Tenth pin stuck in the newspaper

Warren Buffett’s portfolio is very concentrated. Berkshire Hathaway is the second largest owner of Apple. The percentage owned is 5.83%. According to the Stratosphere website the Apple holding makes up 50.04% of the listed equities portfolio Warren and Charlie invested in for Berkshire. Charlie Munger died recently. He will be missed. Warren and Charlie have created immense joy and value for their stakeholders. Charlie was one of those old school gentleman for who their word was their bond. Munger’s formula for success should be taught in schools around the world. “It’s so simple. You spend less then you earn. Invest shrewdly, avoid toxic people and toxic activities, and try and keep learning all your life, etcetera, etcetera. And do a lot of deferred gratification because you prefer life that way. And if you do all those things, you are almost certain to succeed. And if you don’t, you’re gonna need a lot of luck.”

Picture above; Stocks wheel of fortune Berkshire owns plenty of different stocks. The portfolio concentration is huge. Not everyone would or should put over halve of their value of the listed stock holdings into one investment (Apple). Charlie Munger and Warren Buffett however have proven their concentrated investment style worked for them. In terms of asset allocation their style is also concentrated and prefers equities. Warren Buffett has said that he never in his life had less than 90% of his assets in equities. For most investors it is true that if you get your asset allocation right you will make money. The asset allocation part is where most of the value is being created in investing. Vanguard UK; “Asset allocation drives the majority of long-term returns, not security selection.” Berkshire’s cash pile reached a fresh record of $157.2 billion in November 2023. It seems Warren is adding to the “T-bill and chill” part of his investments. With bonds yield finally around 5% again that is not a big surprise. Bonds are back as a valid investment for asset allocators after a horrid run... Bonds maturing in ten years or more have slumped 46% since peaking in March 2020 (source Bloomberg). That’s just shy of the 49% plunge in US stocks after the dot-com bust. Investors are now singing a slightly different version of Sabrina’s song Boys (Summertime Love); Bonds, bonds, bonds. I’m looking for a good time. Bonds, bonds, bonds. I’m ready for your love. Interestingly China and some petrol countries are this year actively selling US treasuries and realizing huge losses by doing so. The bank of England is also selling part of their bond holdings at terrible losses for the UK taxpayer. There might be a lesson in here for your asset allocation. Follow Warren and do the opposite of central banks and dictatorships. To ride on Buffett’s coattails means to become successful by attaching oneself to his success. There are plenty of investors that have sold out of stocks in the last two years. It is a good sign that the rent-a-stock crowd has left the stock market casino. Investing with permanent capital means one needs to be comfortable being uncomfortable. When buying something hurts like hell there is a good chance that is the right thing to do long term. To quote Maverick Equity Research; “Bears make headlines and lose money, bulls make money! As always...” You need the endurance to not to sell out of your equity positions at the worst part of the cycle. Actually practice buy-and-hold. Or as Holland Park Capital London says buy-and-hope... Peter Hargreaves stated recently in the Telegraph newspaper; “I must emphasise that a well-constructed portfolio should need very little tinkering. An important rule in investment is that time in the market is more important than timing.” The first rule of compounding according to Charly Munger; “Never interrupt it unnecessarily.” It is about time to stick the tenth pin into the quotation page of a newspaper and pick a (none £ listed and none Euro listed) stock this time. It makes sense to aim for a dollar listed stock this time for diversification reasons and according to the investment plan of the book “Beat the Stock Market Casino”. First though let’s have a look at how the monkey and crayon portfolio have done so far. Both the monkey and the crayon portfolios are paper portfolios. A paper portfolio doesn’t exist in the real world. No real money is put to work in a paper stock portfolio. Holland Park Capital London Ltd does seek to own all the companies in the monkey and in the crayon portfolios, but the timing of the stock market purchases will be different and the number of shares purchased and the average purchase prices will be different as well. The returns that Holland Park Capital London Ltd will achieve will be completely different from the paper portfolios as a result. The monkey portfolio is still making money and is up 9.2% now excluding dividends. The crayon portfolio was luckier so far. The crayon portfolio is up 51.5% (excluding dividends) according to the Sigfig.com website since inception. The real performance difference between the monkey and the crayon is less than it appears because of dividends. The last couple of stock picks for the crayon portfolio are in the red. That makes sense as when the tide goes out all boots are sinking. LVMH (9th), Diageo (8th), Inmode (7th), Games Workshop (5th) are hurting the performance of the crayon portfolio. The earnings of those four companies are still growing nicely though. Holland Park Capital London is happy to be owner of a small chunk of those businesses for the long term. This project started in May 2019.

Above; S&P 500 return May 2019-November 2023 with dividends reinvested, fees ignored and taxes estimated (source dqydj.com). A lump sum invested in an S&P 500 ETF in May 2023 would have done better than the monkey and the crayon portfolios. The return figures for the monkey and crayon portfolios are with dividends excluded (so the returns would be higher in reality). Also the lump sum invested would require all the money to be there up front. The monkey and crayon portfolio invest piecemeal every six months. Therefore the monkey and crayon had a lot less money invested for most of that period versus the lump sum to come up with those returns. The time-weighted returns therefore are better than it looks above for the monkey and the crayon portfolios. The investments for the monkey and crayon portfolio aim to be more globally diversified than the S&P 500 index. Of course the S&P 500 earnings also come from overseas earnings so the S&P 500 index has some of that global diversification already baked in. Finally the goal for Holland Park Capital London Ltd is to make money on an absolute return basis with this investment method. Relative returns are interesting, but one can eat from absolute returns and not from relative returns. The tenth position will have a new position value of about $5000 according to the “no capital gain taxes growth investment plan” in the book ‘Beat the Stock Market Casino’. Have you bought the book “Beat the Stock Market Casino” yet on Amazon? The crayon portfolio follows where the monkey portfolio leads to keep things simple and comparable. Both portfolios will invest around $5000 in the tenth round of investment picks. Holland Park Capital London Ltd’s stock selection skills are completely incompetent compared to Warren Buffett and Charlie Munger. Diversification, buy-and-hope with a long time horizon and asset allocation is the name of our game. The company just bought a 2027 junk bond in the UK with a 12% yield. The first investment in the bond bucket in order to diversify the asset allocation as well. Bonds, bonds, bonds; we are looking for a good time! For the tenth round the marker landed on the listed stock Dollar General Corp with code DG on the quotations page of the FT newspaper. The day range on Friday the 15th of December 2023 for this listing was 129.35-130.99 in USD. For the monkey portfolio a paper transaction was added to the paper portfolio of 38 shares at $130.99 the day’s high price. That transaction had a value of about $4978.

Above; FT newspaper green marker landed on the stock Dollar General for the monkey stock pick of the tenth round. For the crayon portfolio a paper transaction was added as well. The advantage of buying a stock every six months for the long term is that is focuses the mind. It reminds of the Lose Yourself song from Eminem. “You only get one shot, do not miss your chance to blow. This opportunity comes once in lifetime, yo.” To the crayon paper portfolio unsurprisingly the stock Apple Inc with code AAPL listed in the USA was added. Good enough for Warren and Charlie so good enough for Holland Park Capital London. The traded day range on Friday the 15th of December 2023 for the AAPL listing was 197.02-198.4 in USD. For the crayon portfolio 25 shares of AAPL at $198.4 were selected. That transaction value on paper was about $4960. Future performance of the two new stocks will depend on the future multiple of the earnings paid by investors and the future earnings themselves. Both are impossible to predict. There is no analysis here of why Holland Park Capital London Ltd put AAPL in the crayon portfolio in the tenth round. It is just the opinion of Holland Park Capital London Ltd to like this stock at this moment in time best for the US stock market. This is not financial advice. Do your own research please. This article is for information purposes only. Both paper portfolios have 10 holdings now. Slowly but surely the portfolios start looking a little like diversified portfolios. May the force be with both paper portfolios. Thanks for reading this blog. Holland Park Capital London hopes you enjoyed the information in the blog. This is not a financial promotion. Holland Park Capital London Ltd is not receiving any compensation from anyone to write this blog. Holland Park Capital London is long the stocks in the crayon portfolio and the monkey portfolio. Holland Park Capital London Ltd just doesn’t have the same amount of shares per holding as the paper crayon and monkey portfolios. The purchase prices are also completely different. Holland Park Capital London Ltd is also long the S&P 500 index. Holland Park Capital London has no business relationship with any company whose stock is mentioned in this blog. Holland Park Capital London expressed its own opinions. This is not advice. This blog is for information purposes only. Make your own decisions please. Do your own research. Please go and see an authorized financial advisor before making any investment decisions. What works for Holland Park Capital London may well not work for you and your personal situation is unknown to Holland Park Capital London. Stocks go up as well as down and you may get back less than you invest. Your capital is at risk when you invest in stocks. In other words you can lose all your money by investing in stocks. Any information in this blog should be considered general information and not relied on as a formal investment recommendation. This blog is for information purposes only and helps Holland Park Capital London expand on the book “Beat the Stock Market Casino” and brings extra discipline in the investment process. Holland Park Capital London Ltd is not liable for any mistakes in this blog. This blog cannot be a substitute for comprehensive investment analysis. Any analysis presented in this blog is illustrative in nature, limited in scope, based on an incomplete set of information and has limitations to its accuracy. The information upon which this blog is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore the accuracy cannot be guaranteed. Any opinions are as of the date of publication and are subject to change without notice.