Quarterly Update – Q2 2020

Welcome to the quarterly update for Q2 2020. This is part of  a series where I track our financial progress on a quarterly basis. I present three parts in this series: (i) Investment & Portfolio Update, (ii) Passive Income Update, and (iii) Goals Update.

1. Investment & Portfolio Update

Q2 2020 saw robust growth in portfolio value after a turbulent Q1. I continued investing aggressively over the course of the quarter with some re-initiations and some new positions in the portfolio.

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Outlook for July 2020

Half the year is in the books, with Q2 2020 US stock market return ringing in the best quarter since 1987! Most of the returns have come from the strong performance in the tech sector, while other sectors have lagged, so anyone heavyweight in tech has enjoyed the great returns over the past few months.

Q2 earnings results will be interesting to watch as it will be the first reporting of full quarter amidst the pandemic. Expectations are pretty high as the multiples have expanded quite a bit for some names.

On the central bank front, the Fed has reduced the daily liquidity, so some weakness seems to be lurking. There is already some talk of continued support both on monetary & fiscal front, esp heading into the US election cycle over the next few months.

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2020 Top Investment Picks – Q2 Update

At the beginning of the year, I put together a list of Top Investment Picks for 2020 from the investment community and track them on this website. This is just meant to be a fun exercise to see how the picks do. As part of the process, I intend do provide quarterly updates on the picks to see how they are doing. This is the update after Q2.

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3 Recent Buys – BAM, FB, MSFT

BuySell

A quick update on a couple of recent buys in the portfolio.

  • First purchase: I added to my position in Brookfield Asset Management (BAM.A.TO) @ CAD$44.00 with the recent weakness in stock price. There are still a lot of overhanging questions on the impact of BPY (Brookfield Real Estate subsidiary) on the parent company and how the commercial real estate market will play out, but I decided to incrementally add to my position here.
  • Second purchase: I added to my position in Facebook Inc (FB) @ $209.70. The recent backlash against FB from companies to pull ads was a good buying opportunity imo. Some of these companies have stated that this is a pause for just one month, while others have left it open-ended. Regardless, the revenue source is diversified with third party analytics showing that FB’s top 10 advertisers make only 1.5% of total revenue.
  • Third purchase: I continued building on my new position of Microsoft Corp (MSFT) @ $193.50. Recently I decided to go up the risk curve a bit and sold off most of my bond allocation & decided moving those funds to one of the two AAA rated companies with a long road of growth ahead. I am close to a full position now, but may add more in the future as my overall portfolio grows and sizing automatically changes.

Full Disclosure: Long BAM.A.TO, FB, MSFT. Our full list of holdings is available here.

Recent Sell – KMI, Bonds

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A couple of sales in my portfolio recently as I try to align my portfolio closer to what I think is better for long term growth.

I sold and closed my positions in:

  • Kinder Morgan Inc (KMI). Loss = 26%
    • I’ve held KMI for a long time and held through the rough patch the company went through a few years ago. However, my capital is not only stagnant, but losing value by staying invested in this dog of a company/industry. So, decided to cut my losses & exit.
  • Bond portfolio: Sold off most of my bond holdings after some good gains, thanks to continued depression of interest rates.
    • Vanguard Total Bond Market Index ETF (BND). Gain = 8.3%
    • Vanguard Emerging Markets Bond Fund (VWOB). Gain = 23.5%
    • BMO Emerging Market Bond CAD Hedged ETF (ZEF.TO). Gain = 16%

Full Disclosure: Our full list of holdings is available here.