Tuesday, April 11, 2017

TLH Portfolio Performance Q1 2017

I've made some changes to the way I account for portfolio performance for 2017.  Originally I was tracking the portfolio since inception(October 2015).  This created a couple problems. For one it was tedious to track everything, and it wasn't exactly quite clear how well the portfolio was doing on a yearly basis against our benchmark SPDR S&P 500 Index ETF(SPY).  So I started calculating since inception and the yearly number. That's confusing then for me to explain the performance of each one.

Also the reason why SPY is our benchmark is simple. For an investor wanting quick and easy access to the the index they'd most likely buy the ETF, which is the largest to track the S&P 500.  It also pays out real dividends that it collects on investors behalf from every holding.  I like this better than comparing it directly to the index itself since it's what normal people actually do with their investment accounts.

It also seemed confusing that the portfolio was calculated with each "buy" representing one share.  That was a choice I decided on after I started this endeavor.  Looking back this also seemed to be a poor choice.  It's nice in one way since most people buy stocks with whatever funds are available.  But it's again not the cleanest presentation. Especially since I would make a buy at any point in the year.  It also gave some holdings a larger weighting within the portfolio even if I only made one buy. For example IBB, IBM, and SAM were big holdings in the portfolio despite only having made 1-2 buys of each one.  That's compared to some of the tobacco holdings such as VGR or RAI where I made 3-4 buys.  Clearly I liked the tobacco holdings more as I own all of them, but I had to make multiple buys in order to get a heavier weighting. Under the new approach they represent about 20% of the portfolio. Which is actually in line with where it was before.

I've decided to change the portfolio results presentation and stick to it once and for all. In hindsight I should have followed this from the get go.  Here is how I will proceed.

The portfolio will be presented on an equal weight basis with calculation starting at the beginning of each year.  Each holding will be given a $10k starting balance.  I'll only be adding or selling stocks at the end of the year from now on. This is a departure from my earlier stance of adding and selling at will. Since the purpose here is long haul investing the sells will be minimum.  When I do announce a new add be assured I will place shares in my personal portfolio too. This way everyone knows I put my money where my mouth is. So in December 2017 you can expect to hear what my new adds/sells will be if any. The maximum number of adjustments will be 5 stocks each year either as buy or sell.  There will be no minimum or maximum set for the year as far as the number of holdings. Although I'll try to keep it around 30 plus I hope it doesn't get past 40 stocks.

Calculations will reset each year. So at the beginning of 2018 every holding will be given a new $10k to start, and the performance plus dividends will be calculated throughout the year.  Hopefully this makes things easier for people to compare performance, and much easier to understand.  So without further adieu here is the performance for the first quarter of 2017 under the new calculation results that are set in stone forever.

I'm very pleased to announce that the portfolio actually beat the S&P 500 under this new calculation method. I'll admit I was extremely anxious to find out how it would perform under the new method.   The portfolio returned 7.49%. That's pretty awesome.  For comparison sake's an equal $10k in the SPY ETF would have yielded an investor a 6.06% gain.  So right out of the gate the portfolio is beating the index. That's reminiscent of my first few quarters in 2015 and 2016 under the old calculation method which I beat the index.  That felt quite good.  This feels good also.  I'm hoping to keep the performance up all year and I have faith the picks are up to the challenge.

Equal Weight Performance With $10k Starting Balance

Shares12/31/2016Beginning3/31/17Ending%GainDividendsTotal Return


Benchmark Comparison


JUST a reminder that WhiteWave(WWAV) will complete their merger with Danone soon.  I'll re-apportion the proceeds equally amongst the remaining holdings. I'll also have to do that again with Reynolds America(RAI) and British Tobacco(BTI). Although I think it could possibly take until Q1 2018 for the sale to close.  Remember that transaction is part cash and stock.

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