Individual Stocks, October 2017

The equity portion in my active strategy are all in individual stocks. For the sake of transparency, here is the list. Please note that this not intended as investment advice and you are urged to always do your own research and make your own decisions. I may conduct transactions with any securities without writing about them prior to or after the fact. No obligation to disclose is implied.

Right now are 30 stocks total. In my old nomenclature I referred to all dividend-paying stocks my “DGI portfolio” and the others as “growth stocks”. I no longer make that distinction since moving all of them to my taxable accounts and reducing current dividend payout became a consideration. Together these stocks account for over 60% of my active strategy or 33-35% of the total portfolio, its single largest component. They are mostly US large caps. Three (Baidu, Tencent, and BYD) are Chinese, while Silicon Labs ($SLAB) is the only mid cap.

In the table, gain/Loss is for price only, based on the cumulative sum paid on all lots. Dividends are not counted. The holding periods vary. Some like Aqua America ($WTR) which is my wife’s and the first lot was acquired in 2003, others a few months ago. Gain/loss information is provided as an illustration that I don’t tolerate deep losses without some conviction in the stock. The overall dividend rate is under 1.5%, less than that of SPY and VTI (about 1.9%).

Many stocks are colored red which is used to indicate strong conviction or “tax handcuff” such that they are not candidates for near term trades. As stated previously in other posts, the only stocks that I more or less made up my mind to sell are in energy. They happen to be in an up-swing so I’ll wait for that momentum to wane.

The relative weights are quite random at this time. There are two schemes under consideration: one is equal weight (1/N); the other is to have two groups, equal weight within each group but one group at a higher level to reflect a greater conviction or expected return. Currently all but three stocks are in round lots. It makes option trading easier but strict conformation to to a weighting scheme more difficult. Overall this is not something that I lose sleep over.

I monitor the sector weights but do not set a target. The overweight to tech and to a lessor extent, financial, is consistent with my overall market view. As the market cycle evolves that will change, but we’re talking about a time frame of years. There are plenty of other tools in my arsenal.

I have only been tracking the individual stocks as a whole since April so there isn’t enough of a track record to make any conclusions. So far they are +2% vs. SPY. My target is to simply match SPY so I’m quite pleased with that. Owning individual stocks allows the lowest cost of ownership (< 1 basis point per transaction at InteractiveBrokers vs. ~5 basis points per annum through index funds), opportunity for TLH, and greater income generation potential by selling option premium. However, I have no edge outside of US large cap so in index funds are a cheap way go get exposure there. In the passive accounts I'm 50/50 US/International and tilting small and EM. Arguably I could use even greater tilts than what I currently have.

So there it is, all my individual stocks. Please note again that None of the above is investment advice, and the standard disclaimer applies.