Richard Stroud
COPIERS AND FOLLOWERS UPDATE Hi everyone, Happy New Year to you all!! Now the markets are completely open today after yesterday’s bank holiday in the UK here is a quick update for you all, along with a recap of last year and what to expect this year. Of course I don’t need to tell you all that last year was a difficult one for the portfolio, gaining by a shade over 2%. The reasons for this are listed in more detail in my previous post, but here is a brief over view of last year’s lacklustre performance; • Some positions gained too much in 2020 and have now reduced to more normal levels • Our lack of exposure to tech meant we lagged the general stock markets • Value orientated stocks, of which we are overweight, failed to get going As well as this, my attempts to limit volatility by using the $VXX as a tool, as I have done with some success in the past, did not work out and as a result this will now be a tactic I will use very sparingly, if at all. Despite the disappointing year the portfolio did end in profit and in doing so has now finished in the green for 3 years in a row, which is something to be celebrated. And during this period the portfolio has advanced by 131%, comfortably beating the S&P 500 which gained 89% over the same period. Keeping with the S&P 500, it was one of last year’s biggest index gainers, advancing by over 27%. However despite my comparisons between the portfolio’s performance and the S&P, it is worth pointing out that there is quite a difference between the two and indeed comparing an index to any portfolio isn’t always the best way to measure performance. Looking at the S&P 500, the top 5 companies (Apple, Microsoft, Amazon, Google and Tesla) make up over 23% of the entire index of the 500 businesses listed. As well as this, 4 of these companies (discounting Amazon, which gained less than 5% last year) accounted for nearly 10% of the entire index’s rise last year, with Google leading the way with a gain of over 67%. Another thing to bear in mind is we have a fair amount invested outside the U.S. with a fair few positions in the U.K and Europe, as well a small portion invested in China. However please don’t think I am trying to find excuses, no one is more disappointed with last year’s performance than me. Looking ahead to this year, there are several reasons to be optimistic that the portfolio will perform much better than last year. Again, please see my last post for a more detailed explanation, but here are the main points; • Value set to outperform this year • Threats from coronavirus continue to reduce • Less uncertainty from the Fed, with our financial positions set to benefit from rate hikes • Inflation set to benefit a good portion of our positions I am very happy with our selection in the portfolio and have now invested the remaining funds in 2 more positions - $ALK (Alaska Air Group Inc) and $888.L (888 Holdings) Both look to have great potential, with Alaska looking particularly promising having come through with much better financial credentials than pretty much any other airline. Once again let me wish you a Happy New Year and hopefully this year will be a much more successful one for us and the portfolio! Best wishes, Richard.
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