Marc’s 2023 Annual Performance Review

January 2024, Newsletter

The end of the year is always a great time to reflect on one’s life and even more importantly, one’s portfolio. In a nutshell, my portfolio returned 21.86% but surprisingly, it did not beat my SP500 benchmark (24.23%), which is always the goal.  Thankfully, I lagged the market only by a small amount (2.37%). To be fair, you actually have to add about 1.5% of market dividends to the SP500’s 24.23% to get a total return of about 25.73%.  This means I lagged 3.87% in total, not what I expected, but also not terminal.

If you follow this Newsletter (which you should) you would know from previous editions that the market is very weird and driven by very few big name stocks.  So investors were at a disadvantage in trying to beat the market in 2023.  That being said, the risk associated to that weird concentrated market is much higher than what it appears.  So to end up just shy of the SP500 return with a much safer portfolio is worth something. In other words, sometimes you’re better off under performing a bit in order to lower your risk.  Its simply a better longterm approach. All in all, a 20 plus percent return is still a really good result, so I feel pretty happy about that.

Strategy Changes for 2024

As you can see from my “Monthly Moves” below, I have made some big changes and will likely continue to make a few more next month.  For the most part, I have unwound my previous strategy, in which I overweighted the Communications Sector and over leveraged the account. The right time to undo a strategy is tricky, but since the SP500 is near its all time high, I figured that this would be a good a time as any.

In addition, to unwinding the old strategy, I have started to position the portfolio to reflect the fact that there are some really expensive US sectors (Information Technology, Communications, and Consumer Discretionary) within the market.  The idea is to underweight those areas a little and become heavier in the cheaper areas.  The risk is that the expensive sectors could continue to become even more expensive while cheaper sectors do nothing or even fall. Craziness can surprisingly stay in a market for a long time. I will also continue to underweight US stocks, and overweight Canadian and international stocks.  While I’m at it, I’ll also do some house keeping and get rid of some really small positions, or positions that no longer align with the broader new strategy.

The Details

I have increased my Financial Sector by buying more Bank of Nova Scotia (BNS), which is an out-of-favour Canadian bank.  I have also significantly reduced my TD Bank (50% return), mostly because it has been falling in consumer satisfaction.  I plan to eventually be overweight in Financials.

I have sold Shell (94% return) and am now mostly nuclear with Cameco (CCJ) in the Energy Sector.  In the future I may invest in an alternative energy stock.  I still think that oil stocks will eventually rebound and are not going away any time soon, but in my view, nuclear has a better future.

I have sold off some smaller positions that were part of older strategies.  This includes Meta (96% return) and Delta (small insignificant gain). 

I sold VOX ETF (45% gain), which was the main focus of my successful Bear Strategy.

You may have noticed that I have not even added one new position for all these changes, but have instead only added to existing positions. Next month, I should be finished with all the changes, but again, will likely not be adding many new positions.  Its how the portfolio is structured that is more important than the individual positions after all. I plan to provide the breakdown of the final portfolio next month.

How did you do? Was is it a good year?

Marc’s Monthly Moves

Sold:

• Delta Airlines (DAL)
• Shell (SHEL)
• META
• 1/2 of TD bank (TD) 
• VOX ETF

Bought:

• More Bank of Nova Scotia (BNS)
• More Archer Midland Daniels (ADM)
• More CBRE

Marc’s Portfolio End of Year Performance

• Portfolio return: 19.6% (including currency losses)
• Portfolio return: 21.86% (without currency losses)
• S&P 500 return: 24.23%
• RSP ETF S&P equal weight 11.72%
• TSX: 8.12%

The portfolio underperformed its benchmark by 2.37 points. When dividends are included (1.5%) in the SP500, which they should be, the portfolio under performed 3.87%.