Deanco Investment “Group” Update – June 2020 (Month 32)

There is no group, it is just me and my money.  I’m just a guy with a regular day job who likes keeping close tabs on his investing.  Each month I’m sharing my investment portfolio, individual investments, and performance (good or bad). This is my June 2020 update (32 months of tracking it).

I started tracking all this 32 months ago and entered into things very anxious about my investment portfolio.  Since then I’ve gone from a diversified, ‘set it and forget it’ portfolio in index ETFs in Month 0 to a concentrated stock portfolio in my first year.  At times I was 100% allocated to stocks (and individual ones at that).  Strangely I was less anxious with this than I was with my prior portfolio.  Over the past year, I’ve been moving away from a concentrated stock portfolio and into a more diversified portfolio using index ETFs.  I’ve also shifted my portfolio into different asset classes.  I do not feel anxious about my investment portfolio at all these days.  Part of this has to do with the structural changes I’ve made to it but most of it has to with having a much better understanding of why it is doing what it is doing.  Much of this has to do with learning a ton of new things from a ton of new people (mainly #FinTwit).

Over the past year, I’ve wrestled with whether it makes sense to pick individual stocks AT ALL versus just investing in the indexes.  I’m not sure that most people who do this wind up beating the market (most don’t for sure).  I’m not sure I have the skills to do it.  I have learned that the time and energy (and potentially additional risk if I’m a bonehead) of individual stock selection doesn’t make sense for me for my entire portfolio.

Thank goodness I came to this realization too.  Why?  Because many of the stocks I selected have not performed very well (and several have performed horribly).  As I said, I’ve learned a ton over the past 32 months.

I feel like I’m going to wind up somewhere in the middle (mixing individual stocks and ETFs).  I like to tinker with my portfolio when I have time (which sometimes exist and other times does not).  I believe the methodology I’ve developed back around last October is a good one for how I want to manage my portfolio.  I’ve been moving my portfolio towards it slowly and am close to where I want to be.  I think I’ve gone a bit too far away from the individual stock selection side of things at this point.  

Part of this is because I’ve been listening to podcasts talking about different topics on stock selection over the past few weeks.  There wasn’t one particular podcast that I remember listening to but some combination of Trey Henninger’s DIY Investing and the guys over at Focused Compound comes to mind. A couple of concepts have stuck out of the slew of podcasts I’ve listened to:

  • 10 Bagger Companies – The concept of only investing in a company that I believe has the potential to be a 10 bagger over the next 10 years is an interesting hurdle that seems like it would help me filter ideas down.  If I can’t come up with a somewhat likely high-level, quick case that gets me to 10x in 10 years then FULL STOP.  No need to spend another minute.  I’ll just keep my money invested in the index ETF.  If I can get to a somewhat likely case that gets to a 10x then at that point it is time to do more research and see if the company makes sense to own.  Of course, this exercise is just a guess (which could be wrong).  But if you are focused on only ideas where a decent guess is 10x and you are wrong you will still likely do okay.  I’ve already worked on building a tool into my toolset that will help me facilitate this workflow.  I think this simple test would have kept me from buying several of the stocks I’ve bought over the past 32 months.  Hell, it might even tell me I need to sell some that I still own!  Vice versa it might point me back towards some of the ones I’ve sold.
  • Coffee Can Portfolio – This concept also seems interesting and aligns with how I’ve seen my portfolio work.  The concept is you buy a stock and you never sell it (you put it in a coffee can on the shelf and never open it).  I spend a good deal of time researching a position before I put it on.  I usually intend to own it for a very long time when I do add it.  I haven’t exactly done this in my portfolio to date.  I’d say this has more to with me getting an overall strategy implemented that I’m comfortable with than me picking stocks I’m not comfortable holding long-term.  The concept of buying something and putting it away and not thinking about it again makes a lot of sense to me and aligns with my strategy well.  Together with a ’10 Bagger Filter’ it might also be completely workable.

The combination of these two concepts along with all the other things I have in my process that I’ve developed over the past 32 months has me excited about individual stock selection again.  I plan to spend some time looking at my existing investments, things I’ve sold, and things I’ve had my eye on with some of these new concepts to see if I can get comfortable with things.  I might rework my stock portfolio a bit using these additional tools/concepts in the coming weeks/months.

I continue to let my bond allocation dwindle.  I hold part of this as dry powder to buy things (stocks) later.  I hold another part of this as dry powder in case I need money in ‘real-life’.  I think that all the money that is being printed these days is going to lead to inflation.  I think it will either continue to be asset inflation as we’ve seen to date or real live inflation (which we haven’t ‘officially’ seen to date).  I don’t know which we get or if we get both (which is likely) but I know I don’t want to own bonds because they are toast.  I’m not aggressively paring down the position but I’m whittling it down as I see alternatives I want to allocate to.

After a rip higher the Energy sector settled back down during the past month (falling comfortably back into its old, familiar ways).  Information Technology and Consumer Discretionary were red hot during the month.  I’ll likely lighten both these a bit and add to Financials (which continue to struggle).  For some reason, I wound up a bit too light in the Industrials sector so I’ll also bolster that a bit as I lighten up elsewhere.  My target allocation is the 25-year sector average of the S&P 500.

As you can see Information Technology barrels higher making up 27% of the S&P 500 Index.  It is literally off the charts.  I think things have gotten a little ahead of themselves in this area.  It is my highest allocation as well but I don’t have that high of an allocation to it (and won’t).

I closed out a few individual stock positions during the month.

  • $HA – Hawaiian Airlines – One sell was due to COVID’s impact on the business.  I had owned Hawaiian Airlines since November of 2017 (for about $38 a share).  Before the pandemic hit it was sitting around $30 a share.  In March it got obliterated along with all the other airlines (it got down to $9 a share).  YIKES!  I listened to Warren Buffett talk about selling all of his airline stocks at the Berkshire meeting.  I watched airline traffic not budge off the pandemic lows as things began to reopen.  I watch the $JETS ETF buyers bid airlines up.  I decided on 6/5 to let them have my airline and sold out of my position (at around $21 a share).  So far this looks like a wise sell (it is now around $14 a share).  I reinvested the proceeds into the Fidelity Industrial ETF (so I still own some).  I might look at this business again using my 10-bagger lens and reenter the position.  I know schizophrenic!
  • $KRO – Kronos Worldwide & $TX – Ternium – These sells were mainly due to me moving away from individual positions in my portfolio.  I’d been sitting on a loss in these cyclical companies for some time and had been slowly decreasing my position size.  They had both gotten to be such small positions that I went ahead and closed them out completely.  I did this to not have to think about them ever again (reanalyze them, etc).  I reinvested the proceeds into the Fidelity Materials ETF (so I still own some).  Ditto here, I might talk myself into reopening these positions with my 10-bagger / coffee can portfolio lens (albeit with a much smaller allocation).  More schizophrenia!!!

Preston, my eldest son, and I recorded our thoughts as of mid-year on things going on in the markets.  We usually sit around and talk about this stuff anyway so now we just record it once a month or so.  I’m an idiot and forgot to hit the stream button the first time so we did it twice.  It isn’t worth your time to watch it…unless you want to see the absolute best investment content on all of the internet…during the few minutes it was streaming…maybe…probably not.  If you made it this far, just click the link and let it play for a couple of seconds so we get ‘a view’.

For full update download this ^^^ PDF.

My individual positions (and all kind of additional information about each of them) can be found here:

My Current Portfolio

I’d love to talk about investing with you.  Link up with me on Twitter

Published by deanorolls

Well, if I told you that you wouldn't need to go to my would you?!?!

Leave a comment

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: