2018 Portfolio Closed
The Stay Invested portfolio was UP today +55.27 (+0.05%)
Overall GAIN/LOSS YTD: -$13,144.35 (-11%)
Our benchmark index, the S&P 500 is DOWN Year-To-Date (-7.03%)
"Never be afraid to re-invent yourself.”
-Clay Baker
I made my buys for the year on December 28, 2017, see the new portfolio here (Click Here).
Closing Out The Year
The 2018 portfolio has been closed, we now begin a whole new chapter in our investing with $ 68,479.74 in cash to buy our new positions.
The numbers in the headline aren't pretty and I make no apologies or excuses for the performance. Basically we lost 4% more than the broad market, so we neither grew or preserved capital.
The portfolio was designed to forget previous years by zeroing out and starting new every January. In 2016 the portfolio was up +$118,739.22 (+35.35%). In 2017 the portfolio was up +$266,011.02 (+45.56%). If I had been running the portfolio with carryover from year to year we would look pretty good right now. Going forward I will carry forward gains and losses, so 2019 is essentially the beginning for us all.
2019 Changes
I'm making some changes for the new year. Since mom is no longer with us the original purpose of this project needs to change but will remain a legacy to her inspiration for this blog. Below are some changes you can expect:
The name has changed from Mother's Little Helper to Stay Invested
The portfolio value will carry forward gains and losses at year end
Investments will focus on growth
I will provide more analysis or a thesis for the stocks I put in the portfolio
Instead of a permanent Buy & Hold strategy, I will be buying when prices are attractive and holding until we reach predetermined exit prices. In previous portfolios everything was bought in January and we held until December. This year we'll buy in tranches, adding to positions as prices decline and selling when over valued or cash is needed for other investments
The portfolio will be more concentrated than in past years
I will hold onto the S&P 500 index fund and the Gold fund
Every investor must look at their own time horizon and tolerance for risk before making any investment decision. An older investor should be focused more on income producing investments while a younger investor can take more risk. The stock market will always be the greatest wealth creating machine, but I have to say, cash investments look pretty good right now. CD's in particular are great short term investments that are starting to pay a decent return with no risk.
Keep Me Honest
Jump below and see how my 2018 calls turned out. I dislike the pundits on TV making calls about the markets and never being called out for their mistakes. I created this section to measure myself. 2018 wasn't a great year for my calls, wins were big but so were losses. Overall I was overly optimistic in a market where negativity would not relent to the good data. That isn't unusual when stocks are priced to perfection and only 'blow out fantastic' earnings calls can produce more gains. With the reset in the latest market correction I'm looking forward to a good 2019, but nobody should expect 2019 to look like 2017.
Stay Invested,
Clay Baker
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Keep Me Honest
I am attempting to keep track of my calls and predictions by logging them at the bottom of every post.
Bond prices will decline as a result of rising rates and a Dollar Shortage.
Bond prices move in inverse to bond rates. As rates increased prices declined. But most investors don't buy US Treasuries directly, they buy bond funds. Looking at a popular long term bond fund we can see that if you bout the BND in January 2018 and held it all year the price per share declined from $81.34 to $79.01. The YTD return had been a dismal -1.95%. Whereas an inflation protected, short-term bond fund like Vanguard's VTIP cost about the same to own and delivered +.36% return, or 3.24% annually.
Invest in China stocks. NetEase, YY, JD, Baidu, Alibaba, mobile phone services and makers, and China BioTech
I've been overly optimistic that tensions with China would either be resolved or investor sentiment would change. Chinese stocks across the board have been decimated. Let's look at each stock to see how they did.
NetEase: YTD declined 31.34%, but is up 20% since September.
YY: YTD declined -46.40% and may have more room to fall.
JD: YTD declined -47.59%.
Baidu: YTD declined -30.76%.
Alibaba: YTD declined -19.34%
Invest in Whirlpool (see Whirlpool caveats above), Kohl’s, Costco Wholesale, Home Depot, Dollar General and Casey’s, Ingersoll-Rand, Illinois Tool works, Paccar, Honeywell, and DowDupont, PayPal, Square, Goldman Sachs, Citibank, Bank of America, JP Morgan, DBC, Apple, Microsoft and Caterpillar.
There was a lot going on in this series of calls which were from several posts, let's look at each one. Overall had you invested in all these stocks at the beginning of the year and sold today your NET loss would have been -1.13%; significantly better than the S&P 500. The banks were a huge disappointment and are now selling below book value. Anytime you can buy an investment bank significantly below book value its a win. Banks traditionally sell at a discount to the market, about 75%, they are trading well below that discount now, mostly on sentiment.
Kohl's: is UP +19.97% YTD
Costco: is UP +8.55% YTD
Dollar General: is UP +15.12% YTD
Casey's: is UP +13.23% YTD
Ingersoll-Rand: is UP +2.10% YTD
PayPal: is UP +13.09% YTD
Square: is UP +61.15%
Microsoft: is UP +17.36%
Average +18.82%
Whirlpool: declined -36.39%
Home Depot: declined -10.19% YTD, but if you had bought at the lows you would have beaten the YTD decline.
Illinois Tool Works: declined -25.25% (hit hard by autos and trade wars)
Paccar: declined -16.83%
Honeywell: declined -10.95%
DowDupont: declined -25.55%
Goldman Sachs: declined -36.01%
CitiBank: declined -30.35%
Bank of America: declined -17.38%
JP Morgan: declined -9.45%
DBC: the Invesco DB Commodity Index Tracking Fund declined -13%
Apple: declined -7.68%
Caterpillar: declined -20.29%
Average -19.95%
Goldman Sachs slides to around $210/share
Wow did I miss this one! Or did I? I called for a slide, it just went a lot further down than I expected. Goldman Sachs closed today at $163.03. With a book value of $197 this is a significant discount. I've heard some analysts calling for further declines as deep as $140 due to an overseas scandal. But that was back when the stock price was at $151.
Proctor & Gamble, Coca-Cola, Merck and Pfizer will go lower as rates rise.
I got this one right but for the wrong reason (call it luck). All three companies declined YTD, but not because of interest rates. All of these companies pay a great dividend, so even with the declines I would have added to shares to lower the cost basis and collect more dividends.
The Chinese yuan will replace the dollar in international trade. Not this year, but it will happen in coming years.
Yet to be seen. China is working to become the worlds largest economy and the Trump administration is attempting to stop that from happening. Displacing the dollar would be disastrous for the U.S. but if our debt levels continue to increase and China manages to gain trust internationally, its hard to see this not happening in my lifetime.
The DOW will close the year with 9-10% gain.
YTD the DOW is down -6.70%, big miss.
The S&P 500 will close the year at 2900-3000.
The S&P 500 is at 2475, down -7.03%, big miss.
The portfolio will generate about $2,065 in dividends.
Total dividends were $2,099.21
M&A of drug companies will increase over the next 24 months.
2 year call, this was weak. But how did we do this year? While there were a couple of blockbuster deals the year was fairly quiet. Biotech investors are hoping 2019 will be a year of merges and acquisitions as larger drug companies look to replenish their pipelines. The top 10 deals can be viewed here https://www.genengnews.com/lists/top-10-ma-deals-of-january-june-2018/
Healthcare, technology, industrial's and financials should outperform through the remainder of the year and into the high of next year.
Healthcare carried portfolios this year with a 3% gain while all other sectors were negative for the year. Ultilities squeezed out a minor gain right at the end of the year as a safety tarde, but is quickly giving that up. Technology, industrial stocks and financials broke down with energy being the worst performer.
JP Morgan, SunTrust, KeyBank and Visa perform well through remainder of 2018.
JPMorgan declined -9.45%, SunTrust Banks declined -22.93%, Key Corp declined -27.57 and Visa is UP +14.84%. The banks have declined dramatically on bad sentiment while the payment processing financials have excelled. There's nothing wrong with banks, it seems we're just not over the financial crisis and aren't ready to accept that they have good business operations that are well protected by reserves.
Disclosure: I am personally invested long in some or all of these funds that appear in the Mother's Little Helper portfolio or manage these investments for my Mother's portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the MLH portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. Since I may on occasion discuss Bitcoin and other cryto currencies I disclose here that I personally own investments in the cryto-currencies listed here: AMZN, DBC, VTI, VWO, VEA, VIG, XLE, MUB, TBT, GLD, Bitcoin, LiteCoin
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.
