Thursday, January 4, 2018

Allocations for 2018

At the start of the year 2018 our portfolio was allocated on high level in pretty much same way is it was last year:

Stocks 98,7%
Gold 1,3%
Cash 0,1%

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


Geographical Allocation (stocks):

Europe 59,4%
North America 30,1%
Emerging markets 10,5%

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:

Technology (Other)
Financial
Technology (Semiconductor)
Healthcare
Clean Energy
Basic Materials & related services
Industrial Goods


Top 5 positions - in order of weight in portfolio:

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


19,4% of all stock positions are done via ETFs out of which 7,7% are allocated to broad emerging market ETFs. Rest are sector-specific ETFs.

Monday, January 1, 2018

Portfolio performance 2009-2017


Happy New Year 2018!

It's once again time to check how our portfolio fared in the previous year against passive index investing.

The year 2017 was a mixed bag. Our global ETF and U.S stock positions delivered very good results. Micron with +82,36% gain was by far our best performing position and generally technology stocks were having a very good run. Our Finnish large caps were not having a good year, but luckily the small caps gained nicely (on average >30%).

Overall our portfolio gained 12,1% vs. benchmark investment 7,3%. The "benchmark investment" is an imaginary passive ETF that closely tracks the performance of MSCI all country world (ACWI) index in euros (more info here).

In terms of cumulative yearly gains, we are now 11,2% above the benchmark investment:

Portfolio performance 2009-2017.
 Note: "Difference" column uses exact values as input rather than figures rounded to 1 decimal that are displayed.

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


In the year 2017 we had very good tailwind from euro which raised against U.S dollar from 1,054 to 1,201. Our portfolio contains significantly more European stocks than the ACWI index and we measure gains in euros, and therefore, EUR/USD exchange rate matters a lot.

Going into 2018 we continue to be almost 100% invested into stocks. I will cover our allocation in the next post.

Saturday, December 23, 2017

Own positions compared to those of famous money managers

In continuation to my previous post I wanted to see how our positions in stocks listed in U.S. compare to those of 64 money managers followed by Dataroma.com.

Ownership count among the 'superinvestors':

Berkshire Hathaway Inc. (BRK-B): 16
General Electric Company (GE): 11
Intel Corporation (INTC): 3
Micron Technology, Inc. (MU): 3
Nokia Corporation (NOK): 2
Western Digital Corporation (WDC): 3

It's somewhat surprising how small the ownsership count is in the tech stocks I have selected. Especially in U.S. based companies like Intel, which are leading companies in their industries and trading at very reasonable valuations.

I also wanted to see which money managers have selected same plays.
Robert Torray is holding currently 3 out our 6 stocks: BRK.B, GE, INTC.

There are quite many which have 2 out of 6 common (five money managers). From those I raise the names that have selected min. 2 out of our 4 tech stocks, because those are the most interesting to me.

Robert Olstein of Olstein Capital Management has position in both INTC and WDC.
Meridian Contrarian Fund is long in NOK and MU.
David Tepper of Appaloosa Management holds both MU and WDC.

I think I just found more money managers to follow besides the two I mentioned in my previous post ..


Thursday, December 21, 2017

The only stock both Warren Buffett and David Einhorn have in their top 10 holdings

I follow many money managers. Two of my favourites to watch are Warren Buffett of Berkshire Hathaway and David Einhorn of Greenligh Capital.

After comparing their top 10 holdings side by side, I noticed they have only one stock in common: Apple (AAPL).

Their history on Apple ownership is, however, very much different. Einhorn initiated position in Apple as early as in Q2 2010* where as Buffett's position in Apple was disclosed in Q1 2016*.

Einhorn has reduced his position in recent quarters. Apple used to be his top position still in Q4 2016*. Now it's 5th largest*. In Berkshire's portfolio Apple is currently* 3rd largest investment.

Despite following both closely, I don't share any of their top 10 holdings currently. I admit I have considered Apple multiple times and regret for not hopping on board then.


(*) Reference for positions and their history: Dataroma.com.

Sunday, December 3, 2017

Semiconductor sector: quite a ride

Semiconductor stocks have had quite a ride in year 2017. Like a lot of technology stocks out there, also some semiconductor companies start to look expensive. However, not all of the chip stocks have challenging valuations.


Intel core i7-970 pin side
Image: Rainer Kn√§pper, Free Art License

I collected a bunch of well-known large cap chip stocks to the following table and sorted them by forward price per earnings ratio from lowest to highest:

Table. Comparison of selected semiconductor stocks (data source: Finwiz.com)

It has to be said that this is by no means an apple-to-apple comparison as these companies - while all having to do with semiconductors - are very different from each other. There are manufacturers of memory, central processing units (CPU), graphical processing units (GPU), digital signal procesing units (DSP), field programmable gate arrays (FPGA) etc.

Nvidia seems to be the hottest stock out of the selected ones with forward P/E exceeding 40. Market seems to expect great future for this GPU maker. I guess it has to do with new applications for GPUs like artificial intelligence (AI).

Micron on the other hand has the lowest valuations almost across the board. Only Western Digital has lower price to free cash flow (P/FCF). Memory business has been in the past quite volatile (swinging between oversupply/undersupply) so I guess that may be the reason for the market to take cautios view on e.g. Micron.

Qualcomm seems to have largest pile of cash relative to market gap (P/C), but free cash flow does not look so good. Taiwan Semiconductor Manufacturing Company and NXP Semiconductors N.V have good looking free cash flow (P/FCF). With regards to price per book (P/B) there seems to be many in range of 2-3 while Nvidia is flying far higher than anyone else at 18,77.

Our positions in this sector happen to be the top three companies in the list (lowest forward P/E): Micron, Western Digital and Intel. These companies make the basic building blocks of digital age. While they aren't remotely as hyped as Nvidia is, I believe they too are going to do well as the amount of data that each person generates and consumes is going to grow exponentially.

My first two computers didn't have a hard disk drive. I recall third had something like 30MB. Now "low end" of normal drives hovers around 1TB. That's 25000 times the amount I had in early 90's and likely costs a fraction of what I paid for my first drive back then even if adjusted for inflation. With work memory (RAM) the story is similar.

It does not stop here. Big data applications ("data lakes") in corporate world are already dealing with next level multiples (PB = 1000xTB and EB = 1000xPB). Eventually also individual consumers deal with petabytes (PB) worth of data.

Think VR. I don't think it really takes off until VR gear resolution is on human eye level. What we now know as TV may eventually change to a 360 field-of-view VR gear kind device allowing you to look freely around. That means huge amounts of graphics data to be stored and processed.

AI also needs massive datasets at the time when it's "taught" ("machine learning", "deep learning"). Use of AI is also going to enable analysis of vast amounts of data (think massive realtime automated video surveillance of major cities).


I often think of gold rush and how we may now be in same kind of situation with many technologies (like AI and VR). I do not really think about the people who went out to try to find gold, but the ones who figured out what to sell to those people.