Put in $2000. Then purchased (also using the $900 plus change from dividends and interest):
$300 for APO
$300 for BABA
$200 for BIDU
$300 for BN
$584.25 for CKHUY
$801.7 for PAX
$300 for PYPL
$200 for SQ
With the Fed keeping the interest rate on hold and the inflation (PCE 2.6% from a year ago in May) still high, the market has not yet rewarded stocks which will benefit from a lower interest rate, that's why alternative asset managers that indirectly relies on cheap capital, utilities and REITs in my portfolio did not perform well. Not enough tech stocks also hurt the portfolio performance. The lower interest rate will come and even without that, steady growth from the companies will prove that they can reward shareholders handsomely with high dividend yields (due to low stock prices) and mid-single-digit annual earnings growth.
In this update, I added more into CKHUY (CK Hutchison Holdings) again because it is still cheap. There will be a one-off profit boost coming from the merger of 3 UK and Vodafone later this year or early next year, that will either give extra dividends back to shareholders or repurchasing shares.
I also heavily invested more in PAX (Patria Investments Limited). It's pretty cheap at P/ADE = 17.86x given the 5+% dividend rate and 12-15% annual earnings growth.
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Recent and upcoming dividend distributions
Portfolio
All-time return:
One-year return:
Portfolio IRR (calculation): 14.90%
Approximated IRR for an SPY-only portfolio: 18.75%
Individual holdings:
Breakdown by categories (real-time):
All-time returns for individual holdings:
Last prices:
Portfolio holdings conviction
The convictions in the table below reflects my current opinions and will guide the future contribution of additional investment to existing holdings. Stocks not inside the table are stocks with subpar return on equity that will be very unlikely to receive more contributions from new money (there can be exceptions for very cheap stocks).
Conviction in long-term prospects means how much I believe a company would match or outperform the market (e.g. S&P 500) in the long run. Valuation matters so the conviction generally corresponds to the neutral rating of Valuation. It has the following ratings: weak, moderate, strong
Valuation: overvalued, slightly overvalued, neutral, slightly undervalued, undervalued, greatly undervalued
Brief comments on individual holdings
ADC
Agree Realty is one of the lowest leverage triple-net lease REITs with a debt to EBITDA ratio of 4.9x. Its tenants are mostly investment grade (67%) retailers and restaurants. At the worst time of 2021, it collected 95% of the rents, which shows the quality of its assets.
One special thing about Agree Realty is its 14% portfolio in ground leases, which has low default risk, low cash flow, with short-term inflation risk, but long-term stable return. It diversifies the risk portfolio of the company.
Its acquisition and disposition ratio is 4.2% in 2021. The ratio is kept low for the past, which again, shows the quality of the assets, so that it does not have to sell many non-performing assets.
SQ
Paypal is the leading payment company online, and Square (or Block) is the physical point-of-sale leader with a market share of 22%. Its Cash app is doing great in fintech with a bright future. CEO Jack Dorsey's big bets on bitcoin ensures Block a distinct leader in the fintech world.
PYPL
Analysts expect Paypal 2023 EPS to be $4.94, and will grow more 15-20% annually for a few years. Its top line will grow at a high single digit as well. 2023 P/E ~ 13 is quite attractive. Paypal's economic moat did not change recently. Its neutral position in payments is a good counterposition for big competitors like Apple Pay, Google Pay, Visa, Mastercard, Zelle, etc. It's OS and payment network neutral. As a case in point, Paypal was accepted as a payment on Amazon.
Short-term catalysts are continuous growth of users in Venmo, shopping super app, and the cost cutting measure to make the company more efficient. The stock price is depressed now only because the market worries about its short-term growth.
META
Global Monthly Active User (MAU) above 2.8 billion. Facebook is the biggest social network in the world. There will always be people buying Facebook/Whatsapp/Instagram.
The economic moat is weakened by Tiktok, but Tiktok is not really a social network that connects users who are familiar with each other, but another variant of youtube, so Facebook is still the top dog in social networking, although user time spent is definitely hurt.
Given Facebook's investment in VR; optional values in Facebook dating, and Facebook shops; Facebook Pay and Messenger have good monetization potential; Instagram has a unique position for people to express themselves; the improvement in Ads Infra to compensate for the loss in Apple App Tracking Transparency, I believe Facebook will come back. Long term annual growth of 15-20% in earnings should not be a problem.
BRK.B
Berkshire Hathaway in the current form was found by my idols, Warren Buffett and Charlie Munger. I will try to buy more if it's not very expensive.
AMZN
The biggest e-commerce company outside China. Amazon is the top company in the cloud business. The prime memberships are sticky because of the great value. Its IoT devices, while not complete, are all very popular. Amazon also owns the largest ebook market including the ebook hardware reader: Kindle. Its advertising business is growing rapidly as well. It also has a huge potential in the medical drugs market.
Basically, Amazon has potential in a lot of daily life goods and services which do not require high-end technology. It challenges incumbents with high profit margins. Amazon is definitely a killing machine. The only drawback is that the stock is quite expensive today. Annual growth around 15-20%.
PLTR
Palantir is a big data analytics company that mainly services democratic governments in the West, especially America, the strongest in the world, for the sake of global peace and prosperity. I think it's a very bold statement that is not easily found in innovative tech companies in Silicon Valley. It also services large scale manufacturers, medical and financial institutions.
Palantir builds solutions for customers, so the service it sells often needs some long lead-time, which creates a natural barrier of entry. Once Palantir gets into the business process of a customer, it's sticky. Its support of the US military makes it stand out among other Silicon Valley high tech companies, which eliminates a lot of competition.
One saying is that Palantir and Google are two sides of a coin in terms of handling customer data. Google gathers a lot of user data but the usage is very restrictive, and it focuses a lot on privacy. Palantir, on the other hand, only processes data gathered by clients, to help clients "process users".
It is going to earn about $1.98 billion in revenue in 2023. Assuming a long-term profitability of 20%, that is about $400 million in earnings. With a market cap of about $35 billion, a P/E of 88 is too rich for now.
The nature of the business has a lumpy growth. The company should have no problem maintaining a 20-30% annual growth in revenue for quite a lot of years as expected by the management, mainly due to the needs of the government in big data and artificial intelligence.
OWL
Blue Owl Capital is an alternative asset management company, similar to Blackstone. Its focus is on direct originations of loans to private-equity backed and non-sponsored companies (middle-market and upper-middle-market companies). It has a net leases real estate platform. It also provides long-term minority equity and financing to private capital investment managers. A majority of the company's assets are funded by permanent capital, so it does not have withdrawal risk. Most of its earnings come from recurring fees from asset management without performance consideration, so the earnings stream is quite stable. Given it acquired STORE Capital (STOR) recently at a decent price, the management is very good.
Equity compensation related expenses were about 35% of DE that got added back into GAAP when getting DE. Its "true" EPS is about $0.1 per quarter, or about $0.4 in 2023. The P/E is about 30, not cheap, but not very expensive considering its growth is 15-20% annually. Another way to look at it is that its dividend yield is about 4.5%, and it's growing in double digits for at least 3+ years, which makes it quite attractive.
APO
Apollo specialized in distress situations, which reduced the number of competitors. Its famous slogan is purchase price matters, which shows how price conscious they are in picking investment. It has another slogan "we want 25% of everything and 100% of nothing on the asset", which is a goal post of the company about engaging in a lot of asset managing transactions even for other asset managers. It's a good way to position the company to have a large adjustable market. Their use of reinsurance company, Athene, helps them to grow assets under management effortlessly as well.
Expected 2023 EPS is $6.61, so P/E around 12, pretty cheap with an expected growth of 10-15%. 2.5% dividend yield helps a bit as well.
BN
With an IFRS book value of $52.36, Brookfield Corporation is trading at a 37% discount to book. With their asset management business and reinsurance company, they will be able to continue to earn stable cash flow to deploy into their attractive return opportunities from real estate and infrastructure. Mohnish Pabrai believes Brookfield has the best alternative management DNA (video, full interview), so I have no doubt this is a great company to own for the long run.
With their asset management business growing 10-15%, and their holdings in various real estate and infrastructure earning 10-20% annual return, it's a stock that can achieve an annual return of 15% easily given the huge discount to book.
BAM
The pure asset management company part of the Brookfield Corporation. With BN, BAM can grow its asset under management (AUM) easily. Oaktree Capital, founded by the famous Howard Marks, is part of it, so it's very reputable.
The management has already indicated they are locked in to grow its cash flow 15% annually for the next field years. Its management fees do not rely on performance that much, so they are stable. With an expected 2023 EPS of $1.39, P/E 25 is not cheap, but with the help of 3.8% dividend yield (close to 100% payout, thanks to the asset light business model), there is a fair chance the stock can return 15% annually.
BX
A very reputable company in real estate. Its management fees rely on performance much more than Brookfield, but Blackstone has a track record, so I am not too worried about it.
Expected 2023 EPS is $4.36, P/E ~ 21. A 3.5% dividend yield with expected annual growth of 10-15%, this stock can potentially get a 15+% return in the long run.
MPW
Brief analysis and latest updates here
CKHUY
CK Hutchison Holdings (OTC: CKHUY, SEHK: 0001) is a diversified conglomerate with interests mostly in telecommunications, retail, ports, infrastructure, and energy. The company was founded in 1979 by Li Ka-shing, one of Asia's richest men.
CK Hutchison is a well-managed business with a long history of profitability. The company has a strong track record of generating free cash flow, which it has used to invest in growth mostly by M&A, and return to shareholders through dividends and share repurchases.
CK Hutchison's businesses are all essential services that are not easily disrupted by new technologies or competition. This gives the company a moat that protects its profits and allows it to generate stable cash flow over the long term.
It is trading at $6/$18 ~ 33% of book value, P/E ~ 8, and a dividend yield of over 6%. The ADR costs probably $0.05-$0.1, which unfortunately is quite costly for lowly-priced stock like CKHUY.
HASI
Brief analysis and latest updates here
AHH
Brief analysis and latest updates here
EPRT
Brief analysis and latest updates here
MAIN
Brief analysis and latest updates here
BABA
Brief analysis and latest updates here
PAX
Brief analysis and latest updates here
GTY
Brief analysis and latest updates here
BNL
Brief analysis and latest updates here
WPC
Brief analysis and latest updates here
BIDU
Brief analysis and latest updates here
BXMT
Brief analysis and latest updates here.
On 2023/06/24, I bought it at $19.60 for the high dividend yield ($2.48 annually, 12.65%, ex-div date next thursday). It's mainly to cover the monthly fees for the Robinhood Gold membership. I do not intend to add more because its high leverage makes me a bit uncomfortable.
TSM
Taiwan Semiconductor is a global leader in chip manufacturing. It has passed Intel and is getting farther and farther ahead of Intel. It has a wide economic moat as a popular company in Taiwan beloved by common people. It's a national treasure.
With all technological gadgets today requiring chips to operate, including military weapons, its business is neverending. Supply problems are just small hiccups which do not hurt the fundamentals of the company.
Starting from the 2023/04/04 update, I did not intend to increase my stake any more because Buffett sold pretty much all of Berkshire Hathaway's stakes in 2023 Q1, and my exposure in VWO has included TSM already.
SPY, VWO, MCHI
ETF Brief Descriptions and Updates
