Put in $2000. Then purchased:
$300 for AMZN
$300 for APO
$300 for NVDA
$1524.19 for PAX
The portfolio achieved two milestones in this update. First, it finally exceeds $100k in value, so it is officially a six-figure portfolio. It may change back to a five-figure one a few days later, and that's okay.
Second, after losing to a hypothetical SPY-only portfolio for a few months, the portfolio came back with an IRR of 14.33%, which is more than the 13.91% in a hypothetical SPY-only portfolio. This beating was thanks to the recent strength in the REIT sector and CK Hutchison along with a corresponding weakness in tech. The cause of this phenomenon is the market expectation of interest rate cut in Sept that triggers a small sector rotation.
With their low long-term growth, REITs do not have much upside to begin with, and I was just mostly interested in their stability. With the recent strength in share prices, I do not expect any great opportunities to increase my stake short-term.
On the other hand, tech companies are getting more attractive. Amazon (AMZN) went down 10% after earnings, which enticed me to add more into the position again after more than a year since my last purchase.in 2023/02. I just gave it a buy below price of $178, so being able to buy it at $170 is not bad. This is an example of buying a great company at a fair price. I have no idea why the market thinks the earnings were bad. Its most important profit driving businesses: AWS and Ads, are growing 20% annually, and I don't see them significantly slowing down for a few more years.
I also started a new position in Nvidia (NVDA). It's the poster child for an AI stock today that needs no introduction. I am definitely late to the game, but not too late, hopefully. As Whitney Tilson said, the three most dangerous words in investing are "I missed it" (source). I don't expect Nvidia can double from here short-term, but I believe I can achieve at least 15% annual return by buying it at this price point. I gave it a buy below price of $113, so this is another move of buying a great company at a fair price.
Finally, I put the majority of the new money in $PAX. TRADE ALERT - International Portfolio July 2024 (New Investment) and a follow-up after earnings TRADE ALERT - Core & International Portfolio August 2024 by High Yield Landlord gave me a lot more confidence with the company. Two quotes from the 2024 Q2 earnings call are worth mentioning:
Our confidence in our business outlook is further demonstrated by the fact that Patria Holding Limited, or PHL, the controlling shareholder of Patria Investments Limited and the vehicle through which senior management of Patria stake is held, is committing to purchase up to an additional $12.5 million of PAX shares through the end of 2025 on top of the share repurchase program. As a reminder, PHL currently owns a majority stake of more than 53% in Patria. These actions, in addition to our intention to utilize up to $100 million of future PRE to fund M&A and/or pay down M&A related debt and now to potentially repurchase stock as well demonstrates that we will be flexible and opportunistic as we look to use our capital to drive profitable FRE and DE growth and long-term returns to shareholders while optimizing and maintaining a conservative balance sheet, which is of the highest priority and which Ana will review in more detail shortly. So even with the change of our dividend at the current stock price, the current yield is a solid of about 5%.
We expect FRE per share to rise to $1.10 and $1.12 for 2024 from our previous guidance of $1.09, which reflects our expectation that the 2024 year-end share count will be modestly lower than we had previously guided to as we issue fewer shares and we use more cash to fund M&A and related contingencies. Our 2025 FRE per share guidance comes in at $1.26 to $1.41 with a midpoint of $1.34. At midpoint, this represents a 20% year-over-year growth.We expected a strong FRE growth to also drive accelerated DE per share growth into 2025 as we move past from loaded M&A financing costs and excluding the DE impact of any performance fees. Overall, we are even more excited about the growth opportunity that lies ahead.
The management expects the FRE to grow 20% next year, which is very great given the P/ADE (my adjusted distributable earnings) is just 16.79x. It has a dividend yield of about 5%, and I expect it to grow its earnings per share around 12% annually. It is trading at such a great bargain for such a promising company that no wonder High Yield Landlord touted it as an investment with a "combination of high yield, upside, growth, and safety." PAX's management also has so much confidence in the company that they are committing to purchase more shares in PAX. In addition, PAX will also start repurchasing its shares. I will keep buying more heavily if the share price stays this low.
Transactions
Recent and upcoming dividend distributions
Portfolio
All-time return:
One-year return:
Portfolio IRR (calculation): 14.33%
Approximated IRR for an SPY-only portfolio: 13.91%
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
Brief analysis and latest updates here
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
NVDA
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
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