Review: 2018

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Includes: AAPL, BKNG, BRK.A, BRK.B, DNOW, FB, GOOG, GOOGL, HKMPY, LSLPF, RYCEY
by: Absolute Return
Summary

I am completely invested at the end of 2018.

I went from holding 14 stocks to only 7.

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

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 Property (OTCPK:LSLPF), Rolls-Royce (OTCPK:RYCEY), 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 P/E multiple of 19 and grows at ~ 20%. If you compare Netflix (NASDAQ:NFLX) and 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 (NASDAQ:FB): 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 forward PE. This is even cheaper than Google and FB grows more quickly.
  • Hikma Pharmaceuticals (OTCPK:HKMPY): 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 (NASDAQ:AAPL): 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 and 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 (NASDAQ:BKNG): Booking has built an OK moat in hotel bookings in Europe. I started with AirBnB (AIRB) 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 (NYSE:BRK.A) (NYSE:BRK.B) 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.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.