Portfolio update - 2023 June 22

My top (>2%) positions in no particular order: META, GOOGL, BRKB, NVDA, AAPL, AMZN
In:
Out:

Fixed income: 1%
Cash: 10%

Sectors (kinda): Insurance (BRK): 12%, Media: 1%, Banks/financials: 5%, Stock funds: 3%, Industrial: 1%, Consumer: 4%, Medical/pharma: 2%, Tech: 46%, Various owner-operators (not included in other categories): 2%

New positions: SYM, DE, IAS, MU, QLYS, SHLS, NTOIY, XPEL, TKO
Positions increased: FTNT, RNG, BILL, PYPL, EXPE, MNDY, ABNB, ANET, DASH, YELP, GMAB, PANW, UTHR, LYV, MELI, GOOGL, CPNG, PGNY, BMBL, ZS, HLFFF, DOCU, BLDEW, DLO, EVVTY, CSL, NOW, TEAM, DDOG, CELH, DUOL, SE, DOCS, SNOW, PCTY, VEEV, CRM, ZM,
Positions reduced: MRNA,
Positions eliminated: FRCJL, FRCCL, PAGS, SSNC, VCSA, LEAT, IT, BOC, SWAV,
Flip-flop: RILY/RILYK/RILYN/RILYT/RILYP, KYYWY, META, GBTC/FBTC, THRY

RILY/RILYK/RILYN/RILYT/RILYP - long odyssey of buys, sells and swaps. Ultimately RILY position went down, combination of RILYK/RILYN/RILYT/RILYP went up. 

KYYWY - bought and then sold on merger announcement.

META - reduced position on size, though added a bit at dip.

Swapped GBTC to FBTC.

Reduced THRY though bought some on latest results.

Sold SWAV on merger announcement.

Sold PAGS, SSNC, VCSA, LEAT, IT, BOC on low conviction and/or quarterly results.

Added stocks to companies at somewhat attractive prices.

New positions - initial buys.

Portfolio update - 2023 December 31

My top (>2%) positions in no particular order: BRKB, GOOGL, META, AAPL, AMZN, NVDA
In:
Out: RILY (price drop)

Fixed income: 1%
Cash: 11%

Sectors (kinda): Insurance (BRK): 12%, Malone/media: 1%, Banks/financials: 6%, Stock funds: 3%, Industrial: 0%, Consumer: 4%, Medical/pharma: 3%, Tech: 44%, Various owner-operators (not included in other categories): 2%

New positions: DHR, BYDDY,
Positions increased: ZS, DOCU,
Positions reduced: PAGS, GBTC, EXPE, ETHE, CNNE
Positions eliminated: WMICX, SSTWS, SPLK
Flip-flop: RILY

My returns for time periods ending December 31, 2023: 

Stock accounts: 2023: 45%, 2y: 0.6%, 3y: 5.6%, 5y: 13.7%, 10y: 9.4% annualized. 

All investment accounts including 401(k)s, ESPPs, etc (some unreliable numbers): 2023: 34.7%, 2y: 0.17%, 3y: 4.9%, 5y: 13%, 10y: 8.4% annualized.

For comparison SP500 returns (without dividends and dividend reinvestments): 2023: 24%, 2y: 0%, 3y: 8%, 5y: 14%, 10y: 10% annualized.

Sold SPLK as merger spread narrowed. Reduced GBTC, EXPE, ETHE on run up. Reduced PAGS, CNNE as low confidence positions.

Bought initial positions in DHR and BYDDY. Added to ZS and DOCU at attractive prices.

Traded around RILY position on drop and bounce.

Do most stocks underperform T-bills?

Bessembinder study on whether stocks outperform one month T-bills is pretty widely known. A lot of people summarize its results in attention grabbing one liners. Even the official ASU page link is called "do-stocks-outperform-treasury-bills".

In fact, the one liners are quite misleading. The authors on ASU page carefully choose phrases so that the claims would be technically correct. But these careful word choices hide the actual picture, which is not as sensational. Let's dig in.

The study measures wealth creation from company going public to either the end of the study (2016, 2019, 2022 - I take spreadsheet from 2019, since it was used in the paper) or to company ceasing to exist as a public company. There are no adjustments for inflation or for economy growth. This methodology strongly biases the positive wealth creation to companies that are around in 2019 as can be seen in the top of wealth creation table. Companies that have ceased to exist usually don't have positive value creation, except for the few that get acquired. Since there are only about 4300 public companies in US in 2019, it is not surprising that "All of the wealth creation can be attributed to the thousand top-performing stocks". That would be about 23% of companies existing in 2019. Even assuming that half of the wealth creation came from companies that no longer exist in 2019 (this is unlikely based on the study's construction), 11.5% of companies existing in 2019 created a large percentage of wealth. This is much higher percentage than the quoted 1-2%.

Furthermore, the study measures absolute value creation and not annualized percentage return, which leads study to claim that 1-2% of companies create over 50% of value. This is true, but only for the absolute size of the value created. It does not mean that investing into the other 98% of companies leads to losses or inadequate returns. The study itself shows that in most 3-year periods over 50% of companies create positive wealth, i.e. their returns outperform treasury bills. The study does not show how many of these 50% of companies have high annualized percentage returns. For example, if a tiny company TinyCo has absolute wealth creation of $1M in 3 years, while a huge company HugeCo has absolute wealth creation of $1B in the same time, the study considers that HugeCo created 99.9% of wealth, even if TinyCo returned 10x in terms of appreciation, while HugeCo returned only 20%. As I have mentioned, this effect is exaggerated by the fact that in 2019 HugeCos are closing to $ trillion valuations, while first $10B company appeared only in 1955, so wealth created by most companies before 1955 would be about hundred times smaller than wealth created around 2019 by HugeCos.

Bessembinder methodology assumes buying at IPO and never selling. For investors, who do not hold forever, it is quite possible to have high returns in companies that later underperform or go bust (see Blockbuster).

Some of the numbers in the Bessembinder spreadsheet look suspicious. Apparently American Airlines Group had positive wealth creation from 1939 to 2016 (though negative 1939 to 2019). In 2013 AMR corporation was in bankruptcy and merged with US Airways Group. US Airways is the company that has history going back to 1939, so it is the company considered in the wealth creation 1939-2016. But it also went through bankruptcies in 2002 and 2004. It is possible that the positive wealth creation 1939-2016 comes from dividends or other corporate actions but it is suspicious. It might be worthwhile to dig into the "positive wealth creation" of American Airlines Group from 1939 to 2016 and into the quality of Bessembinder's data.

Portfolio update - 2023 November 23

My top (>2%) positions in no particular order: BRKB, GOOGL, META, AAPL, AMZN, NVDA, RILY
In:  AMZN, NVDA (added positions from separate accounts)
Out:

Fixed income: 1%
Cash: 11%

Sectors (kinda): Insurance (BRK): 12%, Malone/media: 1%, Banks/financials: 6%, Stock funds: 3%, Industrial: 0%, Consumer: 4%, Medical/pharma: 3%, Tech: 43%, Various owner-operators (not included in other categories): 2%

New positions: UTHR, IT, AMAT, DLO, ANET, GMAB, GNL-A, GNL-B, PGNY, EVVTY, BNTX, MNDY, DASH,
Positions increased: RILY, THQQF, IVSBF, CNNE, LYV, DOCU, KARO, V, GOOGL, MELI, FTNT, FOUR, DOCN, RNG, DOCS, CRWD, CURN, MRNA, BLDE, SSNC, ABNB, SWAV, CPNG, BMBL, PANW,
Positions reduced: RILYT, RILYP, SPLK, CSL, PINS, THRY, MORN, LVO, VCSA,
Positions eliminated: EXPI, SCHW, PROSY, MTCH, VMW, CHEK, QDEL,
Flip-flop: META, PYPL

Fixed income: Sold RILYP and RILYT as they rose, did not rebuy on current drop yet. Bought GNL-PA, GNL-PB as their prices dropped.

Sold some META and PYPL and then rebought at lower prices.

Sold remaining VMW on merger. Sold most SPLK on merger announcement.

Sold EXPI, SCHW, PROSY, MTCH, CHEK, QDEL mostly because of uncertain prospects. Reduced CSL, THRY, LVO, VCSA because of uncertain prospects. Reduced PINS and MORN on valuation.

Bought new positions and increased positions based on attractiveness and valuation.

 

Portfolio update - 2023 June 19

My top (>2%) positions in no particular order: BRKB, GOOGL, META, AAPL, RILY
In: 
Out:

Fixed income: 2%
Cash: 3%

Sectors (kinda): Insurance (BRK): 14%, Malone/media: 1%, Banks/financials: 8%, Stock funds: 4%, Industrial: 0%, Consumer: 3%, Medical/pharma: 2%, Tech: 47%, Various owner-operators (not included in other categories): 2%

New positions: SCHW, CSL,
Positions increased: RILY, THRY, ZS, ABNB, RILYP, RILYT, LMGIF, EXPE, V, NOW, LVO, LYV, KARO, FTNT, FOUR, RNG, TSM, PANW, INTU, SPLK, CRWD, THQQF,
Positions reduced: META, MTCH, VMW,
Positions eliminated: IRBT, COF, ETSY, VMEO, FNKO, WFC-PL, BAC-PL, TRTN-PD, OTCM, ZIP, OPRX, ATVI, PUBM, AYRWF, GNL-PA, GNL-PB, INN-PE, MGNI,
Flip-flop: FRC, FRC-PN, FRC-PJ, WAL, VBNK,

Fixed income: Added to RILYP and RILYT as they dropped, sold a bit of RILYP as it recovered. Sold most of my preferred shares WFC-PL, BAC-PL, TRTN-PD, GNL-PA, GNL-PB. I was not sure if the yields were sufficiently high for risks taken.

Traded some banking stocks: FRC, FRC-PN, FRC-PJ, WAL resulting in some losses. Also traded VBNK and sold COF. Bought and holding SCHW. Added and holding RILY, V, FOUR, 

Bought CSL on valuation.

Added to THRY, ZS, ABNB, LMGIF, EXPE, NOW, LVO, LYV, KARO, FTNT, RNG, TSM, PANW, INTU, SPLK, CRWD, THQQF on valuation and attractive expectations.

Sold some META for position sizing.

Sold VMW on price runup.

Sold MTCH, IRBT, ETSY, VMEO, FNKO, OTCM, ZIP, OPRX, ATVI, PUBM, AYRWF, MGNI mostly because of uncertain prospects. Some of these may have lowish valuations and the sale might not have been the best choice.

Portfolio update - 2023 March 05

My top (>2%) positions in no particular order: BRKB, GOOGL, META, AAPL, RILY
In: 
Out:

Fixed income: 3%
Cash: 3%

Sectors (kinda): Insurance (BRK): 14%, Malone/media: 0%, Banks/financials: 9%, Stock funds: 4%, Industrial: 0%, Consumer: 3%, Medical/pharma: 2%, Tech: 44%, Various owner-operators (not included in other categories): 2%

New positions: ZS, LYV, SWAV,
Positions increased: THRY, PANW, CRWD, GOOGL, DDOG, VRTX, KARO, FTNT, RILY, RILYP, PYPL, EXPE, ABNB,
Positions reduced: META,
Positions eliminated: MCO, APPS, APO, PX, FVRR,
Flip-flop:

Fixed income: Added to RILYP when it dropped due to short seller's report on RILY.

Sold MCO, APPS, APO, PX, FVRR mostly for portfolio cleanup.

Sold a bit of META on the stock runup to $18Xs.

Bought and added stocks that seemed to be trading at attractive prices.

Portfolio update - 2023 January 2

My top (>2%) positions in no particular order: BRKB, GOOGL, META, AAPL, RILY
In: RILY - bought
Out: PSHZF - sold

Fixed income: 2%
Cash: 8%

Sectors (kinda): Insurance (BRK): 15%, Malone/media: 0%, Banks/financials: 8%, Stock funds: 4%, Industrial: 0%, Consumer: 1%, Medical/pharma: 2%, Tech: 41%, Various owner-operators (not included in other categories): 2%

New positions: TREX, SDIIF, RNG, VCSA, INN-E, GNL-B, GNL-A, RILYP, COF, TSM, FTNT, FOUR, CELH,
Positions increased: PX, TTD, GOOGL, ZM, INTU, CRM, VEEV, DOCU, SHOP, MRNA, CURN, DFAU, IWF, META, RILY, ADBE, VMEO, U, MGNI, NOW, SCPPF, KARO, APPS, AYRWF, IVSBF, HLFFF, TEAM, THRY, LRCX, DOCS, PANW, AMD, DDOG, ABNB, AMZN, YELP, CRWD, FNKO, WDAY, ETHE, PUBM, PAGS, EXPE, GBTC, CNSWF, V, SSTWS, VRTX, TDOC,
Positions reduced: COIN, KNBE, COUP, RVPHW, VMW, PINS, ATVI, ETSY, MTCH,
Positions eliminated: XP, ATY, RMD, TWTR, POSH, STNE, PSHZF, MLSPF, IAC, TER, CHGG, OTMOW, HZONWS, WEJOW, SHCRW, KPLTW, BGRYW, OUSTWS, TTWO, 
Flip-flop: FVRR

Fixed income: I invested in several fixed income securities, including INN-E, GNL-A, GNL-B, and RILYP, which had yields of 8-9%.

Merger arbitrage: I had good results with TWTR. I bought and later sold VMW as the prices increased. I bought COUP before the buyout announcement and sold it afterward. I sold my position in KNBE after the buyout announcement. I gave up on ATVI and sold most of my shares. I also bought some IRBT.

Crypto: I added some ETHE and GBTC to my portfolio as the value of cryptocurrency dropped.

I sold some stocks and reduced my positions in others due to uncertainty about future growth and performance.

I initiated tracking positions for TREX and SDIIF.

I bought stocks that I believed were attractively valued. However, many of these stocks continued to decline after I purchased them.

2022 returns: My actively invested accounts had a return of -31% in 2022. This could have been better if I had invested in the SP500 instead. $IWF had a return of approximately -30.5%, so that would not have performed better. Although considering that I had some cash, $IWF probably would still have done better.
$META at -65% and $GOOGL at -40% definitely did not help. These stocks made up a significant portion of my portfolio and contributed to the negative returns. $AAPL at -27% or so, performed somewhat similarly to my portfolio.

My returns overall:
Comparisons with SP500 are approximate, since SP500 calculator does not have December 2022 data yet.
Earliest to date: 8% annual vs ~9.3% SP500
Last 10 year return: 6.92% annual investment accounts, 6.87% active accounts vs ~12.4% SP500
Last 5 year return: 4.62% annual investment accounts, 3.69% active accounts vs ~9% SP500
Last 3 year return: 3.34% annual investment accounts, 0.85% active accounts vs ~8% SP500