As a reader of this blog you probably know most of the stocks that I own since I’m keeping track of my purchases and sells on the portfolio page. But just a list of stocks doesn’t tell the whole story. How big the various positions are in absolute and relative terms is for example very important from the portfolio perspective, and just looking at a list it’s for example hard to see how the companies are distributed geographically or how they are valued on average. So lets start with an overview of the positions of my portfolio:
Almost everything you see in this list is something that I have discussed previously on this blog. I’m quite content with the number of positions and their sizing. If I would start from scratch I would probably size some of the positions lower down on the list slightly different, but don’t think it matters a whole lot if a position is 4 or 5 percent of the total portfolio. Not a single one is so big that I would lose a night sleep if it would go to zero, but I certainly don’t think that’s likely for the bigger positions. Berkshire Hathaway is a diversified conglomerate with a solid balance sheet that would probably do relative well if shit hits the fan. Asta Funding has most of the balance sheet in cash while Alternative Asset Opportunities should have returns that are uncorrelated to the market. Hard to see how these could turn out disastrously. The first real risky positions are, in my mind, Conduril and Salem Communications. They have a weaker balance sheet, but Conduril is nicely profitable while Salem Communications is deleveraging and generating tons of cash flow.
The amount of cash that I’m holding is probably also a good subject to talk about. Compared to some value investors the amount of cash in my portfolio is low, and this is actually a highish level for me. I just happen to have some cash because a few special situations recently liquidated, but it’s my goal to be more or less fully invested as long as I’m able to find undervalued companies or attractive special situations.
Having said that: if you would look at my portfolio on a look-through basis I do have a lot of cash, but it’s at the level of the individual companies. ASFI, Rella, Solitron, Deswell, OBIC and ALJ are all companies with roughly their market cap in net cash, and some of the other companies on the list also have a solid liquidity position. It’s a bit too much work to calculate it exactly, but I estimate that effectively ~35% of my portfolio is in cash or cash like securities. My hypothesis is that as a result my portfolio would do relative well in a bear market, especially since I also have a few small short positions that reduce my market exposure.
Closely related to the number of positions and their sizing is the diversification of the portfolio, so time for the second graph: an estimate on how the various businesses are located throughout the world.
Given the fact that my two biggest positions are located in the US it’s not a big surprise that I have a lot of exposure there. I don’t really care how my exposure is exactly distributed around the world, but I don’t want to be too concentrated in one single region. I would prefer to own a bit less in the US and probably a bit more in Europe, so if the opportunity arises I wouldn’t mind swapping a position in the US for a new position in Europe. I also have to note that the above diagram is a crude representation of reality. It doesn’t account for companies exporting to, or being active in, other countries. Allan International gets for example a lot of revenue from Europe, but since the manufacturing facilities are in China I decided to put it in the China bucket.
I could create a similar diagram with regards to my exposure to various industries, but don’t think that’s really useful since the overlap in sectors is minimal in the portfolio. This is unless you go to a very broad classification and put for example Berkshire Hathaway and Asta Funding both in the financials category. While that’s technically correct I don’t think that would provide any useful information since both businesses are totally different. It’s not very different from putting Microsoft and your pop-and-mum grocery in the same category.
The biggest overlap is in the (life) insurance sector. AIG and Delta Lloyd are both active in the life insurance business and Berkshire probably does have some correlated exposure as well somewhere in their insurance and reinsurance businesses. Given the fact that AIG and Delta Lloyd are both relative small positions and Berkshire is also doing a lot of other things I’m comfortable with my exposure. But it’s unlikely I would invest in a new insurance company without exiting another.
To finish this post, some questions for my readers:
- How do you perceive the riskiness and the diversification of the portfolio?
- Did you find this post about my portfolio composition interesting?
- Anything else you want to know about my portfolio?
Obviously long everything discussed