Portfolio allocation

Our sector allocation is currently as shown in the picture: 

The backbone of the portfolio is technology. The related sectors total to 46% of portfolio. This is the same aggregate allocation as in the previous year across the tech sectors. There were changes in individual sectors and companies, but they seem to even out on this level.

Industrial goods & services is our second largest bet with financials trailing very close. Berkshire Hathaway is counted 50/50 for both.

Our top 5 stock positions currently are:

1. Berkshire Hathaway (USA)
2. Nokia (Finland)
3. Metso Outotec (Finland)
4. Verkkokauppa.com (Finland)
5. Siili Solutions (Finland)

 

Compared to year go Berkshire Hathaway and Nokia have climbed one position upwards while Metso Outotec fell from 1^st place to 3^rd largely because the two previously mentioned performed much better in 2021. Since I trimmed our semiconductor positions smaller, Micron nor any other players are visible among top 5. Verkkokauppa.com continues to be the 4^th largest position and Siili Solutions raised to be the 5^th.

Especially the top 3 positions are significant. They make up 34% of the entire portfolio while top 10 is 67% of the portfolio, which contains all told 23 stocks from Finland and USA.

Back to black - in a big way

On March 21st, 2020 near the bottom of the COVID19-induced market crash, I wrote a blog post stating essentially that

• I don't believe in timing the market. 
• This included pledge of not jumping out of market when it starts to look bad (exception being a clear bubble)
• As result of sticking with this I lost all gains from previous 3 years
• As my next steps, I told that I was going to continue to ignore daily swings of the market and focus on the quality and financial condition of the corporations we continue to be invested in.

Well, you know what happened. A very rapid correction upwards and then some.

Both our pre-crash and post-crash portfolios were riskier than the portfolio than the Dow Jones Global Index (W1DOW) shown in the figure above (yellow line). The post-crash portfolio being more risky than the pre-crash one because I deliberately shifted balance to the most risky assets in portfolio.

And when I say risky, I mean high beta. Not some low quality hacks, but high quality corporations that just happen to amplify whatever the general market direction is.

Because of that, I emphasized that I make these investments with 10-30 years time horizon. Because it could have gone the other way too. In which case I would have been ready to sit on that portfolio for the said time.

After significantly beating the index, I have rotated back to companies that are low beta and hence the portfolio is likely going to behave close to market.

Let's be clear: Getting above average return was not due to some skill I possess in picking overperforming stocks. It is largely because I took more risk (than the index contained) and was compensated for taking that risk because the market moved the right way and the high beta stocks amplified the market move.

Where the stock picking comes in is to have a portfolio that you do not have to follow every day. Not even every week to get a good night sleep.

Happy New Year 2022!

Happy New Year 2022!

Last year was the busiest I have ever had. Thus, did not have time to post. But also did very little in terms of change in portfolio. There was no need because we had already rotated in 2020-2021 heavily towards value from the hot stocks.

I maintain my view that

• some of the stocks are grossly overpriced
• on the other hand, one can find still reasonably priced stocks

Despite the flight to value, we managed to have the best year ever in terms of absolute gains. In terms of year-on-year growth the year was second best (only second to 2019) at 27,2%.

Relative to our benchmark investment the portfolio gained 1,1% extra.

 Portfolio performance 2009-2021 (chart).

Portfolio performance 2009-2021 (table).

In terms of cumulative yearly gains, we are now 76,3% above the benchmark investment. 

All five best performing stocks are listed in Finland:

• Nokia +95,8%
• Nordea +60,3%
• Fortum +37,0%
• Capman +31,1%
• F-Secure +29,5%

From our U.S portfolio, Berkshire Hathaway, which is also by far our largest single position in any market, gained 29% when measured in euros.

Last year, I started with wishing that the year 2021 would bring the end of the Coronavirus pandemic globally. Did not happen.

Thus, extending that wish for 2022.