It’s the first of July and that can only mean one thing: it’s time to look at the performance of my portfolio so far. I think 2016 has offered the most challenging environment for investors since I started this blog, although that is more indicative of the lack of market turbulence in the previous years than the seriousness of the crises this year. In the middle of February things were not looking very good with global stock markets and my portfolio down roughly 10%, but both managed to recover. Last week was interesting as well with the unexpected negative result of the brexit vote, but fortunately(?) the market impact (so far) is smaller than I expected.
* Return in euro’s after transaction costs, dividend withholding taxes and other expenses
** Benchmark is the MSCI ACWI (All Country World Index) net total return index in euro’s
As you can see the MSCI All Country World Index (measured in euro’s) is down a tiny amount while my portfolio is up in the high single digits. I think this is a fantastic result. In absolute numbers it’s already more than satisfactory and compared to the benchmark it’s really great. I always wrote that I expect that my portfolio would do relatively well in a bear market, and it’s good to see some confirmation of this. I should add that I’m actually under-reporting my performance somewhat since my brokers values CVRs at zero even though I spend money acquiring them (e.g. ALXA). This subtracted approximately 64bps from the results.
I’m pretty happy with the performance of the majority of my positions this year with Conduril being the obvious exception. The stock dropped 45% from a price of €56/share at the start of the year to €31/share now. There are some good fundamental reason why the stock has been getting cheaper, the main reason being the big exposure to Angola that isn’t doing too well since oil prices dropped. At the same time the stock is now trading at just 37% of NCAV (if we include some loans to Portugese companies that are classified as non-current assets). Because of that I decided to increase my position in the stock recently, although I’m at the moment not as willing to bet big on it as a few years ago. At that time it was also very cheap, but with less assets and (way) more earnings power. Now the distribution of possible future outcomes is more binary which makes it sensible to allocate not too much capital. Also nice to see is that Retail Holdings is at the top of the list with regards to performance since I called it my best idea for 2016 on Seeking Alpha.
As you can see my portfolio is currently positioned conservatively with a big allocation to special situations (that usually are less correlated with the overall market) and cash. While my allocation to special situations varies throughout the year I think this is reasonable representative for the first six months of 2016. I think I can be pleased that assets that made up just 25% of my portfolio generated the majority of my overall performance. Unfortunately I cannot simply allocate more capital to this category because there are usually a limited number of attractive deals in a given time period that I can find. Kahala Brands is for example accounting for roughly a third of the special situations portfolio right now which is certainly as big as I want to go. If anything that might be a bit on the too big side already since the spread has already narrowed significantly since I first posted about the idea. But with an expected close in roughly one month time while the spread is still 6% selling just feels wrong.
Long everything in the portfolio overview