Responsible Investor Portfolio Update, August 29th, 2020 | $TCEHY $NEM $BK $SYF $CLIX $GRUB $PCG $LVMUY $LRLCY $PEUGF $ELC.MI $WBD.MI

Just when one might have started thinking that the FED was running out of ideas to sustain the growth in the stock market, Jay Powell announced an unprecedented change to the inflation policy from 2% as a goal to 2% on average as the target. Not that inflation has gone up during years of balance sheet expansion, including in the EU, but it does provide more room should it pick up and pass the 2% mark. That news depreciated the dollar even further relative to the euro.

In more recent news, Japan was hit by the sad news of their long-standing Prime Minister Shinzo Abe announcing to step down due to illness after 8 years of service and one year before the natural end of his term. This exerted pressure on the Japanese stock market as it can be seen from the drop the $EWJ ETF had on Thursday. It will be interesting to see whether his successor will continue to embrace the so-called “Abenomics” and maintain the stability Abe achieved by ending a streak of several predecessors who only lasted 1 year on average as PMs of Japan.

The US stock markets have had an impressive week with the three main indices all closing 2%+ higher. Europe had a good week as the Stoxx index moved 1.1% higher but the national stock markets performance varied: for example Italy was up 0.7% while Denmark was down 0.3%.

No changes to our portfolio this week. Our best performer was $SYF which gapped 7.8% higher, followed by one of our two banks stocks, $BK, which grew by 5.1%. $GRUB fell 4.4%, however that’s not concerning given how much it has run over the past weeks.

On my watchlist there are stocks like $WDAY, $QCOM and inverse ETFs such as $SQQQ.

The table below summarises the portfolio performance since inception.

2000828 RIP

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Responsible Investor Portfolio Update, August 22th, 2020 | $TCEHY $NEM $BK $SYF $CLIX $GRUB $PCG $LVMUY $LRLCY $PEUGF $ELC.MI $WBD.MI

This is a market of contrasts. On the one hand we have increasing Covid-19 numbers all over the world and particularly in Europe where infection cases are going back to April-May levels, and on the other several bullish signals, the most recent one to note being the existing house sales in the US which grew by 25% in July – a rate not seen since 2006.

In the meantime the candidacies of Joe Biden and of his prospective VP Kamala Harris have been formalised at the Democratic Convention and the US stock market did not have a negative reaction. In the past there used to be many articles about how a Democratic government would be unwelcome for corporate America whereas positions seems to be more open to a leadership alternative to Trump of late.

It was a mixed week for the stock market: the MSCI World was flat, Europe was down 1.8% (with Italy loosing 2.42% and the Nasdaq Copenhagen a meager 0.12%) and the US indices were up with the S&P500 growing by 0.7% and the Nasdaq by a whopping 2.7%, whereas the Dow ended the week flat. The Dollar recovered about 0.58% over the Euro.

We have made one purchase on the RI portfolio this week, a relatively new ETF which invests in e-commerce while shorting the bricks & mortar sector. It is basically a combination of two other ETFs I have watched (and still own in another portfolio), $IBUY and $EMTY, and goes by the ticker of $CLIX. Thanks to its long and short positions it adds a lot of alpha to a signle investment: it is up 87% YTD, widely outperforming all the US stock market indices.

Our $SQQQ position hit the SL price at the beginning of the week but I expect that it is more of an arrivederci for this hedge. $TCEHY gapped 7% higher and looks like a break-out is around the corner. With gold recovering most of last week’s losses, $NEM was up 2.7%. On our watchlist we have stocks like $HUBS, $JD and $CSGP.

The table below summarises the portfolio performance since inception.

2000821 RIP

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Responsible Investor Portfolio Update, August 8th, 2020 | $TCEHY $NEM $BK $SYF $GILD $GRUB $SQQQ $SCO $PCG $LVMUY $LRLCY $PEUGF $ELC.MI

Welcome to the ever rising stock market era where nothing that used to matter really matters anymore. One could call it state capitalism.

Another week of growth across the board with the US markets leading the push towards ATHs. With the US presidential election now just 90 days away, chances are that more stimulus and more bubble blowing policies will be implemented. That’s all well and good in the short term, but will happen in the long term ? If momentum is dictating the current market direction, at some point valuations will matter, one would think.

In the meantime our portfolio was basically flat this week due to a couple stinkers, namely $TCEHY -which has been affected by Trump’s attack to Chinese stocks- and Italian Contractor WeBuild which has now dropped below 1.1€ and is very close to my line in the sand. On the positive side, $GRUB becomes our first position to pass the 30% mark, a capital appreciation threshold I use to determine when to have take profit (TP) ready: more on this in future weekly updates.

We have sold our position on $IMA.MI on Monday with a nice +14% profit in just one week ! No other changes to the portfolio this week but there are many stocks on my watchlist, such as $CSPG, $SMSFT and $AMAT.

From this week onwards you will see all the stop loss (SL) prices which have been defined so far. A general rule I follow is to consider a 7 to 10% loss to determine the SL price depending on whether it is a divided stock or not and on the general market performance. The SL price increases if the investment relates to a leveraged ETF. And with every rule, there are always exceptions of course !

The table below summarises the portfolio performance since inception.

2000807 RIP

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Responsible Investor Portfolio Update, August 1st, 2020 | $TCEHY $NEM $BK $SYF $GILD $GRUB $SQQQ $SCO $PCG $LVMUY $LRLCY $WBD.MI $IMA.MI $ELC.MI

It is surprising how the global stock markets are capable of shrugging off just about any news headline recently. This week was no different. The pandemic keeps wreaking havoc in many developing countries and of course in the US as a second wave in Europe seems inevitable now. Check out these great graphs from the Financial Times.

On Wednesday the CEOs of the largest 4 tech companies, Apple, Amazon, Google and Facebook appeared before a US Congress Committee to be “grilled” on anti-trust accusations. You can’t say anyone of them lost their cool, really, and when the same companies all reported their Q2 earnings after the close the following day on the one hand it seemed that as if there is nothing to stop them from hoarding cash, and on the other it does reinforce the point of whether there is fair competition and reasonable profit.

The US markets were up this week, especially the Nasdaq, while the World Stocks Index was mostly flat. Italy saw a sharp decline, just shy of 5%, and the European stock markets in general were also down (Stoxx index fell by 2.6%). The other stock market we watch closely, the Nasdaq Copenhagen, was less badly hit with a 1.4% loss and continues to outperform most European stock markets.

We keep finding great investment opportunities in the Italian stock market. A classic  rule when it comes to personal finance is to invest in what you know. This past week I have sent two new buy alerts, one for mid-cap in the Industrial sector called IMA (which is already up 14% since my buy alert) and another one for a Consumer Cyclical stock called Elica, both traded on the Italian stock market.

I am disappointed by the recent weakness in WeBuild which tanked 21% this week. This is a good example of why focusing only on valuation is not sufficient to pick (or deciding to stick with) a stock: if the market is against it, you won’t see it grow. With the 38.2% fib level broken, there is the risk of further depreciation. I will look into it more closely in due course and send an alert if I sell/reduce/accumulate.

WBD.MI_YahooFinanceChart

I realised that one of our SQQQ position was incorrectly reported despite the ETF having hit our SL price of 8.1$: apologies for the inconvenience.

So far we have not included dividends in the total return and I will endeavor to add this information in a future update as some of our stocks have already paid a quarterly dividend since the inception of the RI portfolio.

The table below summarises the portfolio performance since inception.

200731 RIP

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$NEM $LVMUY $LRLCY $BK $SYF $GILD $GRUB $SQQQ $SCO $PCG | Responsible Investor Portfolio Update, June 27th, 2020

This week was a roller-coaster for the global markets which pushed higher in the first two trading days to then loose strength and finish the week down. We still did not manage to have two consecutive negative days though !

In the US markets the #Dow suffered a 3.3% loss, followed by the #S&P500 which closed 2.9% lower than last week and the #Nasdaq which limited the loss to 1.9%. The weekly performance in Europe was no different, however all the three indices we follow more closely fared better than the US markets (#Stoxx -1.1%, #OMXC20 -1.3% and #FTSEMIB -1.6%).

Our RI Portfolio was nominally positive this week (+0,2%) and therefore outperformed these 6 indices by a weighted average of +2.6% thanks to selected stocks and especially to the hedges I had put in place during the preceding week, namely $SQQQ and $SCO.

We now have one full month of track record and I am pleased to see that we are showing a positive total return of 1.4% (+0,4% vs the Market).

There was only one Buy Alert this week, for precious metals stock #Newmont which benefited from the stock markets coming to a screeching halt. We also added to the triple inverse Nasdaq ETF $SQQQ position which proved to be the right move. With reduce and accumulate alerts the relative weight of the open positions change of course.

This week’s winners in our RI Portfolio were $SQQQ (+7,4% gain) and, once again, Grubhub (+8,1% gain).

No relative changes between the three currencies of the RI Portfolio.

We now have 15 open positions, 2 of which are leveraged hedges (inverse ETFs). Even in times of high valuations I keep finding cheap stocks and a possible further drop of the markets next week, especially around the quarter close, may offer an opportunity to initiate new positions.

The table below summarises the portfolio performance since inception.

200626 RIP

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$LVMUY $LRLCY $BK $SYF $GILD $GRUB $SQQQ $SCO $PCG | Responsible Investor Portfolio Update, June 20th, 2020

The global markets were consistently positive this past week, with Italy’s #FTSEMIB leading with a 3.9% gain. Our RI Portfolio lagged behind due to the hedges I had put in place. I had increased our hedges as I felt the markets were “tired” of going up but the week was largely positive in the end. Well, we are still showing a positive total return and we are only 3 weeks in since inception ! Also, I’d rather always loose on my hedges than on my core positions..

We have initiated 4 new positions this week, all in the European markets: two consumer French large caps, Luis Vuitton and L’Oreal and two Italian stocks, one in the media sector and the other one in the technology sector. We have also accumulated on Pacific Gas and Electric Company. With reduce and accumulate alerts the relative weight of the open positions change of course.

This week’s winners in our RI Portfolio were Italy-based Terna (+8,4% gain) and Grubhub (+6,2% gain).

The USD lost some ground compared to the EUR (0.9%) while there was no impact of the Danish krona. This means that in a portfolio in USD, the European stocks will have lost some of their value.

We now have 14 open positions, 2 of which are leveraged hedges (inverse ETFs). We are almost half way through along the path to achieve a complete portfolio. The table below summarises the portfolio performance since inception and now includes the investment strategy for each position.

200619 RIP

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$BK $SYF $GILD $GRUB $SQQQ $SCO $PCG | Responsible Investor Portfolio Update, June 13th, 2020

Two weeks in, the Responsible Investor Portfolio is up 2.5% while the markets are only up 0.6%: that’s a +1.9% outperformance. As the RI Portfolio has stocks traded over multiple markets, the market performance is calculated as a weighted average.

This past week was particularly volatile and saw a sharp decline in the stock markets on Thursday 11th of June: that day the RI Portfolio was actually up, you can read the details in a previous post. This week’s outperformance is particularly significant as the markets were down 4.9% while our portfolio only lost 0.4% (+4.4.%).

We have made 3 trades this week: we sold CELL.MI for a 7.8% profit and bought $GRUB following rumours about a takeover from JustEat after Uber’s bid hit the wall. So far Grubhub is up 6.9%. The other trade is a hedge on oil.

The relevant currencies (USD, EUR and DKK) were neutral and therefore had no impact on the portfolio.

We now have 10 open positions, 2 of which we intend to keep on a short leash as they are leveraged hedges. There is still a long way to go to achieve a complete portfolio which requires several additional positions as well as a greater diversification across the various sectors.

200612 RIP

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$INDA and $EWZ : two ETFs to invest in G20 stock markets

ETFs are an efficient way of investing in markets or sectors for which one would otherwise have to hold multiple positions to reproduce. This is especially true is you have a limited capital to invest, say up to 10k Euro or Dollars.

We opened a 2% position in $EWZ which reproduces the Brazilian stock market. While the outbreak seems to be nearing the peak only now over there, the stock market fall has been so significant that some of the stocks in that market are greatly undervalued, e.g. Petrobras. As always, we will be vigilant and prepared to act if the outlook changes.

We also hold a 2% position in $INDA which mirrors the Indian stock market. I have opened this one due to a favourable technical pattern, something I do rarely as I am mainly guided by fundamentals when selecting stocks and ETFs.

Brazil and India

At present I have 21 open trades (4 of which at $SQQQ trades bought at different price levels). When I am fully invested, I target having 30-40 open trades with an average percentage of 3% each, though some positions may be higher or smaller depending on the strategy. It is very important to be diversified across the various sectors but also to have enough positions to avoid being severely affected by a major swing in an investment with too high a relative weight. While this limits the potential for greater gains, it does protect you on the downside and makes your portfolio more resilient.

Here are the 4 trades in my eToro portfolio from this past week (May 18th to May 22nd):

  • $AMAT +5%
  • $XLK +2 %
  • $DUE.DE +2% (thanks to the positive Zew numbers in Germany, we might be back)
  • $EWZ +2% (we might be back in this one too)

The US stock market is up about 3% this week and 5 of my positions have outperformed them, namely $KO, $SYF, $USO, $IRM, $VIAV. The European stock markets have also grown by about 2%.

In my eToro portfolio I am 35% in cash, 8% in hedges and the rest are long positions in stocks and, to a lesser extent, ETFs and cryptocurrencies.

$SQQQ as a hedge proved to be a winner

Over the past two weeks the market has been quite choppy, especially intraday, but overall it has continued to hold. In fact, the Nasdaq has gained 4.4% and the S&P500 1.1% while the Dow was basically flat at -0.2%.

The difference in performance can be explained by the stocks which compose these indices, with the Nasdaq obviously being packed with many technology stocks which have been outperforming most indices. To give a couple of examples, one of the technology ETF $XLK is up 5.1% this past two weeks, and the so called FAANG stocks are all above 4% with $NFLX up 9.4%.

The relative lack of technology stocks in the European indices, which are dragged down by many bank stocks ($XLF), is the main reason why the European stock markets have been laggards. The financial sector was already suffering from the dovish monetary policies of various areas of the world, with negative interest rates in Japan and Europe for example. The pandemic has only increased their pain as money printing continued everywhere, including the US.

Some say that March 23rd is when the markets bottomed: since then the 3 main US indices have recovered a lot of the previous losses due to the pandemic crisis with a gain ranging between 27 and 31%, while the European stock market has only rebounded by 14%. When they say that it is a market of stocks rather than a stock market, what they mean is that you have to pick the right indices if you want to invest in ETFs, or the right stocks if you want to have more chances of beating the market.

Here are my top 3 winners for these past two weeks:

$SQQQ +6.96% (this is a hedge)

$AMAT +5.07%

$BMY +4.51%

The earnings seasons is not over but its pace is certainly slowing down with a lot fewer companies reporting earnings next week: the one I will be watching most closely is $BABA on Friday.

If you want to see which stocks, ETFs and currencies I own in my eToro portfolio, please follow this link.

Have a great weekend everybody and invest responsibly !

Featured stock of the month: $CHTR Charter Communications

Charter Communications (ticker: $CHTR ) is a media sector company which provides cable services to residential and commercial customers in the United States.

It offers subscription-based video services and also provides internet services as well as other media-related services.

The company was founded in 1993 and is based in Stamford, Connecticut.

As of the end of last year it had 29 million residential and small and medium business customers.

It has a market cap in excess of 100 billion USD and can therefore be categorised as a large cap stock.

While it is currently trading at a trailing P/E of 61, it has a forward P/E of 26.6 which does not make it expensive considering that it is a growth stock with excellent track record.

In fact, based on current estimates, it is expected to grow its earnings by 45% over the next 5 years which corresponds to a 5 year expected PEG ratio of 0.84, implying that it is currently trading at a discount.

As it is a growth stock it does not offer a dividend. Despite that, it has profusely rewarded its investors over the past years, with more than a 36% capital appreciation per year in the last 3 years and a stunning 30% per year over the past 10 years. For comparison, investing in a S&P500 ETF over the same 10 years would have yielded a 9.4% annual return.

YTD the stock is actually up, sporting a 3.9% increase, while the S&P500 is down 11.8%.

Charter communications is also a primus inter pares (first among equals) as it has fared better than its peers and outperformed $XLC (a popular communications services ETF which also features the stock amongst its holdings) by 36% over the past year.

The stock has a beta of 0.8 which makes it less volatile than the stock market average.

The company reported Q1 earnings on May 1st missing expectations. However, it showed a significant rise in customer numbers as well as in revenue which made the stock go up after the earnings release.

From a technical analysis perspective, the stock is well above the Fibonacci 61.8% retracement line from its mid February 2020 highs which may indicate further short-term upside potential.

CHTR

If you want to find out which other long positions I hold in my eToro portfolio, please follow this link.