My 5 year total return score card

5 years of doing your homework can deliver outstanding results in terms of total return.

I am very proud of it, I have weighted average of 22% annualized total return. Which is ahead of the SP 500 which as seen below is at 15.47% CDN$/14.77% US$. I have accomplished this by having a smaller and less risky portfolio. I currently own 21 holdings vs 500… for the SP. Another proof that you don’t need to hold hundreds of stocks to be diversified and achieve fantastic results.

 

score card

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One up on wall street by Peter Lynch

If you would like to get a perspective through the experience of a well known professional Portfolio manager, then this book is for you!! Get it on Amazon, I will personally keep it for reference in the future.

It gives you a good description of different asset classes and Stocks and how you can build your strategy towards a successful Risk adjusted total return that beats the market on a regular basis. They are wonderful historical references towards stocks that everyone forgot and went on to become gold mines total returns.

 

peter lynch

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Apple’s growing service business

For some time now, I have been anticipating the acceleration of Apple’s service business. I think with yesterday’s earnings call put the emphasis on this.

quote : Apple’s services category brought in $9.19 billion in revenue in the second quarter. That’s an impressive 31 percent increase over $7.04 billion in the year-ago quarter. 

In the graph below you can clearly see the trend accelerating ( in yellow): this is important because service revenue has higher margins & is more predictable that iPhone unit sales as you can see below in red.

trend 3

 

Out of 1.3 Billions users, Apple has only converted 270 millions people into Apple music monthly subscriptions for example. So there is still a lot of potential going forward.

Coupled with a 100 billions $ buyback program & free cash flow generation of around 50 billions a year, you can understand why the share price has potential to go higher.

A multiple expansion in my opinion should also be in the medium term. Services are about 15% of total revenue now, if it reaches 25% -30% in the coming years this would definitely be compatible with current p/e ratio of around 17. The iPhone component of this pie chart was at around 70% fairly recently, so clearly the shift has began to a more stable business with higher margins.

 

pie chart 2

 

THE SNOWBALL

I am currently about to finish a fantastic book called the Snowball. It gives a historic perspective on Warren Buffett’s investment decisions. I really enjoyed understanding the way he set up his partnership and it will help me build my next ALL STAR portfolio in the future. So many other aspects of his thought process are a delight to read. If you want to add a time tested successful business process in your investment style this book will do the trick.

 

the snowball

 

REFOCUS YOUR PORTFOLIO

I Recently dropped a few stocks in my portfolio:

ETP, VTR, HCN ( High yields names) in favor of

mastercard logovisa logo

Why:

  1. high yield REITS & UTILITIES will continue to suffer in a raising interest rate environment. (even those with good balance sheets and good moats)

2)  there is no hope for much capital appreciation at current valuation levels

what is the bet then ?

Having a 20 years horizon + I am betting that Visa & MasterCard will still be around with large economic moats to move money around. And the cherry on the Sunday…… they don’t take RISK THEY JUST EXECUTE TRANSACTIONS!!!

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