Review: 2018

This is what my portfolio looked like at the beginning of 2018.

chart

This is what it looks like at the end of 2018.

chart (1)

A few changes that immediately jump out are:

  • I am completely invested at the end of 2018. Since I started dabbling with investments, I almost always had ~ 25% cash. I liked to keep cash because I thought of using it when the markets crashed. I was completely invested in 2012. And, crash or not, I am completely invested now.
  • I went from holding 14 stocks to only 7. I like to think that this is a by product of discipline and not buying things I do not understand. A lot of companies that I was holding at the beginning of 2018, I will never invest now. For example: Silverchef, LSL Properties, Rolls-Royce etc.

At the end of the year, I am holding the following companies.

  • GOOG: I can’t add to what has already been said many times about the significant moat Google has. In my opinion, YouTube is a significantly undervalued business and cloud/self-driving are some bets which might pay hugely. On top of this, Google sells cheaply for a cash adjusted forward PE multiple of 19 and grows at ~ 20%. If you compare Netflix & YouTube, you can ballpark how much YT is worth. People watch ~ 1b hours of YouTube per day! I estimate the value of YouTube to be at least $200b.
  • Facebook: Lots of bad news this year. The stock got hammered and I was able to correct my mistake of not buying FB at ~ $25. On the plus side, now they have a proven business model, make a lot of money, have $40b in cash and grow at ~ 40% YoY. Currently, FB sells at cash adjusted 18 times forwards PE. This is even cheaper than Google & FB grows more quickly.
  • Hikma Pharmaceuticals: I bought Hikma in March after it got kicked out of FTSE250. This is an owner operator and the family owns ~ 25% of the shares. They have three equal sized businesses: Branded Generics, Generics & Injectables. The bad news coming from the Generic segment drowned out the performance/moat they have in Injectables. The company just became too cheap to pass up. I invested big and luckily the stock appreciated by over 50% in the next few months.
  • Apple: Started buying again when the stock sold off in December. I bought it one day before the China sales warning. The thinking here is simple. They have a great eco-system. Their position wrt privacy is a source of moat which no other Software/Hardware companies offer and the products they design & sell are well thought out and a joy to use. The Watch 4 is getting rave reviews and I am not going to pass off a company like this selling for < 12 times earnings.
  • Booking: Booking has built an OK moat in hotel bookings in Europe. I started with AirBnB but have found myself using Booking more and more. One of the major reasons is that you get an immediate confirmation of your booking. Furthermore, the app/website is quite intuitive and easy to use. Unfortunately, Booking still competes on price and face significant competition from Google/AirBnB and also meta search engines like Trivago. This will never be a > 5% position for me.
  • BRK: Berkshire should be able to return 10% a year. And, I plan to keep this position as a safe holding.
  • DNOW: A well run company selling cheaply. This is the only company in the portfolio that I understand the least. But, I like the management and I like the numbers. It is a marvel to see how they manage working capital during downturns!

In order of things I would sell, if push came to shove, are: BRK, DNOW, BKNG.

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