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A welcome to all those who have joined the mailing list and all the readers, to this 32nd post of investing, not rocket science! Investing Doesn't Have to Be Rocket Science: this is our Non-Expert Guide to Portfolio Management. In the last three months, this free blog has added 600+ readers to our mailing list.
A quick recap of this blog series (investing, not rocket science) so far:
In the 1st post: I defined a basic portfolio framework. The objective of this million dollar portfolio is beat inflation and an equity index. The investment style presented here is active portfolio management, without the use of leverage and a time horizon greater than 5 years. The benchmark index is the MSCI ACWI Investible Market Index. Typically, there are two posts a week, which includes details of the portfolio and actionable evaluations (Mondays and Fridays).
From posts 2 to 20, 28-29: I have evaluated 71 stocks and 4 potential bond additions. The portfolio is long 15 stocks, 1 Bond and short 1 stock.
Posts 21 to 27 were focused on the Q1 2023 earnings announcements, particularly of stocks in the portfolio and in the watch-list. You can read all about it in the previous posts here: https://www.claritech.app/blog
You can click on the charts, graphs or illustrations to expand or zoom in. There is no remuneration received to evaluate specific companies or to add to the portfolio or the watch-list. The Amazon adverts you see are the source of revenue for this free blog (subject to purchases or subscriptions).
Economic data released last week
North America Economic Data:
US Manufacturing PMI for May projected to fall to 48.5 from 50.2 in Apr’23. Services PMI projected to rise to 55.1 from 53.6 last month.
FOMC Minutes of the May 2-3 meeting
US GDP grows 1.3% QoQ in Q1, revised upward from 1.1%
US Core PCE Price index in Apr’23 at 0.4% MoM and 4.7% YoY, the Core Personal Consumption Expenditure (PCE) Price Index measures the changes in the price of goods and services purchased by consumers for the purpose of consumption, excluding food and energy. It measures price change from the perspective of the consumer.
U.K and Europe Economic Data:
Euro area Manufacturing PMI projected to fall to 44.6 in May’23 from 45.8 in Apr’23, Services PMI in May’23 projected to fall to 55.9 from 56.2 in Apr’23
UK Manufacturing and Services PMI for May’23 projected to be 46.9 and 55.1 respectively, down from 47.8 and 55.9 in Apr’23.
The PMI (Purchasing Managers’ Index) is considered a leading indicator of overall economic activity.
UK headline inflation in Apr’23 at 8.7% YoY from 10.1% in the previous month. Core CPI rises to 6.8% from 6.2% in Mar’23.
UK Retail Sales up 0.3% MoM in Apr’23 compared to a -1.2% in Mar’23. On an annual basis, retail sales was down -3% YoY in Apr, the 13th consecutive negative YoY reading.
German GDP disappoints, falling -0.2% YoY in Q1 and -0.3% QoQ marking two consecutive quarters of negative QoQ growth.
Asia Economic Data:
China Lending Rate unchanged at 3.65% since August 2022.
Economic Data This Week:
Chinese Manufacturing and Services PMI data for May
EU CPI projections for May
EU Minutes of the Monetary Policy Meeting
US Non Farm Employment data for May’23
US Jobs opening data for Apr’23
Financial Markets:
The US indices finished a turbulent week on an upbeat note as market participants dealt with various economic indictors and uncertainty around the debt ceiling debate. Fitch put the AAA rating for the US on credit watch negative. Also priced in was the possibility of another rate increase by the FOMC in June, according to the CME Fed Watch tool the probability of a 0.25% rise was at 65% by Friday. Q1 GDP was revised upwards from 1.1% to 1.3%, initial weekly jobless claims came in lower than expected, while the PCE reflected strong consumer spending. Nvidia logged a 25% jump in price after its results and forward guidance and also fueled a rally in the Semiconductor sector (up 10% for the week).
Among the S&P sectors, Info Tech (+5%), Communication services (+1%) and Consumer Discretionary (+0.4%) were gainers while Consumer staples (-3%) and Materials (-3%) were the weakest. The Euro Stoxx 50 was flat as was the MSCI World Index for the week while the Hang Seng was down -5% (according to a Morgan Stanley report, this year has seen US$6Bn of outflows from long only funds of US listed Chinese stocks). Treasury yields rose, Dollar Index gained and Gold was flat in the week that was.
A look at gas prices in the US (which was one of the main drivers of inflation last year) and the crude oil stocks in the US.
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This series is for information purposes only without regard to any particular investment objective, financial situation, suitability or means. It is not be construed as a recommendation, or any other type of encouragement to act, invest or divest in a particular manner (whether explicit or implicit). We recommend that you are familiar with the terms of use.
Portfolio review:
1. Since inception of this series (14th Feb 2023), the portfolio is down -15.53%, while the benchmark is up +0.98%.
2. Risk measures: The portfolio has a Sharpe Ratio of -2.11, Sortino of -2.12 and a Standard Deviation of 1.71%.
3. The biggest gainers on the portfolio are Alphabet (+39%), Tesla (22%), BMW (+14%), Glencore (+7%).
4. Nvidia is the largest detractor in the portfolio. Rise in the stock price of Nvidia (+39%), a short position (used as a hedge to equity exposure – read about it in post 14 here), contributed to a downward pull in portfolio performance. Without this hedge, this portfolio is up +2.3%.
5. Among the long positions, Deutsche Bank (-14%) continues to remain the largest detractor, followed by Citigroup (-10%).
6. Asset Class: Fixed Income, Real Estate and Cash have contributed to the positive performance of the portfolio. While the long positions are up 3%, including the hedge, Equities are in the red.
In summary, since inception the portfolio has under performed the benchmark, particularly in the last two weeks, largely due to the strategy in equities.
Allocation:
1. Regional allocation: Europe 39%, North America 52% and Asia 9%
2. Asset Class allocation: Equities (33%), Fixed Income (23%), Real Estate (4%) and Cash (40%)
3. See illustrations below for Portfolio Holdings and Allocation.
That’s all in today’s post, in the next post I will evaluate the Q1 earnings of Nvidia and decide if I should hold, reduce or exit this short position in the portfolio. Also, is there some way I could have decided this earlier?
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