Podcast: Restructuring my portfolio

Simon BrownJSE Direct, Latest

Simon Shares

  • Correction, last week I said Naspers got some R100billion from selling Prosus shares. It was more like R22billion.
  • Apple (NYSE code: AAPL) results knocked it out the park, again. Profits up 11% to US$22.2billion, EPS up 19% to US$4.99 and revenues up 9% to US$91.8billion (US$1billion revenue for each trading day in the quarter.). All above expectations and even iPhone sales grew 8%.
  • Coronavirus. Is this the end of the world, half an end or nothing much? Likely not much but at this point we truthfully don’t know. It is spreading and it is lethal, but part of the increase in numbers is due to health officials being on the alert. Also most deaths are aged people and those already susceptible to an infection, how bad is it for healthy people? Do we convincingly know of somebody who got the virus and has been clear for 14 days? Reports are of over 100 being ‘cured’. Lots of questions and thus far very few answers. Certainly global markets have been jittery, but no real panic as yet. That said, there will be pain, Starbucks has closed 1,000 stores in China. Even if just for a week, that’ll hurt a little. Longer could hurt a lot. Short answer, we know little and this will play out over a few weeks at least.
  • PGM demand, will vehicle manufacturers switch from palladium to platinum? Nasen Nair from Sasfin Securities commented to me that maybe the savings aren’t enough to justify the switch? About $100 PGM goes into a catalytic converter so switching saves maybe $50 (albeit switching pushes up demand and hence prices). And on a car costing +$10k that’s small change?
  • CellC has defaulted on a loan and that sent Blue Label (JSE code: BLU) down some 12%. The reason is simple, while they have written CellC to zero, the market hopes they get something, but this default makes it look less likely.
  • After destroying the company and its value, Brait (JSE code: BAT) executives will get a R200million golden handshake after the rights issue in place to save the company and move control to Ethos. You can’t make this stuff up.
  • Upcoming events;

Restructuring my portfolio

Over the last few years I have been slowly increasing my ETF portion of my portfolio from 50% with the ultimately goal of getting it to around 65%. This is going to take some 5 years and the logic is to reduce risk (risk that I buy dogs) and make my life easier.

So far this is on track but also has impacts in other parts of my portfolio as the current split is 30% in ’til death do us part long-term stocks. Then 10% in second tier small and mid caps and the final 10% for trading.

So what gives if I squeeze my ETF holding to 65%.

The easy answer is that each of the other three drops their weighting by 5%. The hit on the long-term is fairly modest but very pronounced on the second tier and trading portions of the overall portfolio as they drop from 10% to 5%.

The second tier I will cheat and buy some ASHMID ETFs that tracks the local midcap and this will be part of my 65% into ETFs. So easy solution.

Till death do us part will get a large pile of cash as my Metrofile* (JSE code: MFL) get bought out at 330c later this year. This is currently my largest holding after I was a large buyer between Christmas and New Year as some seller got aggressive in the market knocking the price down to 265c (my lowest purchase was 272c). Most of this cash will go into ETFs when it arrives (likely around mid year) and this will boost my ETF holding to over 60% and easily on track for the 65% target.

Then the biggie is my trading portfolio, essentially I’ll be halving it’s size so either I trade smaller size or I remove one of the two strategies.

Current trading strategies are;

  • The lazy trading ETFs
  • Trading ALSI futures pre-open every morning.

My plan here is to discontinue the lazy ETF trading. It’s a small percentage of my overall portfolio and it will then free my ALSI trading to carry on carrying on.

The question then is what of the weekly lazy update I send every Sunday. In short it will expire in time, but send me thoughts.

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