Today I am starting a series of posts about my second SIA-style exemplary Growth Leaders Portfolio (GLP). This portfolio is aimed at both keeping exposure to the world’s leaders of growth and maintaining a top-down SIA-style portfolio allocations management. I have deliberately incepted GLP on the 28th January 2020, alongside with the Pension Portfolio (PP). Opposite to the PP though, I have not yet (also deliberately) rebalanced this portfolio to be able to watch it perform throughout March/April given the outperformance of cash-positive, high-growth, high-tech stocks vs. old economy stocks during the Covid-19 pandemic event. GLP will be rebalanced as of end April 2020 accordinlgy to the SIA philosophy of allocations, as we now surely have peak of the last long lasting economic cycle behind us and we entered the Contraction phase now. Portfolio will be rebalanced and commented once a month going forward. Please remember that you can always check current status of both GLP and PP on the Portfolios page (I try to update them monthly).
The basic assumtions of GLP are:
-> general rule of cycle-adjusted portfolio allocations accordingly to SIA is valid here just as it is in PP,
-> GLP needs to be balanced and capture both worldwide growth opportunities (via equities exposure) and safety (via long term high grade sovereign debt exposure and inflation-hedged value holders like Gold),
-> Exposure to Equities is as a rule higher than in PP and must be within the following tresholds: RC: 50-70%/E:50-60%/B:20-50%/RS:0-20% (where: RC-recovery, E-expansion, B-boom, RS-contraction/recession),
-> High grade sovereign debt exposure must constitute minimum 15% weight (no upper treshold).,
-> Gold exposure must constitute minimum 15% and maximum 40% weight and is done via ETFs covered with physical gold,
-> Cash should be maximum 30% weight.
-> Equity part of portfolio allocated in stocks with the following characteristics: incumbent or prospective global leaders of their sector, growing sector, growing or stable wide margins (40%+ gross), providing disruptive technologies with big growth potential, low financial leverage or none (max 1,5x NetDebt/EBITDA trailing), high FCF Yield) – qualification method: SIA Score,
-> ETFs (also leveraged) allowed as part of equity allocation, but constitute no major holding, but rather short- to mid-term management tools,
-> The portfolio is USD-based. No FX hedging.
-> GLP equity exposure will be relatively concentrated (no more than 20 names)
-> single stock cannot exceed 15% of the equity exposure and 5% of the total portfolio.
Let us now shortly recall the basics of stock picking for a SIA-style portfolio expressed in the SIA Score:
S1: growing sector 1pts/0pts,
S2: incumbent or prospective global leader 1pts/0pts,
S3: growing or stable wide margins (40%+ gross; 3yr avg) 2pts/0pts,
S4: Net Debt/EBITDA <1.5 (last 3 ended FYs) 2pts/0pts,
S5: above-average cash flows (last 3 ended FYs) (FCF/MktCap > S&P500 Dividend Yield or US 10yr Treasry Yield (higher of the values)) 2pts/0pts;
MAX TOTAL SCORE: 8pts/MIN TOTAL SCORE: 0pts/MIN SCORE TO QUALIFY: 4pts .
Now onto the stocks I picked up. Total allocation in equities stands at 34% at inception (inline with SIA for Boom phase of the cycle). I have picked 11 names as of 28.01.2020:
|% Weight |
|AMD||50,53||53,96||2 726,60||2,70||7,94%||28.01.2020||2 726,60||Semiconductors||4|
|SQ||74,8||50||3 740,00||3,09||9,09%||28.01.2020||3 740,00||Software-Infrastructure||6|
|NOW||314,05||12,5||3 925,63||3,98||11,71%||28.01.2020||3 925,63||Software-Application||6|
|NVDA||247,97||11,18||2 772,30||3,11||9,15%||28.01.2020||2 772,30||Semiconductors||8|
|UBSFY||15,21||198||3 011,58||2,75||8,09%||28.01.2020||3 011,58||Electronic Gaming & Multimedia||8|
|GRMN||101,92||40||4 076,80||3,05||8,97%||28.01.2020||4 076,80||Scientific & Technical Instruments||8|
|SWKS||119,79||34,65||4 150,72||3,40||10,00%||28.01.2020||4 150,72||Semiconductors||8|
|EA||111,9||40||4 476,00||4,24||12,47%||28.01.2020||4 476,00||Electronic Gaming & Multimedia||8|
|INTC||67,31||50||3 365,50||2,86||8,41%||28.01.2020||3 365,50||Semiconductors||8|
|BKNG||1 917,45||1,7||3 259,67||2,41||7,09%||28.01.2020||3 259,67||Travel Services||8|
|BIIB||281,95||8,5||2 396,58||2,41||7,09%||28.01.2020||2 396,58||Drug Manufacturers – General||7|
|Total Equities||37 901,37||34,00||100,00%||37 901,38||Avg: 7,18|
|CASH$||1||3 901,78||3 901,78||3,66||28.01.2020||3 901,96|
|GLD||147,66||153||22 591,98||23,04||28.01.2020||22 591,98||anchor|
|TLT||143,568||248||35 604,86||39,29||28.01.2020||35 604,69||anchor|
|Growth Leaders||100 000,00||100,00||100 000,00|
SIA score matrix as of inception looks like this:
For any financial data on any of the US companies I strongly suggest that you visit the US Securities and Exchange Commission EDGAR system, where you can find all the official filings of US listed companies as well as quarterly and yearly financial reports. Optionally you can dig for financial data on selective companies on macrotrends.net or other sources (just make sure they are reliable). I list the ones I personally use the most here.
With the equities potfolio being set and allocated accordingly to SIA, we can now grab exposure to the so called “anchors” of the portfolio (at inception represented by TLT and GLD as per PP as well), which are supposed to balance equity exposure (remember that according to SIA we’re looking for assets that have low or negative correlation with equities and are safer than equities). We’re ending with 39% allocation in TLT and 23% allocation in GLD. A small cash buffer remains.
With this done we have the GLP set at inception. The portfolio will be updated monthly starting 30th April 2020.
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.