Q1 2022 Portfolio Update
performance reviews and reflections
The portfolio was down 8% over the first quarter. This is in the same ballpark as the S&P 500 which is down 5%. I’m not sure if this means anything over such a short period. Over the past 12 months, the portfolio is up 15% while the S&P 500 is up 16%. Over the past 3 years the portfolio has returned 72% against the S&P 500 return of 57%.
The last few months have been a bit of a roller coaster. If you were to watch the performance daily, it would be gut churning. Weekly observations would still be tough to swallow. If you only looked once a month… “meh; no biggie”. It’s been a good lesson to disconnect most of the time and spend the time on what matters: watching the businesses and how they are performing and what their forward prospects are.
A Shift to Quality
I’ve recently been thinking more about business quality. Now that I’ve been fortunate enough to accumulate a reasonable amount of capital and I have been blessed with a good steady and high income from my day job, my focus has shifted away from simply reaching for high returns towards a better chance at good returns over the long term. I still want to hunt for opportunities in microcap businesses that may be under followed. But I also want to have a core holdings of some of the best businesses available when they become reasonably priced.
Over the past few months, I’ve sold a few of my lower quality businesses and amassed some well known businesses with long histories of high quality operations. I bought the following new small positions:
$spgi - S&P Global
$mco - Moody’s
$v - Visa
$adbe - Adobe
$tmo - Thermo Fisher Scientific
$dhr - Danaher
I sold out of $patk Patrick Industries and sold a small portion of Altria $mo and most of my remaining Berkshire Hathaway $brk.b (blasphemy, I know).
The Minor League
I have been thinking of how to treat the smaller, less well known, and under-scaled or unproven businesses. I’ve been thinking of treating these more like a minor league farm team roster. The few that perform over the years will become bigger positions and new capital can be allocated if they’ve earned a position in the “big leagues” of my portfolio.
These are a few of the businesses I’d like to learn more about for one reason or another. I’ve either heard some smart people talk about them or seen some clues that they might be great businesses. Some might end up being in the “too hard” pile and that’s okay too.
$glxz Galaxy Gaming - 100 m$ microcap in the i-gaming business. A secular growth trend is underway in the industry and the business is asset light and high margins with decent growth prospects. Need to dig into it more.
$pool Pool Corp - a formidable compounder for the last decade or more. Small cap that distributes parts and services that go with the new build and maintenance for pools.
$otcm OTC Markets - a well run high margin and asset light business with float and no need for new capital to grow. Basically a monopoly in its industry covering the “over the counter” stocks.
$cts.to Converge Technology Solutions - a small cap serial acquirer in IT software, cloud solutions and cybersecurity.
That’s it for now. Keep an eye out for some new write-ups on these future prospects over the next few months.
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