The start of a new year is always filled with projections of trends and patterns for the months ahead. Looking at traditionally observed patterns, Santa was a no-show for his predicted December rally. Now everyone is watching to see what happens in January for insights into how things will go for the rest of the year. I'm not a fan of these predictions; they're just too unpredictable. So my new year resolutions are to stick to value over vision, principles over prophecy and reality over rumour, with a healthy dose of analysis thrown in.
Did you get what you wanted for Christmas? I hope so. I am happy to say that I did: shares in Sprue Aegis and Playmates Toys, making Little Acorns a completed portfolio.
As I talked about in my last post, I was watching these two businesses closely when they hit the target list in December. They are now up 4.5% and 8.2% respectively since I bought them. Could this be the effect of the Santa Rally? Um, no. Only the FTSE 100 saw a bit of an uptick and that was hardly a show stopper. These gains are purely thanks to STRIDE identifying good value opportunities.
My portfolio is now where I have been aiming to get it: 30 slices of around $4,000 each. I'm sure a more experienced investor would have reached this point much more quickly than me. My novice status definitely meant that I missed a few opportunities, but you live and learn.
Today, Little Acorns is up 14.03%, down a little on last month, but so are all the major markets and I'm still ahead of them. It's the overall health of the portfolio that interests me. In realised dividends alone, I've made 3% since I started out. That is double the annual return I made as a property investor.
Analyst predictions of volatility this year may be well founded. I'm writing this as reports of China's further decline impacts negatively on stock markets across the world, while the political situation between Iran and Saudi Arabia is pushing up gold and oil prices. All the more reason to focus on value above everything else, avoid reacting to rumour and run against any stampede to achieve market beating results.
Feeling the Strength of the US Dollar
One thing that's surprised me recently is the impact my choice of base currency has had on reporting my portfolio gains. Until they are realised, of course, this is only a reporting detail, but the effect on my unrealised gains is significant.
The Dollar has strengthened consistently since the end of 2014 against the basket of global currencies; it rose 1% in December alone. Out of my 30 holdings, only 5 are in US$ but I chose to report in US$ because it's the most widely used international currency, making comparisons between markets, sectors and territories very simple.
Don't get me wrong, I'm delighted with my 14% gains so far. But when I dig down into the impact the strong Dollar has had on my reporting, the results are quite dramatic.
Take Homeritz, for example. This Malaysian home furnishings business is listed in Ringgits. My shares in Homeritz are 98% up since November 2014. Below is the detail of this holding as it appears in my portfolio.
In the left hand column, you can see that I paid a total of R12,484.60 for these shares and that their current value is almost double at R24,750.00, as you'd expect. I've also made R802.50 (6.43%) in dividends.
The impact comes when this is all converted into US$. Below is my latest Little Acorns email update. Here you can see that the current value of my Homeritz shares (the last on the list), when converted, is $5,763.19. I invested approx $4,000 in each slice so if the US$ had remained at its rate of November 2014, the Current Value reported below would now be around $8,000.
As I said earlier, this discrepancy doesn't matter because I have no intention of selling anything; it's simply a reporting issue. Right now, analysts are predicting that the US$ will continue to strengthen until the end of 2017.
The truth is, nobody knows how the markets will behave. Which is why I resolve to continue to focus on the value in individual businesses over predictions in currency, trend or anything else.
See you next month.