Tuesday, February 17, 2015

Annual Portfolio Review

It's this time of the year again. Need to explain myself what am I doing. Lot's of worries around the world: Ukraine (it's a real war in Europe, make no mistake), Greece, ISIS. Ebola just subsided (don't know why that one scared investors). And yes, collapse of oil prices (only really rich people think it's bad). But let's not forget, worries are good for investors. They allow us to get good entry points. And bull markets climb a wall of worry. It's scary when everybody's happy (remember March 2000?)

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. Most money is invested in US. But I increased my European exposure lately. Europe is coming back. Domestically, with GOP controlling Congress, we might get into some ugly fights, with possible veto and government (or parts of government) shutdowns. I think every such fight is a buying opportunity.
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.
No changes since last review.
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. Additional plus in current environment: it's a European company, based in UK.
Added to position 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.
Sold some calls and puts 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.
No changes since last review.
Risk: Any retailer is a high risk company. Anything can go wrong.
Plan: hold.
Twitter (NYSE:TWTR)
Many people think that company is only good as a possible takeover target. Wrong! They are just at the beginning of monetizing their popularity.
No changes since last reivew.
Plan: hold.
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.
Added to position and reinvested dividends 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.
No changes 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.
Added to position 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.
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.
Reinvested dividends since last review.

Sold since last review: l'Oreal (OTCPK:LRLCY), Diana Containerships (NASDAQ:DCIX). I hate all shipping now. As for l'Oreal, I sold it just to take profit, can return at a lower level

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 Twitter, @afilonov
Disclosure: The author is long ARMH, DSW, EADSY, FB, GOOG, GOOGL, HSBC, MMM, PII, RTN, SAN, TWTR.
Additional disclosure: I have no position in DCIX or LRLCY. Positions can change any time.