2021 Year end review
Hello,
For my year in review, the main thing I did this year was start this newsletter. I am humbled and happy that people read it.
Early 2021, I was in a bad place because I saw covid restricting my life, especially living in a very dense urban area, no car and being very limited and restricted, me that likes exploring the city and the surroundings a lot.
Luckily, somehow I got the idea to stop focusing on covid and to start blogging about my stock picks. I simply had to document what I was doing, the rare stocks I was buying that did not interest many people in the Francophone online sphere.
Blogging about stocks opened several things for me:
Giving me an great goal: Instead of feeling restricted and doing nothing or just researching, I was creating something.
Meeting some awesome investors, who blog or not - and their ideas.
Improving my stock understanding through feedbacks (liquidity, IFRS leases, Capex). The community is so smart as a collective because there is always some person who finds what is missing, or who owned the stock 5 years ago, or knows a comparable company, it is crazy.
Focusing on my back-end watchlist and tools: writing means organising, so I formalised my notes, my watchlist.
A perspective towards a side or full activity in the long term if real value is created from my ideas.
2021 Portfolio return
I am not comfortable revealing the whole portfolio publicly but here is my review.
2021 was very good, up about 30% net. 2020 was “bad” for me because I ended flat, but still ok for me knowing the circumstances.
In 2020 I planted some seeds that ripped higher in 2021: Bank of Ireland and MTN Group (analysis of MTN is available on the substack). They were just absolutely ridiculously cheap and rebounded hard.
in 2021 I did not have things that imploded lower like last year because of Covid. Things stayed at worst more or less flat. And the good things helped to make the performance. This is because I now mostly avoid “turnaround value” .
I had one bad stock, Pax global, that I sized conservatively at 1.5% of the portfolio. It is not a turnaround but a solid growth company affected by geopolitical tensions and presumption of Fraud. The impact was minimal and I sold at a loss. I still like the company but switched to a similar priced opportunity.
in 2021 I made some good returns with quantitative+quality investing. Quantitative with the PE or P/FCF and quality with a sector selection (Health and consumer services). Some things in Poland like Sausage maker Tarczinsky, Toya. Same In Hong Kong with Modern Dental (idea by Global stock picking that I bought quite low) making a big part of the performance, Tianyun, Lam Soon. All these were based on safe sector+cheap. For this reason I maintain an automated watchlist of defensive stocks. I am not sure that this type of easy value trades will be available each year.
I increased my allocation to Oil and Gas, as always from a defensive perspective. Oil inflation is probably my worst fear economy wise.
I had a bit of turnover but this is what happens when you follow a quantitative watchlist and discover new investors who share great ideas.
While my portfolio went up, the permutations, the stocks I discovered by myself and from my network, made that at year end the portfolio is much cheaper than in January, with also more dividend income.
Lessons learned:
Quantitative (low P/FCF or P/E) seems to work if you apply an industry filter
Poland, Turkey, HK, Singapore are cheap: It’s much easier to pick up bargains there. Just plain value without hidden assets or catalysts.
No matter how deep the knowledge of a stock is, it can blow up due to a black swan → I saw 100 pages decks and the stocks still went down. And the decks were not proven wrong! simply some political move hit the stocks.
2022
Investment:
The portfolio is very cheap with over half under 10 PE and the rest not far from 10, and they are defensive stocks for the most part. It never had a better risk reward at year end in my opinion.
I have over a hundred names in my spreadsheet, added through ideas from others, and I want to manually assess them and write internal or external notes. I have screened a lot, followed a lot. Now I need to focus on deepening my knowledge of the stocks selected. They are so many ideas on the internet if you take a global approach, and I need to slow down an re-center, sort things out on a spreadsheet.
If value rips a lot, I would reassign to Garp tech after careful analysis of the prospects of the companies. So i have to build a small tech watchlist. I know some names but I have to really analyse the moat. I will probably switch to tech when everyone will be switching to value!
I am very careful about the macro. I think the consequences of Covid economically can still surprise us. I avoid cyclicals like construction, cars, even home renovation. I may miss some opportunities but looking worldwide there are enough opportunities in defensive segments.
Japan: Im going to abandon it. too deflationary/slow growth/overcapitalised/complicated. The difference with EMs where they are just in the process of building new industries is visible in company reports. I will only follow @cachethatcheque dividend portfolio just in case there is a bargain, and my current watchlist.
Newsletter:
I want to grow readership, but I am happy with the current pace. I know that value/EMs/small caps will only become popular if tech underperform badly.
I will probably write a bit less in order to have 1-better quality and 2-more focus on the watchlist of new ideas. Initially I was very excited to share some of my holdings, and now that the basis is established I can take my time a bit more.
Thanks for reading ! Happy new year.