Hi everyone, I found ð³ð°ðð¢ ð¢ð§ððð«ðð¬ð¬ðð§ðð ðð§ððð«ð§ðð¡ðŠðð§ rebalancing again this month - I'm happy to share my findings with you here:
The average return per year - for the ððð¥ð®ð & ððšðŠðð§ðð®ðŠ ð°ðð¥ðð°ðð¢ð portfolio - recovered somewhat in August 2022, rising to +17.1% (from +13.8%). This is encouraging, but in a year like this, this number can change dramatically on an almost daily basis - depending on recession fears, war, and even geopolitical factors such as the conflict between China and Taiwan. Since the start on February 11, 2020, the return is now +50% again.
A ððððð¢ð¥ð¥ð¢ðð«ðð & ÃŒððð«ð¬ð¢ðð¡ðð¥ð¢ðð¡ð ððððð¥ð¥ð of the entire portfolio is available here:
I'd love to put it all in here, but displaying it is a bit tricky. I have nevertheless packed as much as possible for you in here.
But now back to the ðð€ðð®ðð¥ð¥ðð§ ðð¢ðð®ððð¢ðšð§:
It turns out that my confidence seemed justified in the last rebalancing in July. The portfolio seems well positioned for the current economic climate with a high allocation to the commodity sector. This is despite the fact that many issues remain such as inflation concerns, war, and supply chain difficulties.
The rebalancing in August also showed that one has to look closely: Companies that no longer meet the quality criteria must be rigorously weeded out rather than held on to. Because nowhere is it written that you have to make up a loss with the same share. In practice, I notice that both laymen and professionals find it difficult to part with losers in the portfolio. Instead, they often sell winners too early instead of keeping them. Both are detrimental to returns.
As an asset manager, I try to take these ððŠðšðð¢ðšð§ðð¥ð ððšðŠð©ðšð§ðð§ðð out of investment decisions. When investing, it is important to be very ð¬ðð«ð®ð€ðð®ð«ð¢ðð«ð ð¯ðšð«ð³ð®ð ðð¡ðð§. This is exactly how I approach the value and momentum strategy: ðð®ðð¥ð¢ðððð¢ð¯ ð¡ðšðð¡ð°ðð«ðð¢ð ð companies with ð ÃŒð§ð¬ðð¢ð ððð°ðð«ððððð§ shares and a ð¡ðšð¡ðð§ ððšðŠðð§ðð®ðŠ are bought. Those shares that no longer meet these criteria are sold.
ððð® in the portfolio are no less than two U.S. companies from the commodities sector: on the one hand, this is ððð ðð§ðð«ð ð², which, in addition to processing petroleum, is also active in the production of nitrogen fertilizer and was founded back in 1906. The second company is ððð ðð§ðð«ð ð², which specializes in the processing and supply of petroleum products in the United States, Canada, and Mexico.
Both companies are characterized by having a high Piotroski F-Score. That is, they are ð¬ðð¡ð« ð«ðð§ððððð¥, have a ð ðð«ð¢ð§ð ð ððð«ð¬ðð¡ð®ð¥ðð®ð§ð , and are ðððð¢ð³ð¢ðð§ð ð¢ðŠ ððð«ð§ð ðð¬ðð¡Ã€ðð. In addition, they have a very ð¡ðšð¡ðð¬ Adjusted Slope ððšðŠðð§ðð®ðŠ - meaning the stock price has risen sharply and they are still cheaply valued. Such a combination is not easy to find. Certainly, the high raw material prices help here and it will be seen in the coming year whether this remains so. Unfortunately, it does not currently look like the world situation will change overnight.
I am happy to present the core business of the two newcomers in the portfolio here:
ððð ðð§ðð«ð ð²:
CVR Energy was founded in 1906 and is headquartered in Sugar Land, Texas.
The company operates in the United States of America and specializes in petroleum refining and nitrogen fertilizer manufacturing.
In the Petroleum segment, CVR Energy refines and markets gasoline, diesel fuel, and other refined products. The company owns and operates crude oil refineries in southeast Kansas and Wynnewood, Oklahoma. It primarily serves retailers, railroads, agricultural cooperatives and other refiners/marketers.
The Nitrogen Fertilizer segment owns and operates a nitrogen fertilizer plant in North America. The company sells products primarily to agricultural and industrial customers.
ððð ðð§ðð«ð ð²:
PBF Energy is based in Parsippany, New Jersey and was founded in 2008.
The company is divided into two segments: Refining and Logistics. Through its petroleum processing operations, PBF produces gasoline, low-sulfur diesel, fuel oil, lubricants, asphalt, and other petroleum products, for example. As of December 31, 2021, the company owned six oil refineries and related assets.
The company sells its products primarily in the United States, but also in Canada and Mexico. In addition, its logistics operations provide rail, truck, and marine transportation, as well as pipeline transportation and storage.
ðð§ð¥ðð ðð¬ðð«ðððð ð¢ð:
It has been shown in numerous studies and also in practice that the ððšðŠðð¢ð§ððð¢ðšð§ ð¯ðšð§ ððð¥ð®ð ð®ð§ð ððšðŠðð§ðð®ðŠ has outperformed the overall market. This is especially true for a diversified portfolio. I consistently apply these findings: For portfolio construction, a three-step analysis is used for a single-stock strategy to invest in the companies with the best risk-return ratio. The analysis and selection process is as follows:
ððð¥ð®ð-ð ðð€ððšð«ðð§: Finding the 10% companies with the strongest undervaluation using carefully selected value metrics.
ðð®ðð¥ð¢ðÀðð¬-ð ðð€ððšð«ðð§: Filtering the companies with very good fundamentals.
ððšðŠðð§ðð®ðŠ-ð ðð€ððšð«: Selecting stocks with the highest price momentum.
This procedure was developed following the "ðð«ðð§ðð¢ð§ð ððð¥ð®ð ððð«ðððð ð²" by James O'Shaughnessy and was multiplied by the quality factor (ðð¢ðšðð«ðšð¬ð€ð¢ ð -ðððšð«ð) and the ððð£ð®ð¬ððð ðð¥ðšð©ð ððšðŠðð§ðð®ðŠ (Andreas Clenow) further refined, in order to smooth out strong price movements due to exceptional situations and to follow the classic ððð¥ð®ð ðð«ðð© ðð§ðð ðð ðð§ð³ð®ð°ð¢ð«ð€ðð§.
The approach involves a predominantly ð¥ðð§ð ðð«ð¢ð¬ðð¢ð ðð§ ðð§ð¥ðð ðð¡ðšð«ð¢ð³ðšð§ð with a ðð¢ð¯ðð«ð¬ð¢ðð¢ð³ð¢ðð«ððð§ ððð«ðð¬ðð¡ð«ð¢ðððð§ð©ðšð«ðððšð¥ð¢ðš. Monthly rebalancing takes place.
