After The Sell-Off, I Added To My Tech And Housing-Related Positions

Jan. 09, 2019 12:10 AM ETCONE, DOC, ENB, META, INVH, LEN, PVTL, SWKS, VTR
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Value, Special Situations

Contributor Since 2006

David built his FinEd company (as CEO and founder of bionicturtle.com) into the world's #1 exam prep provider (EPP) for the Financial Risk Manager (FRM) exam. In February, his company was acquired by CeriFi where he is President, Bionic Turtle, a CeriFi company. He teaches risk management, expert finance, applied math and data science.  He is a Chartered Financial Analyst (CFA) and Financial Risk Manager (FRM). He is also a practicing data scientist and his github is located at https://github.com/bionicturtle

Summary

  • When the market panics but fundamentals are net favorable, be greedy (subject to a valuation discipline).
  • I added eight new positions and increased my allocation to Facebook (my only "sin stock" in a otherwise sea of generally good governance) and Lennar.
  • This portfolio is ~ 50.0% technology; almost half (15/32) pay a dividend. I am diversified into all sectors except Basic Materials, Telecoms, and Utilities.

Since my last post at the beginning of December, I've added several positions to my Tech Turtle portfolio. As I didn't sell anything during the sell-off, this increased my number of positions from 24 to 32. This is more positions than I want to hold eventually, but several of the companies on my watch list became attractive (or even compelling). While of course my portfolio did suffer in December, overall I am satisfied with how my diversification shielded me from a severe draw down. Here is the current status: 

010819-tech-turtle-portfolio

I added these eight positions:  

  • Introductory position in BlackRock (BLK)
  • Introductory position in CyrusOne (CONE). I have wanted to add a data center REIT,  Brad Thomas has carefully covered this segment and I find his recommendation persuasive
  • Introductory position in Enbridge (ENB): Admittedly, this is based almost entirely on coverage by Seeking Alpha authors, as I do not have expertise here. But there is almost a consensus among the experts and this gives me one position in Energy (i.e., diversification)
  • Added small position in Pivotal Software (PVTL)
  • Added small position in Skyworks Solutions (SWKS)
  • Added small position in Ventas (VTR). I'm happy to add this high-quality complement to Physician's Reality Trust (DOC)
  • Added American Homes 4 Rent (AMH). Now I don't need to agonize over the relative merits of AMH versus Invitation Homes (INVH)! 
  • Added a speculative position in William Lyon Homes (WLH) which is already +8.6%. This small homebuilder (< 500 million market capitalization) is the quintessential definition of negative sentiment, but it has good fundamentals and a smart strategy.

 I increased my positions in:

  • Facebook (FB). Much has been written on both FB and AAPL, of course. Facebook is the only stock that I own with deplorable governance. However, like Apple (AAPL) I expect the price to get back above $200.00 in a matter of not-too-many months. FB is not a forever holding, it's just a discount opportunity. About Apple, as far as I am concerned, it shifted from a Buy to a Hold: its capital allocation plan secures a solid floor on the stock. I will re-evaluate when it gets back to $200.00 but in the meantime there's no reason to get too confused by the valid issues (primarily, an unsustainable average selling price and an open question on innovation): from an income statement and balance sheet perspective, it's just too early to sell Apple.
  • Lennar (LEN), where I continue to buck sentiment. I do not like most of the homebuilders (right now), but I do like Lennar for the same reasons as I articulated in July

My decisions always refer to the portfolio, in addition to the security. Any individual purchase should always make a contribution to the portfolio, and always adds factor exposures. This is a somewhat aggressive portfolio (it samples as "growth" but I consider my style value, actually). About half is allocated to technology, where I'm most comfortable. But I've deliberately included other sectors. Of course, my overall increase reflects an optimistic view of equities, especially in light of the sell-off. I do not obsess about negative momentum (as evidenced by my homebuilder positions). I care about Value and Quality. Quality gives you permission to be patient. The median EPS growth among my portfolio is more than twice the market average. Almost half (15/32) pay a dividend, with a 2.7X dividend cover, which is even slightly above the market average. 

tech-turtle-sector

Disclosure: I am/we are long AAPL, AMAT, AMH, AYX, BAC, BLK, CHGG, CLDR, CONE, CTK, CVS, DOC, ENB, FB, GOOGL, GSKY, HDP, HPQ, INST, INVH, LEN, PVTL, QTWO, RDFN, SFM, SWKS, TJX, VTR, VWAGY, WLH, XROLF, ZUO.

Additional disclosure: I am long each of the stocks in the exhibit, except the three at the bottom which I've exited entirely (DISCK, KR, and SBUX)

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