Portfolio Review: CY2020

Portfolio Review: CY2020

One of the best things I ever did (in 2016) was invest in a fund that focuses on fast-growing businesses.  Even asides from the actual performance of that style, this decision has made it much easier to stay emotionally grounded when the market is ripping higher. The benefits of that were extremely obvious this year.

Coming back to the market in the past month after 8 months or so away, things look wild. The mindset has changed drastically. It’s very different to where we were in December 2019, or even May this year. A large portion of share price returns appear to be due to paying a higher multiple for the same dollar of earnings. Many things now look “insane” instead of just “frothy”, “spicy”, or “expensive”.

I don’t spend a lot of time looking at stocks these days, but I still keep an eye on performance.


Calendar year 2020 returns were +2% for the year with an average of 45% cash.  Returns were +9% in constant currency terms (i.e. a -7% currency headwind) due to a rising AUD.

Current positions:

This is what I currently hold, as of 19 December, with no changes since then:

Positions as at 19.12.2020 in AUD-equivalent terms.

Performance Review:

Recognising the possibility of coronavirus becoming A Big Deal in early Feb, I sold the riskier parts of the portfolio and ended up with a >60% cash position. I began researching and made incremental decisions, buying more as stocks got cheaper.  As the fear wore off, I increased some position sizes (Flughafen Wien) at higher prices as well, but I didn’t do nearly enough of this.

Work became extremely busy at the same time (March-April), and staying up til 1am researching became infeasible. The result was that, although I still had about 45% cash, I wasn’t able to deploy all of it.  Apart from the Aussie stuff which is new, positions in the chart above broadly haven’t changed since April, and you can see my position sizing errors straight away.

I didn’t buy nearly enough Flughafen Wien, didn’t buy enough Twitter, and I should have bought a fair bit more IBKR. Each of those should have been >6% initial positions compared to ~4% currently (after >30% gains). I’m overall happy with my returns but inadequate position sizes and too much cash cost me a couple of percentage points.  Relative to the S&P 500 and the ASX200, returns since March have been very poor.


  • I should have been A LOT more aggressive on some positions.
    • Didn’t buy enough at higher prices coming off the March lows.
  • I didn’t have enough time to get comfortable with some promising ideas.  Spotify was one I spent a lot of time on with colleagues, that and looking at how aggregation is evolving (video, music, games).  I didn’t buy it and I didn’t write about it either.  Disappointing.
  • Carried too much cash into a boom.
    • To be honest there’s an aspect of hindsight here “the market went up a lot therefore I should have been a lot more long”.
    • I still think it’s about 50-50 that this amount of cash was the right decision for me. An economic recovery was not (and is still not) a given. Stock prices are generally out of line with fundamentals in many places.
  • I bought stable businesses with strong cashflows and attractive FCF yields, which did not go down as much in March, and also did not go up as much post-crash. This certainly resulted in lower returns relative to the main indices.
  • Distressed businesses get hit disproportionately hard by economic upsets, something I learned in March.   Even so, you can see that Scorpio Tankers (STNG) has had a nearly 50% decrease in its debt to equity ratio due to high cashflow in the first half of the year.

Some businesses are priced in a way that future earnings will never justify the current market capitalisation.  In 15 minutes I could name ~20 stocks where investors are likely to lose >80% of their money in the next few years (TSLA, NKLA, BYND, AMD etc) – there are probably dozens of them.   From what I’ve observed, public equity price multiples now exceed VC/private equity multiples for the first time in many years.  This suggests to me that we are getting pretty deep into mania.

Next Year:

There’s an obvious disconnect between plausible earnings prospects and stock prices in some parts of the market, including one stock I hold, Booking.Com (which I need to revisit).

I don’t have much else to tell you, to be honest.  Investing’s hard at the moment.  I’m keeping my hurdle rate the same, at >8% a year.  I don’t have any intrinsic interest in buying a stock for a 5-6% return as I could buy an index fund with similar expectations. I still think there are opportunities in:

  • Distressed businesses.  Unfortunately in the US, heaps of these still trade on 30x earnings, but there are pockets where unloved businesses can be found.  NYSE:CRC and NYSE:TAP are two examples from this year.  (I used to hold CRC and sold it in March…disappointing).  COVID is likely to exacerbate under-investment in oil tankers.
  • UK and Europe.  Most US businesses I look at are a “no” on valuation grounds, or because growth appears to be slowing just as expectations are accelerating (Pinterest is a good example).  UK and Euro businesses I come across generally look reasonably priced.
  • Emerging markets value stocks.  I pirated that idea from a few other people so it’s not originally mine. A couple I’ve looked at were Gazprom and Kina Securities.

2021 is shaping up to be extremely interesting.  My suspicion is there’s disappointment in the post for quite a few parts of the market. Sezzle also has a few questions to answer.

Food for thought.

I currently hold positions in every stock shown in the diagram in this post. I also hold a tiny position in Pacific Green Technologies (PGTK), which is not shown. This is a disclosure and not a recommendation.

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