This post is about my “Fun Fund.” I am going to discuss the performance of this actively managed investment account in the second half of 2022.
As a reminder, most of the prior posts about this account (which is really just a small Roth IRA that I am tracking more closely than my other investments) are located on this page.
Q3 and Q4 2022
I recently realized that I failed to post a journal entry for Q3 2022. In Q3, this account was down (11.46%). In Q4, I followed that up with a positive 10.67% return.
The Q4 performance was a little better than the SPY [+7.53%], but was a little worse than RPV and QVAL, which were up 12.43% and 11.14%, respectively. All those figures are from Koyfin and are 09/01/22 through 06/30/22 total returns.
2022 Annual Figures
For the full year 2022, I was down (24.14%). I have the SPY down (18.67%), VTI at (20.03%). RPV stunted on us, with a loss of a mere (2.56%). Probably had a lot of energy exposure. QVAL was only down (11.34%).
“ATTRIBUTION”
My largest position now is $CAG at ~19% (since everything else is getting clubbed). $CAG was actually up 18.22%. My banks are like 30% of the portfolio (BAC, WFC, BK, and USB). They all got clubbed. Down between 25% and 15%. That’s fine, I get it. We’re looking down the barrel of a recession and the price of money is going haywire.
Each of these four should have among the stickier, least price sensitive, liabilities in banking. Rising rates should make those durable competitive advantages more valuable from an earnings power perspective. They are big enough to benefit from the additional regulatory capture created by post GFC compliance requirements and benefit from the scale advantages applied to technology and distribution. At least that’s the idea.
SMG and EBAY are each like 6% now. They got crushed, based on what I would classify largely as the COVID reversion realization. So their businesses have tanked year over year as the COVID boom for those businesses dissipates. Also, it seems marijuana had a speculative bubble pop and SMG got caught in that.
I still hold a good slug of $CMCSA (~8%). I would also characterize that as being weak partially because of COVID giveback. The market is seemingly trying to determine if the new, slower growth rate is due to a reversion to pre-covid or due to competition from fiber and wireless broadband. It does seem like competition will be elevated for some time, but I’ve seen a fiber bubble before at least once. I still think Comcast and Charter have the stronger hands in a secular growth market. Importantly, they also have the alignment of ownership/skin in the game (as opposed to the TELCOs). So, I am betting they will win again (and not paying much for the bet).
I am still DCAing into SMG, CMCSA, and EBAY, in other accounts a little bit on weakness. Although, I must admit that I have been buying more $GOOGL and $AMZN lately. Speaking of Goog, it is up to a 4% position in this account now. Basically we got search, and one half of a global consumer software duopoly. Cloud will probably be a nice oligopoly and they will do fine as well. I think they just build better stuff than anyone else. Throw in maybe the best venture capital firm in the universe (probably helps to have access to their data and funnel) and better ownership/management alignment than Apple (and a more sustainable and diversified bidness model imop) and I’m pretty ok to continue nibbling at these prices.
I also HODL ~3% each in $DFH, $LAMR, and $PARA. I dumped my $COTY back in November at ~$7.60 per share. I ended the year with ~8% in cash.
FIN
In conclusion, I took a L versus the SPY last year. But at least I beat the QQQ (33.67%). Thanks for reading.
Interesting portfolio. Given the fact you run a concentrated portfolio, you might consider wide moat businesses such as SPGI, MCO, V and MA. Just to name a few.
I’ve DIS, NKE, BRKB on my watch list.
Hi Nitin,
Thanks for the comment! Am I to infer that you don’t think WFC and COTY are not high quality? Outrageous! haha.
No, you do offer a good idea. I definitely appreciate the quality of SPGI and MCO but I have been trying to be price disciplined over the last ~3 years. I have decided to try and reduce the concentration in the account over time. I have been buying smaller starting positions and letting dividends pool for reallocation (rather than reinvest). I had a realization last year that the analysis about the number of positions required to diversify a portfolio (e.g., ~ 90% of the benefits from 15 positions…that stuff) is based on an underlying assumption of a normal distribution in the portfolio outcomes. I do think I’m going to be very liberal with concentration due to growth, as I become more influenced over time by the idea that systematically allowing yourself to receive the benefit of the right tail is important to good investment outcomes.
I do own a little DIS and a lot (relative to my active portfolio) of BRK in other accounts.
There was no intention to belittle your portfolio choices. When I mentioned these names, I didn’t imply the names in your portfolio were inferior, or that my names were superior. I simply shared a couple of names, where I have done a bit of research myself.
Hope this helps.
All good. I was just joking around. Thank you!