points at expense of profitability.

It can be also foreseen that every major step in technical advance will increase the "moat" of dominant players i.e. create barrier of entry and makes sure only the very big ones can stay on the leading edge. As with all technology, most profits are made on that edge.

There are many things that have pointed to Micron as a potentially good position. Micron has popped up in my screens as value play. Intel and Micron are collaborating on 3D NAND Flash memory technology, which may get them market share boost in this space.

What also has caught my eye is that David Einhorn has a very big position in Micron (he is one of the value oriented money managers I follow).

Finally, Micron serves as hedge to our position in Western Digital. Transition to solid state drives has not been as fast as many predicted years ago, but it's there as a trend and threat to hard disk drive manufacturers.

--
We have positions in Micron, Western Digital and Intel.

Tuesday, June 2, 2015

Which stocks famous money managers hold?

Dataroma tracks famous value oriented money managers that they call "superinvestors". Among them are legendary investors like Warren Buffett.

I regularly take a look what they hold, what they have bought and what let go.

An interesting question with regards to these money managers is that given they park billions, how far they deviate from index investing?

Top 20 by ownership count was as follows:

I included two more stocks into the list since Google and Berkshire is there twice with different classes of shares.

Obviously they have to select big corporations because of the amount of money they need to put into a single position.

However, the companies are not in the order that you would expect in terms of market cap. The order will change a bit if you look at amount of aggregate money in these positions, but the conclusion does not. They are still not in the order of market cap.

There are three companies with market cap below 100 billion USD: Liberty Global Inc., AIG and American Express. Very many big names with much larger market cap are not in the list: Wal-Mart, Facebook, Pfizer, P&G, Verizon, Amazon, Chevron etc.

To me it seems that atleast these money managers as aggregate deviate what could be called "index investing".

Overall, the "superinvestors" seem to prefer technology and financial sectors. Also, they clearly prefer corporations based in USA rather than elsewhere in the world - even if those would be listed in the NYSE or NASDAQ.


Friday, May 1, 2015

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. I use different criteria and weights than the default "Liisa's list" that is featured in the pages of Pörssisäätiö. Often I check both lists to get two different angles.

Our positions are marked with prefix ">".

Rank Company (Score)
----------------------------------------
>#1 Fortum (2,8)
#2 Orava Asuntorahasto (2,6)
#3 United Bankers (2,6)
#4 Restamax (2,4)
#5 Technopolis (2,4)
#6 Aspo (2,4)
#7 Tulikivi (2,3)
#8 QPR Software (2,3)
#9 Revenio Group (2,3)
#10 CapMan (2,2)
#11 Ponsse (2,2)
#12 Raute (2,2)
#13 Okmetic (2,2)
#14 Sponda (2,1)
#15 Keskisuomalainen (2,0)
>#16 Orion (1,9)
#17 eQ (1,9)
#18 Nokian Renkaat (1,9)
#19 Ilkka-Yhtymä (1,9)
#20 Siili Solutions (1,9)

...

>#21 Citycon (1,9)
>#23 TeliaSonera (1,9)
>#39 UPM (1,5)
>#67 Nokia (1,0)
>#74 Metso (0,9)


Average Score of all companies in the research database: 1,3
Average Score of our positions:1,7

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

Worst Score 0,1 (#97 Biotie Therapies)


Parameters used in screen (weight):
-------------------------------------------
 P/B estimate 2014 (13%)
 P/E estimate 2014, 2015 (8%, 10%)
 Dividend yield estimate 2014, 2015 (8%, 8%)
 ROA estimate 2014 (10%)
 ROI estimated 3 year average 2012-2014 (8%)
 ROE estimated 3 year average 2013-2015 (8%)
 Turnover estimated increase 2013-2015 (8%)
 Net Profit estimated increase in 2013-2015 (8%)
 Gross Margin estimate 2014 (8%)
 Profit Margin estimate 2014 (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.

Saturday, April 25, 2015

Orion. People like, analyst don't.

Over last year I have read many articles that have summed up analyst opinion (or recommendations) on Finnish stocks. In almost all cases, Orion has been one of the stocks that has gathered most "sell" recommendations.

Still, investors seem to like it because it hasn't behaved as analysts have recommended. Instead of going down, it has gone up.

On friday, it went up 12,50% after positive guidance for 2015.
Analysts were surprised.

It has to be said, that Orion is no longer the cheap looking stock I bought initially in 2011.
It has risen considerably over the years (2011-2014). Simultaneously, it has lost patent protection for its most important profit generators of past.

My original thesis was right. The stock price in 2011 fully discounted (and then some) losing the most imporant patent protections it had. Still today Orion keeps surprising the analysts with regards to how well it has come out of the tough situation.

I have sold some of it this year, but continue to hold it as not only it is still well yielding stock defensive stock. It also may have more positive surprises in store..