In this post I shortly present the September 2020 rebalance of the SIA-style Global Leaders Portfolio (GLP). This month the post is a few days overdue, but I unfortunately had no access to the internet at the break of months. Hence all the prices are assumed from the close of 5th October as presented by morningstar.com (these prices may sometimes differ slightly from official market closing prices on the main trading venues) – this is of course an exeption, not a new rule.
This month the equity indices experienced a correction, which was pretty natural after 5 consecutive months up from the March Covid-19 lows. The SP500 was even 8% down from the top, but eventually ended the month at 4% down. The tech-heavy Nasdaq was even -11% on month, but also managed to rebuild into the month end and ended -5% MoM. European equities did better, ending roughyl 2% down for the month in case of the German DAX benchmark and EuroStoxx50.
The has been numerous volatility routs, but they have eventually all been reigned in and the VIX went no higher than 40 level in September. The reasons for some increased volatility were mainly as follows:
-> lofty valuations of some of the high-tech companies,
-> further stimulous concerns,
-> resurgence of the virus cases,
-> approaching US elections.
At the end of day none of these points is either new or surprizing. The equities just had a tremendous run recently and it seems that a reason for a correction was needed. Let’s move on to the rebalance…
The GLP finished September slightly down (-1.5%). This was generally to be expected, given global correction. What needs to be pointed out is that GLP outperformed the equity indices and it’s not equities, but Bonds and Gold that drove the performance lower this month. Here is a short explanation of how the major portfolio constituents performed last month:
-> TLT experienced a drop of 1.6% untill October 5th. Truth is though that all of that drop took place on the last day only and during the month of September the ETF was actually trading flattish within a narrow range. The drop may be correlated with recent improvement in equity markets, as all US indices started October on a high tone. That naturally put pressure on the bonds. From the start of October up until the 5th US 10y Treasury Yield went up from 0.66 to 0.77.
-> GLD also corrected 3%. Inflows to commodity ETFs generally continued, but were a bit more mixed last few weeks, accoring to Bloomberg. Also the USD is to blame here, as it strenghtened almosot 2%. Gold and USD have an almost -0.4 correlation coefficient.
-> The equities portfolio performed great this month and has ended flat vs. the last rebalancing. This is a confirmation of the good stock picking system (SIAScore) we use. It allows us to have stocks that generally tend to to outperform the equity indices in times of corrections due to their strong fundamentals.
Effectively the equity part of GLP went slightly above the 20% maximum treshold assumed for the Contraction period. Hence this month I am marginally cutting the holdings of Square Inc (SQ), which keeps monetizing the the world’s online switch massively. SQ is up almost 200% YTD and Wall Street continues to acknowledge its growth and potential with ever higher targets. The latest was from Susquehanna Bancshare at USD195/shre. The stock’s market price right now at USD180 is 13% higher than the Bloomberg’s average 12-month target price of USD158.6 (with appx 40 analysts covering the name). Proceeds from SQ sale are deposited as cash for now.
Portfolio holdings are traded at the closing price on the rebalancing day presented by www.morningstar.com (which may differ from official closing prices given by appropriate stock exchanges).
Current structure of the GLP can be found on Portfolios page.
Total Personal Return since inception (TPR) of GLP as of close 5th October 2020: +15.7%.
Next update in a month.
Disclaimers: None of the ideas, views and thoughts presented here shall ever be taken as a recommendation to buy or sell stocks,bonds,FX,commodities or any other financial instruments as stated in REGULATION (EU) No 596/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC or the Regulation of the Polish Minister of Finance of 19 October 2005 on information constituting recommendations regarding financial instruments, their issuers or exhibitors (Journal of Laws of 2005, No. 206, item 1715) or the Polish Act of 10 February 2017 amending the act on trading in financial instruments and some other acts. The article is for educational reasons and purely presents private views of the author, thus the author shall not be claimed eligibile for any losses of a third party resulting from trading activities based upon this article. The author uses his best knowledge and data from sources believed to be reliable, but makes no representations as to the accuracy of the data.Full Disclaimers&Liability Limitations page.