Wednesday, February 20, 2019

2018 Portfolio Review

In 2018 my brokerage account performed slightly better than the market.  As usual I will use the Vanguard S&P 500 ETF, VOO, as my benchmark.  VOO was down 4.37% (6.31% capital loss partially offset by 1.93% of income).  My account was down 4.21% (6.67% capital loss partially offset by 2.46% of income). Unlike last year I had some transactions during the year which makes breaking down my overall performance a little more complicated.  Aetna (AET) was bought by CVS near the end of 2018, I will figure the performance for the year by taking the year end value of the cash and CVS stock I received.  I also made four stock purchases in the fourth quarter, I will figure yearly performance by assuming I had set aside the cash needed for these purchases at the beginning of the year.  I will continue to ignore the interest earned on dividends I received during the year.  I included the (approximate) interest paid on the cash assumed to be set aside for investment but ignored the interest paid on the cash I received for AET.

At the beginning of 2017 I had  46.59% of the value of my account in VOO, 12.76% in other ETFs, 31.48% in individual stocks and 9.17% in cash (of which 4.50% was used near the end of the year to buy some more individual stocks).  VOO of course matched the market.  The other ETFs collectively underperformed (mostly because of the poor performance of the energy ETF, VDE) and contributed  -.31% to my overall relative performance.  My individual stocks collectively outperformed despite the fact that most (11 out of 17) of them lagged the market.  This was because of AET a big holding which was my best performer (up 11.92% even after accounting for the later drop in the CVS stock I received for it as most of the purchase price was paid in cash).   They added .44% to my overall relative performance.  My stock purchases (BLK, MET, TD and some more CVS) were largely poorly timed coming just before the year end market drop. Collectively they contributed -.28% to my relative performance. My remaining cash of course outperformed a down market contributing .31% to my relative performance.  This all adds up to .16% of outperformance as expected.

As noted above my individual stocks collectively outperformed the market even though many did poorly. Only two (AET and BBL) outperformed by at least 10% while 8 (ALL, BNS, CAT, CM, IBM, WBK, WFC and XOM) underperformed by at least 10%.  The remaining 7 (ED, INTC, JPM, NSC, PEG, SOUHY and TGT) were within 10% of the market performance.  Fortunately the outperformance of AET (whose good performance in previous years had led to it becoming an oversized position) was enough to bring the collective performance above that of the market.

As noted I purchased some stock during the year.  But not enough to use up the cash I received from the AET forced sale.  So my cash position increased to 13.19% at year's end.  I have a general intention to keep this account fully (or nearly fully) invested but in practice this requires more effort than I have been willing to devote to selecting and purchasing stocks.   As it was my buys were not all that carefully researched.  I bought the CVS to bring the share count up to match what my AET share count had been.  I have an account with TD (TDBank) and feel more comfortable investing in companies I have some sort of positive (or at least neutral) relationship with.  AET is my health insurance provider and did very well so I bought MET (MetLife) which provides my dental insurance (both through my employer).  BLK (Blackrock) was my pick in an out of favor sector (which promptly got a lot more out of favor).  I considered other investment management companies like IVZ (Invesco), LM (Legg Mason) or FII (Federated Investors Inc.) which were cheaper in terms of earnings yield but seemed more dependent on high fee active funds (which don't in my opinion have a promising future).