Commentary
Firstly, I want to mention that I am reconstructing this letter in early 2023, so take what I say with a grain of salt knowing I have the full benefit of hindsight. I am just using old brokerage statements to write about my portfolio from inception along with a combination of portfolio reviews done on a quarterly basis during 2019.
For the Year ended 31 December 2019 the portfolio returned +21.6%
Looking back through my trading activity, the year started out extremely well, with all trading activity ceased after the sale of AMP in early January. This was a catalyst for me to reconsider my approach. I went on to discover the concept of Financial Independence and went on to listed and read to many podcasts and blogs on it, along with reading a few books including the Barefoot Investor & Rich Dad, Poor Dad.
In early 2019 I devised a strategy to 100% invest passively into VDHG, which lasted a total of like 3 months before I decided to implement an ‘active’ portion of 40% which again after a month or so was 100% active. My rationale in doing this was as follows:
“Initially the portfolio was constructed with the intent to limit active investing by having a large core allocation to the Vanguard Diversified High Growth index ETF. Given a lack of capacity constraints and therefore having a large investable universe, it is in hindsight a handicap to the potential of an informed investor.
For this reason, I have intent to sell VDHG and pursue an active approach. While not entirely certain as to how it will perform, I have confidence that a focus on asymmetry in risk/reward through the medium of value investing will outperform in the long run. There will be no limit to what I can invest in and as such, the best opportunities can be acted upon without restriction. I look forward to what the future holds.”
~ June 2019 Quarter Review
The very first Active investments I made were Gazprom (LON:OGZD) & Bluescope (ASX:BSL) in June. Thankfully by this stage I was getting obsessively into value investing having read multiple books including the Intelligent Investor, Buffett: Beyond Value etc. along with finance podcasts. As such my research on these names was beginning to resemble some form of sensibility and depth. I recognised an impressive +40% return on Bluescope in the following 6 months, and Gazprom was a short breakeven holding due to dissatisfaction with the brokerage account I used to purchase it.
I further sculpted the craft, gradually making deeper, more impressive investment write ups and some bumps along the way (albeit paled in comparison to prior years) including dodging a bullett with Collection House (ASX:CLH), selling shortly after the CEO resignation in late November for a price of $1.19, having held the business for 3 months, the price as of delisting in November 2022 was just shy of $0.07, a 97% decline.
October 2019 marked the initial research report of Kelly+Partners (ASX:KPG), my most successful investment ever (In dollar terms) and then future employer (Now former employer). This report was quite poor but then again, I was still gaining my balance in investing.
In the final quarter of the year I started to gain grounding in a particular type of investment strategy, which at the time I defined as “A high-quality concentrated basket with”:
Low Earnings Yield ‘EV/EBITDA’
Preference towards an ‘Outsider’ CEO
A ‘Capital Light’ business model
Negative ‘Net Debt’ stocks
Predictable cash flows with a ‘Moat’"
That is all for 2019. Thank you for reading.