Quarterly Performance Review - Q2 2017

by: David Krejca


As I regularly research and present interesting investment ideas, I have decided to compose a brief performance review of my model research portfolio every quarter from now on.

Through this exercise, I want to build a credible track record of managing funds according to my investment philosophy and selected research ideas published here on Seeking Alpha.

Besides the summary statistics, every performance evaluation will be supplemented with key highlights of the model research portfolio holdings and events.

Dear readers and subscribers,

As in the previous quarter, I would like to start by expressing my sincere gratitude for your continued trust and interest in my research articles on various equity investment opportunities across the globe. During the second quarter of 2017, I received several interesting messages, and my Seeking Alpha profile page welcomed a significant number of new followers. This is a very encouraging feedback, which keeps me motivated to continue sharing interesting insights and keeping you updated on the progress my model research portfolio.

My Investment Philosophy

Continuously in the process of learning, I strive to develop an investment philosophy and establish processes that can last for decades. Although most of my research pieces and investments fall into the category of growth at a reasonable price, my overall investment philosophy can currently be best described as equity long/short focus investing.

Q2/2017 Summary Statistics

Now to the numbers. As measured by Interactive Brokers Group, the time-weighted return of my model research portfolio has reached a little over 19 percent in the second quarter of 2017. To put this into perspective, the predefined benchmarks - S&P 500 Index, the iShares MSCI EAFE ETF (NYSEARCA:EFA) and the Vanguard Total World Stock ETF (NYSEARCA:VT) - added 3.09, 6.38 and 4.25 percent respectively. Even though the portfolio's risk-return characteristics are significantly skewed in favor of maximum capital appreciation over the long term, the portfolio surprisingly did not end up as the loser in terms of risk-adjusted performance as was the case in the previous quarter. The equity curve and precise portfolio risk statistics for the second quarter of 2017 are captured in the outputs below:

As of June 30, 2017, the largest proportion of the model research portfolio's funds has been allocated to shares of the companies domiciled in North America (66.4%) and Asia (24.6%), while Europe accounted for about 8%. The allocation by sector has been led by Communications (~27% vs. 45% in Q1), Consumer Cyclicals and Non-Cyclicals (~34% vs. 29% in Q1) and Technology (~27% vs. 15% in Q1). The portfolio concluded the first quarter with 69 holdings (vs. 32 in Q1). Despite the great tide of new titles, the portfolio remained relatively focused, with the top 10 holdings accounting for approximately half of the model research portfolio.

Key Portfolio Highlights

  • EV boom investments - During the second quarter, I decided to double down on Tesla (NASDAQ:TSLA) and BYD Co. (OTCPK:BYDDF), as I feel the EV market has started gaining significant momentum. Even though the Chinese government phased out most of the EV subsidies and incentives at the beginning of the year, Tesla and BYD should come out on top in the long run because the purpose of the government's measure is to make the EV industry stronger and weed out smaller EV players, particularly those lacking technical know-how.
  • Lithium and cobalt holdings - Besides my favorite lithium picks - Galaxy Resources (OTCPK:GALXF) and Pilbara Minerals (OTCPK:PILBF) - I extended the portfolio's bets on the new battery age for shares of several other lithium and cobalt projects, namely eCobalt Solutions (OTCQX:ECSIF), Katanga Mining (OTCPK:KATFF) and Lithium Americas (LACDF). However, these holdings still constitute just a tiny fraction of the portfolio.
  • Renewables - Wind energy seems to be on a roll. After a careful review of first-quarter results of the world's biggest wind turbine maker, Vestas Wind Systems (OTCPK:VWDRY), I decided to open a long position. Based on my DCF analysis, the company's shares still seem to trade at a 50% discount.
  • Big Tech - Unsurprisingly, Big Technology holdings, such as Amazon (NASDAQ:AMZN), Google ([GOOG]], GOOGL), Tencent (OTCPK:TCEHY) and Alibaba (NYSE:BABA), repeated their success from the previous quarter and ranked among the portfolio's top Q2 performance contributors. Even though many investors started questioning the relatively high valuations and low volatility of shares of these companies, Chinese internet giants experienced a particularly successful quarter (Tencent +24%, Alibaba +30%).

As always, looking forward to your feedback and insights in the comments below!



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Additional disclaimer: Please note that this article has an informative purpose and do not constitute investment recommendation or advice. The author does not know individual investors' circumstances, portfolio constraints, etc. Readers are encouraged to do their own analysis prior to making any investment decisions.


I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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