Monthly Archives: May 2017

We Have Been Busy

This has been a fairly active month in terms of portfolio changes.

As mentioned previously, we have been busy selling off technology stocks and positioning ourselves in new companies and sectors that we believe will come to warrant the market’s attention.

We have already acknowledged that our sale of tech stocks might have been too early. However, we were heavily overweight the sector. The rise in tech equity prices, coupled with underperformance in other sectors, has resulted in a reevaluation of opportunity cost, and as such, we have acted accordingly.

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Facebook – A Bargain In The Rearview Mirror

Here’s a link to an article from ABglobal.com that shows how exceeding expectations can actually make ‘expensive’ stocks seem very cheap in retrospect:

LINK: Growth Stars

This chart that illustrates the differential between Facebook’s earnings expectations and actual earnings is quite enlightening and goes to show the degree to which analysts can underestimate new business models:

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Big Tech Is Doing Very Well

We have been taking some profits on big tech recently, but the numbers in this link show why big tech share prices have done extremely well over the past year:

LINK: Big Tech Earnings and Revenue Growth


Are you surprised that Facebook grew its profits the most? We’re not. It validates the point that their network is a brilliant platform that has only begun to be monetized.

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Should we buy the dip?

Last Wednesday we saw a broad sell off in global equity markets. We had not seen this degree of a sell off for quite some time. For instance, the most widely used ETF (QQQ US) of the NASDAQ 100 Composite Index fell 2.54%. The next day QQQ rose by 0.87%, and on Friday it rose again by 0.42% – closing at a level that was just 0.87% away from recent highs.

Our foremost mission is to safeguard our clients’ capital. Therefore, when faced with drawdowns of a significant amplitude, we must decide whether fight or flight is the most appropriate response. In other words, should we be selling, or should we buy the dip?

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A Great Profile on Brookfield Asset Management

I have been following Brookfield Asset Management for the past 15 years. It is a wonderful company that eschews short term market noise and stands fast and strikes when others lack the desire and/or capital to do so. They are among the most long-term orientated investors out there. Brookfield is one of our top holdings and we will keep on buying it on any price weakness for the foreseeable future.

Here is chart of Brookfield’s performance over the past 15 years versus the S&P 500 index:

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We Have Been Selling

In our January commentary (LINK): Our January Results), we said the following:

Looking at the broader market, all major US stock indices are at all-time highs. On the other hand, the Volatility Index (VIX), which expresses anticipated market volatility, is at historical lows. Although we have been taking profits on some of our high-flying stocks, we do not intend to try to time the market by selling stocks that we like in the hope of buying them back more cheaply in the future. This is called being ‘cute’. ‘Cuteness’ is the domain of babies and puppies, not investment managers.

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OUR APRIL RESULTS

Our weighted average return in April was +2.23% bringing our YTD return to +7.43% (net of all fees).

Earnings season has started and most of the companies in our portfolios that reported their earnings in April traded up strongly – most notably Amazon Inc. and Alphabet Inc. Both are currently trading at all-time highs, as are the major US stock market indices. We sold Amazon after earnings and thus increased our cash holdings. We might have to buy Amazon shares back at higher prices, but at the time being we prefer to err on the side of caution.

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