Saturday, July 19, 2014

Semi-Annual Portfolio Review

World Cup is over. I liked it, although 2010 one was better. I think. Anyway, my congratulation to Germany's team. Four World Cup wins, equal to Italy and just one short of Brazil. What's more important, it's the first time European team won World Cup in America. European football rules!
Well, back to investments. Looks like I (at around 0%) missed this year's rally. Of course, fixed income helped (I account for most of it separately), but it hurts anyway. Below is my current portfolio and my thoughts
Portfolio goal. Growth. This is high beta, unapologetic growth portfolio with some safeguards and some boring investments. The goal remains unchanged.
Basic Principles. Most of the stocks in this portfolio were chosen for long term investment, which, for me, is about 18 months. Every stock is under review all the time, with a major review of the portfolio twice a year. I can trade around any position if I feel like it. The portfolio is not diversified by sectors. Diversification reduces risk, but it also reduces potential gain. No change in basic principles either.
Strategy. I am starting to think that political environment is getting better for stocks. Of course, if GOP takes Senate in November, all bets are off. Other than that, things are getting better. Of course, there is a war between Russia and Ukraine (don't believe that crap about rebels, they are from Russia, mostly). There are problems in Iraq. Europe is still lethargic. But US is booming.
Paradigm Changers. These are stocks of companies that are changing business in sectors or even in the whole world.
Ultimate disruptor. Google is changing the advertising world. The company is also aggressively moving to mobile internet advertising.
Risk: All great empires were destroyed by internal problems. There is also a risk of search ad market saturation.
Since last review stock was split into voting (NASDAQ:GOOGL) and non-voting (NASDAQ:GOOG) shares. I keep both.
Plan: Hold, trade around.
Pure brain company. Company designs ARM CPUs for a wide range of mobile devices and licenses them to different companies. Most smartphones and all tablet computers I know run on ARM CPUs
No changes since last review
Risk: Tech world is changing quickly, somebody can invent a revolutionary new design and beat ARMH.
Plan: hold, trade around.
Facebook (NASDAQ:FB)
Not the only social network company worth investing anymore. But the most profitable so far.
No changes since last review.
Risk: Wall Street hates the company.
Plan: hold, trade around.
Yes, retailer can be a paradigm changer. This is a great company and I like shopping there.
Reinvested dividends since last review.
Risk: Any retailer is a high risk company. Anything can go wrong.
Plan: hold.
Twitter (NYSE:TWTR)
New position.
I wanted it from the beginning. Didn't get a fair (from my point of view) price until April-May. Many people think that company is only good as a possible takeover target. Wrong! They are just at the beginning of monetizing their popularity.
Sold since last review: Restoration Hardware (NYSE:RH).
Banks / Financials
Banco Santander (NYSE:SAN)
Probably the best Spanish, and maybe European bank out there. High yield, big investments around the world. Bought it because I believe in resolution of Euro troubles. This is also can be placed in International part of the review.
No changes since last review.
Risk: Currency fluctuations, more problems in Eurozone.
Plan: Hold.
As far as I know, the biggest bank in the world. European, more to the point, British. And UK loves her banks.
Reinvested dividends since last review.
Risk:currency fluctuation, another financial crisis.
Plan: hold.
Steady growers / high yield. Companies with steady growth, high dividend or both. I am increasing weight of this group, such companies are best investments in depression times.
Airbus Group (OTCPK:EADSY)
One of two big aircraft manufacturers. As Cramer would say, we love duopolies. Company has at least 8 years of backlog.
Added to position since last review.
Risk: currency fluctuation.
Plan: hold, add on weakness.
Polaris Industries Inc (NYSE:PII)
One of the best recreation equipment manufacturers out there. Local (for me) company as well.
No changes since last review.
Risks: another recession, people don't like buying discretionary items in recessions.
Plan: Hold, reinvest dividends.
3M Company (NYSE:MMM)
Most innovative company in Dow Jones index. Another company headquartered in Minnesota.
No changes since last review.
Risk: another recession, management mistakes.
Plan: Hold, reinvest dividends.
Diana Containerships (NASDAQ:DCIX)
Looks like a big mistake. Supply of ships exceeds demand.
Risk: multiple risks related to supply/demand in container ship business.
Plan: Sell.
I wanted to buy cosmetics company for a while. Most of cosmetics are produced by diversified companies, which is not exactly what I wanted. I don't care about toothpaste, razors and cotton swabs. l'Oreal is a pure cosmetics company, located in France, fits the bill.
Played around position since last review.
Risk: management, competition, economic downturns.
Plan: hold.
Raytheon (NYSE:RTN)
Bought this company because of instability in the world. Company makes missiles, including popular air-to-air AMRAAM and SIdewinder, radars, software, i.e. most sophisticated military equipment.
New position.
Fixed Income
I have a group of closed-end funds, which are bought when at discount to net asset value or at low premium and sold at high premium. There are two groups of funds: corporate bond funds and muni funds. There are too many of them and they are rotating too fast to present them in the portfolio review. Watch my trades on stocktalk of Seeking Alpha.
Disclosure: The author is long ARMH, DCIX, DSW, EADSY, FB, GOOG, GOOGL, HSBC, LRLCY, MMM, PII, RTN, SAN, TWTR.
Additional disclosure: I have no position in RH. Positions can change any time.

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