I have heard it alleged that Vladimir Putin is the richest man in the world. For that to be true, he would need to be worth around $200bn. That would be at least $199.9bn more than the lifelong
KGB man/civil servant/politician has declared. Which is just one of the many mind-boggling things we have to contemplate about Russia at the moment.
Even at the start of February, the markets were under pressure – and my more-leveraged-than-usual portfolio has needed care and scrutiny. But I wasn’t considering the risk of a European nuclear war in any of my assessments.
My stance to the news and chaos has, perhaps paradoxically, been to tune out of the market. I believe my portfolio is pretty well positioned and I think that checking its daily movements in no way helps my mental health nor my portfolio risk management. So I’ve reduced the frequency of checking my live updated spreadsheet to barely once a week.
Even covid-19 has disappeared from the news.
But, turning to my monthly roundup of my portfolio, how did the markets do? ‘NATO’ equity markets dropped markedly. Australia saw both its market and its currency rise. Within ‘International’, which I only just started to subdivide a few months ago between Asia/Pac and Europe, there is in fact a big split: MSCI Europe-ex-UK dropped 7.9%, whereas the Asia/Pac-ex-Japan index didn’t move.
The blended average of my markets dropped by 2.7%.
My portfolio dropped 2.9%, very similar to the markets I’m in. I was somewhat relieved, in fact, because I am sitting on some badly wounded holdings. To list just a few examples:
- DOCU: Down 67% (from high).
- SHOP is down 64%.
- HSV: Down 55%, admittedly over a longer timeframe (18 months) than most.
- FB/META: Down 48%.
- XRO: Down 38%.
- ADBE: Down 34%.
That said, there are some surprisingly resilient holdings out there too. The ‘jurassic park’ nature of the FTSE has been helping it here. My portfolio is being propped up by:
- FTSE-100 – at least on 1 March – had held up very well. CTY, the investment trust that largely tracks it, remains well within its fairly tight trading range.
- NESN is up 20% over 12 months.
- So is RMV up 20% over that period.
- HSBA is up 10%, despite the increasingly gloomy situation in Hong Kong.
- And ULVR is down only 5%.
- Of course AMZN is down, 22% from its peak, but it is far from the worst performing tech stock, and in fact is within 1% of its price 12 months ago. It’s one of my largest holdings.
- GOOG is down even less from its peak, and is 30% up over 12 months. Another big holding for me, offering good relative support.
And I don’t even directly hold any oil/mining/energy/defence stocks, which would have been a nice hedge in the current world. I came out of SHEL (up 31%, 12 months) and XOM (up 38%) in my portfolio cleanup. Even local energy players like SSE (up 22%) and NG (up 33%) have done well. I was a long term holder of BAe (up 40%) but that too went in the cleanup. Another lesson for us all around diversification, and the perils of
Buy at the sound of gunfire
While I certainly wasn’t looking out for German arms manufacturers, the old adage ‘buy at the sound of gunfire’ rings true. Germany announcing a €100bn investment in defence will be just the tip of that iceberg; most NATO countries are in breach of their commitments to spend 2% of GDP on defence, and there will plenty of catching up going on. This helps explain the relative lack of market movements.
It is tempting to topup / buy some of my fallen angels. However in general the worst fallers are lossmaking tech stocks, and their valuations remain high by any conventional metrics. I quite strongly suspect SHOP (16x revs), FB (4.6x revs, 9x EBITDA) and perhaps HSV (11 P/E) will seem like bargains a couple of years from now but I don’t have the excess cash to help me put money where my mouth is.
My leverage has blipped back up to the December levels – a loan-to-value ratio of 23.5% – which remains above target. This is despite an unexpected windfall being used both to extend a position and pay down a tiny bit of debt. My Ltd company is my most exposed account, with an LTV of 42%. But overall I have plenty of headroom and am worrying about bigger things than my portfolio right now.