Originally published November 22, 2020
November is a big month as I have rebalanced the portfolio, and added a couple of new positions all in an effort to set up the portfolio for the next six months. I don’t like trading in and out of positions except when rebalancing and prefer to keep things simple for as long as possible. The more trades you make the more likely that your annual returns will fall. Two rebalances a year are sufficient to keep portfolio volatility in check.
Portfolio Rebalancing
This month I continued to concentrate on strengthening my Health sector positions by diversifying out of drug discovery positions. I have added Quest Diagnostics (DGX) which is a diagnostic company that provides diagnostic testing services and analytics. This stock is unknown to most, and among other activities, is currently involved in Covid Testing in the USA. Another addition is Intuitive Surgical (ISRG) which is the maker of robots that now take care of a lot of simple as well as more complex surgeries. Its years ahead of the competition and basically enjoys close to a monopoly in its field. Both of these positions score very well in my professional screener.
I sold off THOR which has underperformed more recently, although it was nice to have during the crash as everyone was buying RVs, and its stock went for a run but the effect was not sustained. Next year could still be a great year for RVs but it’s a little uncertain. I replaced THOR with Alibaba (BABA), which is basically the Amazon of China. Its stock has been under pressure lately due to its ANT spinoff, which the Chinese government recently blocked. The stock may continue to be out of favour for a little while but the rise of the Chinese economy is somewhat unstoppable. I think every portfolio should have a Chinese stock. My stock screener scores BABA very high and the diversification quality that it will bring to the portfolio is priceless. Its also BIG, like really BIG, almost 700 Billion $ big.
Some of you watched as Biogen BIIB rocketed up 40+% in one day after initial approval of their Alzheimer’s drug, only to be un-approved shortly after causing a bigger drop back down to earth. By luck, I sold 1/3 of my position after the rise as it just so happened to align with my diversification strategy. Luck unfortunately plays a big role in every investor’s portfolio, you win some, and you lose some.
Going Forward
Political Influences
Although there seems to be some conflict with the US election results while at the same time the pandemic runs amuck across North America, there may be light at the end of the tunnel with an emerging new president and promising covid vaccines. But as previously mentioned, there certainly can be some big volatility up or down if things don’t work out as planned. The historical data suggests that the inaugural year of a new Democratic president with a log-jammed senate and house is really good for stocks.
The fear that Sleepy Joe to turn America into a socialist country likely won’t come to fruition due to the split house and senate and as a result, everyone will rejoice in relief and therefore the market will go up (best case scenario). But what if he turns the senate? What if he can’t reign in Covid? What if he can’t make everyone happy? Oh my! Anything deviating from the best case is not the end of the world, it just means that it’s going to be more difficult to plan a strategy going forward. It’s still a little early to try and predict 2021 with all the known moving parts.
Observations
With very little year left, the portfolio is picking up steam with the help of some market rotation. The beaten-down stocks purchased in March are finally moving up fast and are starting to make a difference. An 8% beat is huge and makes all the previous strategic trading worth the work. As I have said before, finding opportunities in the market under normal conditions is difficult as everything is priced efficiently. When there is havoc in the market and people are panicking, you can find lots of opportunities as long as you keep emotion out of the equation.
My portfolio weighting is overweight (relative to SP500) in financials, and industrials (to a lesser extent). I have underweighted technology a bit, as well as utilities (completely missing). Tech has done phenomenally and is by far the biggest sector component in the SP500. Will it continue its run? Hard to say, but nothing wrong with selling some off and picking up bargains in the financials. The industrials are overweight mostly due to earlier covid bargain purchases of Boeing and Delta.
Happy investing.
Marc’s Monthly Moves
| Buy | Sell |
| Intuitive Surgical Inc (ISRG) Quest Diagnostics Inc (DGX) Alibaba Group (BABA) | Thor (THOR) Novo (NVO) – Some Biogen Inc. (BIIB) – 1/3 |
Marc’s Portfolio YTD Returns
- Portfolio return 19% (Including currency gains)
- Portfolio return 18.2 % (without currency gains)
- SP 500 return 10.1%
Portfolio beat the SP500 by 8.1 points.
Money with Marc 