Vladyslav Koptiev
Vladyslav Koptiev @AtlasCapital
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Monthly review - January 2020 To my copiers, Our gain in net worth was 7,18% versus zero total return for $S&P 500 index. Such results I consider as very satisfactory, even though it was caused only by the realization of one position in $DLPH (Delphi Technologies PLC), due to proposed acquisition. I don’t believe that price proposed for Delphi share is adequate. In fact, you might notice a number of law firms announced investigation of breach of fiduciary duties by the directors of the company. Fair value of shares is far more, but the chance of getting it after announced transaction I consider as low. Thus, as a result of this sell I recorded 7th consecutive month of outperforming the index. Bear in mind that any particular month can be below target. My performance will fluctuate very widely from month to month, that’s why I always reiterate that you should evaluate it based on at least 3-5 years. Refer to updated performance chart, it will help you to estimate where you could be, if you had started copying me from the beginning of portfolio history. I know some of you are concerned about negative movements in your holdings, like I was just recently. Let me explain why you should not be worried about monthly fluctuations. Since we are investing for long-term, think about your investment as ownership of a house. If you own a nice house and you enjoy living inside it, you don’t pay attention to a stranger who is knocking entrance door on a daily basis and offer a price to buy back your house, unless this is unreasonably high price. If you were happy yesterday with your house and you did not sell it, you will never consider selling it today at much lower price, unless your happiness level has dropped. You will probably think that a stranger must be insane and would not even open the door, if you hear such a low price for your nice house. The same applies to owning the partial interest in wonderful companies bought via stock market. Here stock market is acting like a stranger, and he gives you a quotation for your stock on a daily basis. When Mr. Market is offering me insane price, why would I ever wish to make a deal with this stranger? That’s the reason I never understand why people are setting stop losses. Definitely I will not recommend setting stop loss when you copy me. There is no doubt that 8 companies currently hold by us are wonderful companies. They all posses competitive advantage and demonstrate consistent earning power by delivering high return on capital employed. Thus, there is no need to worry. Instead of selling at a low price, I will do completely opposite – buy more shares from careless people, who are ready to sell at ridiculously cheap price. The thing is that real value of stocks, just like value of houses, does not fluctuate often. It is not appropriate to think that real value of stocks you own is always equal to current market price. Indeed most of the time they match, but not always. Sometimes market price drops far below real value. And on this mismatch there is a possibility to earn a lot of money, just by being patient and allow market price to adjust to real value subsequently. It might be difficult for new joiners to develop a proper reaction to market fluctuations. To mitigate further your concerns I advise you to use dollar averaging – by investing small amount every month. For example, if you have 12k available for investment today, don’t invest full amount now, but spread it over the next year by investing 1,000 every month. Like this you might lose some positive movements if markets go up, but can limit losses if market goes down. Current Holdings: $IMB.L (Imperial Brands PLC) – 19%; $PAGP (Plains GP Holdings LP) – 15%; $VIAC (VIACOMCBS) – 13%; $BIDU (Baidu, Inc.) – 6%; $BT.L (BT Group) – 6%; $LB (L Brands Inc) – 6%; $BIG (Big Lots Inc) – 5%; $BUD (Anheuser-Busch Inbev Sa) – 4%; cash – 26%. Breakdown by sector: Consumer Defensive – 28% Communication Services – 19% Energy – 15% Consumer Cyclical – 6% Technology – 6% Cash – 26% Portfolio reconstitution Recent removals and reason: $TEVA (Teva Pharmaceutical Industries ADR) (no competitive advantage, valuation) $ABL (valuation) $DLPH (acquisition by BorgWarner Inc). New positions till today: $BT (BT Group PLC) $BUD Also increased positions in $PAGP as this remains very cheap and have strong competitive advantage. Next 10 potential holdings: $TEN (Tenneco Inc), $WCC (WESCO International Inc) (WESCO International Inc), $GSH (Guangshen Railway Co), $03320 (China Resources Pharmaceutical Group Ltd), $TEF (Telefonica SA (US)) (Telefonica SA), $WPP.L (WPP) (WPP PLC), $CLB (Core Laboratories NV), $HBI (Hanesbrands Inc) (Hanesbrands Inc), $GPS (Gap, Inc.) (Gap Inc). Link to previous reports: Annual 2019 (very useful in particular as this explains why risk score can be misguided): etoro.tw/2uneNhj November 2019: etoro.tw/2QnfDD0 Link to current market valuation review: etoro.tw/37GKhwT Cordially, Vlad. ... Show More