Kevin portfolio review May

Investment Analysis Clubs Saul’s Investing Discussions
1

I last posted update for February, and I have come to realize how much effort and time go into the great write ups that Saul and others do regularly. It makes me appreciate them that much more. I will continue to just include my top 15 or so positions, with maybe some blurbs on other companies that are smaller % but pertinent to the topics discussed here.

My March performance was basically even at 0.14%.
I had a nice April at 4.34%.
Here is where i was for May.

This Month

My Port     2.45%
S&P              1.16%
Nasdaq           2.50%

YTD
My Port         18.77%
S&P              7.73%
Nasdaq          15.15%</pre/>

While not as incredible as others here, I have to say I am pretty happy with the results so far this year,

Here is what my portfolio looked like at end of Feb

```

Top 15 holdings

Ticker    %      

WBA     11%      
***      9%  (Current employer stock award)
AAPL     5%      
DIS      5%      
SBUX     5%      
AMZN    4.5%     
ATVI     4%      
PCLN     4%     
NVDA    3.5%    
CELG    3.5%     
FB       3%     
NKE      3%     
CASY    2.5%     
GOOGL   2.5%     
CMG     2.5%
```

This is what it looks like at end of May

```
          MAY
TICKER   RETURN     YTD     ALLOCATION

WBA      -6.4%     -2.1%       8.9%
***       8.4%     20.9%       8.4%
AMZN      7.7%     32.6%       4.7%
AAPL      6.9%     31.9%       4.6%
NVDA     36.0%     35.2%       4.6%
SBUX      5.4%     14.6%       4.5%
ATVI     11.5%     62.2%       4.4%
PCLN      0.9%     27.1%       4.3%
DIS      -6.2%      4.0%       4.0%
GOOGL     7.4%     25.3%       3.8%
MELI     25.4%     79.3%       3.1% 
SHOP     19.5%    114.3%       2.8% 
FB        1.3%     32.2%       2.8%
CELG     -5.9%      0.9%       2.7%
NKE      -5.1%      3.5%       2.4%
CMG       1.2%     27.3%       2.3%  
CASY      3.3%     -2.6%       2.1%
Cash                           1.5%
```

**Obesrvations**

Biggest thing that stands out is WBA really holding back performance of portfolio. 
 Being largest holding and down YTD in a year when pretty much everything else 
is doing good to great is definitely keeping my returns down.  
Rather than sell more, yes I actually have sold around 75% of it in last
 few years, my strategy has been to try and build up other positions to match
 and eventually overtake it.  Over the next few months I will decide to either 
trim some more of it, get more aggressive about building up other positions, 
or most likely a combination of both. Since I am currently trying to build my 
cash position as well as adding to others, it is quite a balancing act.

**Transactions**
I have not sold anything in the last 3 months, I rarely do.  I spent about the last year
 really weeding out companies, and focusing on mostly adding to positions and sometimes 
adding a whole new company.
The only new position added was TWLO.  Of course a few days later the Uber news came out, 
so I am keeping an eye on that one and it may be on the chopping block.
I did add significant to several positions tho, as you can tell by looking at end of Feb top
 holdings vs May.  GOOGL, NVDA, SHOP, and MELI all were added to since February as well as all 
three going up nicely in price. Also, added a little to BOFI, but not enough to make it into my 
top holdings.  

Since most are companies very well covered here on the board, or pretty well understood, I will talk about my thoughts for the few that aren't.

Starbucks SBUX  Solid cash flow, stock price stagnant for a while but starting to move up. 
 Between China and their "roastery" initiative, their growth story is not over.  I will be
 patient with this one, as it pays a dividend and since it doesn't move much can always tap
 into it for cash if needed for must have opportunity.

Activision ATVI - doesn't get much mention here, and I don't know why.  Long time video game 
company, still growing. I will try to do a write up on it next week, as I feel it still has 
room to run,

Disney DIS - Kinda like Starbucks.  They aren't going anywhere and have had solid growth 
despite ESPN/cable issue. I feel like this one is a coiled spring now with the recent pull
 back to steal a term from Saul.

Celgene CELG - Biopharm under pressure for pricing but with several drugs generating cash 
flow as well as a bunch at various stages in their pipeline.  I believe Saul was in Celgene 
a few years back

Chiopotle CMG - I am really just riding the wave awhile longer on this one.  It was a high
 flyer for years, took a hit with e. coli incidents. They are slowly making back ground, 
but they are on my list of potential trim/sell

Casey's General Stores CASY - Was a well discussed stock here a year and half ago or so. 
 Growth story is still there, taking a little longer.  Some setbacks - growth in food, soda,
 etc. didn't take off like management thought it would.  I am being a little more patient,
 but will be watching thru the summer to see how they do.  Meanwhile, like SBUX and DIS, 
it is a nice dividend paying potential cash position.

Please let me know any thoughts, criticisms, or questions.  I honestly appreciate any brutally honest blunt advice. 

Hope everyone has a great weekend!

Kevin
20 Likes
2

Nice one Kevin - good effort. Hope you feel more in control of the portfolio, performance and investment decisions as a result of compiling the reports. I certainly do.

All looks very blue chip to me. I wouldn’t beat yourself up over WBA too much - I mean portfolio wide (or top 15) you only have 2 in the red. Seems pretty good to me - and most are 20%+ gainers. Good job.

I guess the only thing for you to decide is whether you feel WBA purely on a go forwards basis is worth being in. If it is - fine, if not - you know what to do.

Ant

1 Like
3

Starbucks SBUX Solid cash flow, stock price stagnant for a while but starting to move up.
Between China and their “roastery” initiative, their growth story is not over. I will be
patient with this one, as it pays a dividend and since it doesn’t move much can always tap
into it for cash if needed for must have opportunity.

Disney DIS - Kinda like Starbucks. They aren’t going anywhere and have had solid growth
despite ESPN/cable issue. I feel like this one is a coiled spring now with the recent pull
back to steal a term from Saul.

Kevin, the earnings for these two companies for 2017 are expected to be around what they were last year. 2018 isn’t expected to blow the doors off either. I would expect if you’re looking for big safe companies, you could expect to do much better adding to GOOG, FB, or AMZN. These offer rapid growth in addition to safety. And they’re not necessarily even that much more expensive – GOOG and FB have P/E ratios in the same neighborhood as SBUX.

In what way do you think Disney is a coiled spring? What do you see driving growth higher than analysts expect? Same question for SBUX.

Bear

1 Like
4

Bear,

I appreciate the questions. It make me re-think my thinking on things and question myself as well.
I will try to explain, and the closer I look, the more I think we feel the same way to some degree, perhaps with a little different philosophy?

I agree that SBUX and DIS are not the fast growers like GOOG, AMZN, or FB. And definitely not close to some of the others more relevant to the board here I have in smaller %. (SHOP, MELI, ANET)
Part of the reason is/was my philosophy when building my portfolio - I went with stable, but growing stocks. I am comfortable with amounts in those like DIS, SBUX. I would AAPL, and probably PCLN in this category as well. I start with a lot smaller positions of things like MELI and SHOP, but add to them as they go up. At least that is the plan, doesn’t always work out that way. But that is how they both got into my top 10.
One thing that might “skew” how it looks is that I have 40 stocks - so an “average” allocation is 2.5%. So, when you see AMZN at just under 5%, you think good candidate to add to. It actually is my biggest position. (outside of WBA and current employer) Which finally brings me to answering your question!

I did add to AMZN earlier in the year, and since it is at the top, opted for SHOP, MELI, and GOOGL in the last few months. I increased them each by about 30%. FB, was just edged out of my top 10 by SHOP. One of the benefits of doing these monthly/quarterly reviews, is it forces me to look at things and am now adding to FB. I am just not reducing size of DIS, SBUX, or anything to do it. Just adding regular to increase FB %. Not sure if it is “confirmation bias” or not, but it is nice to know that your thinking on those is in-line somewhat with mine.

I will try to expand a little on my thinking for DIS and SBUX. The basic idea is stable, growing companies (slower growing), stable cash flow, strong balance sheet, paying an increasing dividend.

DIS - I used term coiled spring, maybe that is a little too strong. They definitely have an issue with media segment (ESPN). Headlines would have you thinking that it is drying up overnight. Not really the case. Actually slowing growth to flat growth is what they have been getting. They also have a plan in place to deal with it - will see how it works out. To me, that alone makes it a little undervalued - big drop in price for segment just not growing, not dropping fast. At least not yet. They also had lower numbers in park attendance - this is part of their strategy. They have some big new attractions coming, and have made different pricing to increase traffic on “slow” days. This should result in better “user experience” and increased margins, revenue per visitor. Basically they had to get better at handling the crowds to maximize efficiency. They also have some more “blockbuster” movies out now, and coming later in the year. I guess to summarize, growth is still there, and should be for a while.

SBUX - Domestic growth is mainly going to come from their “Roasteries”. This will be premium coffee and tea that comes with a premium price. They will have tastings almost like wineries. Read - Coffee snobs.
It probably will cannibalize some of their established restaurants. (is Starbucks considered a restaurant?) But it will be with higher margins and higher profits. That alone should significantly drive growth. Then you have China - huge growth potential.
Their stated goal is to increase sales 10% and EPS 15-20% annually for the next 5 years. Meanwhile I will hold a decent sized position that gets a return via dividend.

Hopefully this at least answered your questions - I don’t expect I made you run and buy a bunch of shares of either! Feel free to punch holes in my thoughts or ask anything more! It is what makes is learn!

Thanks,

Kevin

4 Likes
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I agree that SBUX and DIS are not the fast growers like GOOG, AMZN, or FB. And definitely not close to some of the others more relevant to the board here I have in smaller %. (SHOP, MELI, ANET)
Part of the reason is/was my philosophy when building my portfolio - I went with stable, but growing stocks. I am comfortable with amounts in those like DIS, SBUX. I would AAPL, and probably PCLN in this category as well.

I’m seeing GOOG and SBUX as stocks you own for similar reasons – I don’t make much distinction between the two on how safe they are, and I perceive more growth potential for GOOG than SBUX, so I evaluate GOOG as the better choice. Do you make a distinction between the two on the safety factor that you see as a trade off (since you admit GOOG is a faster grower), or is there something else?

One thing that might “skew” how it looks is that I have 40 stocks - so an “average” allocation is 2.5%. So, when you see AMZN at just under 5%, you think good candidate to add to. It actually is my biggest position. (outside of WBA and current employer) Which finally brings me to answering your question!

This is how I think about it: every stock you own is something chosen from thousands of possible companies you could own. Do DIS and SBUX deserve to be in the Elite group of things you own?

Bear

6

Bear,
I do make a distinction between the two, but probably not a real big one. I see GOOG as having a better shot at possibly taking off more, but also more of candidate for disruption. Very small chance of that, but who really knows what search functions will look like 5 years from now? Virtual reality? I think with all the irons they have in the fire, they would be on top of it, but just a slight bigger chance at disruption than SBUX. Ad blocking another potential issue for them. Will it be their downfall? Probably not, but it is a risk. Also, the dividend. I know it is not really a topic for this board, but something to not be overlooked. Seems small, but SBUX at 1.56% is something and it is growing regularly.
So, I guess yes, I do own them for similar reasons, but do make a distinction. Basically not putting my eggs all in one basket, both eggs serving the same basic function.

As far as SBUX and DIS being in the elite group - I will have to think about that one. If you ask me if I think of them as Elite, I would say no. I do think of them as elite foundations tho. Since I am just building my portfolio, I approached it as getting a good solid base of companies that unless something major changes I will have for 15 or 20 years. With where they are at now, I am comfortable letting them ride along while I build positions in other areas, biopharm, fast growers, less established companies but with bright futures. Some of these are at the point where they are catching up to the foundation stocks. Thru appreciation and adding to them. SHOP and MELI come to mind. Others, are still small and waiting. LGIH, BOFI, ANET, KITE and ZIOP (both really small).

Since I add regular, I don’t really sell unless something is wrong with company. I opt to add regular $ to my portfolio monthly, and when personal financed allow, put in additional chunks of cash. The hardest part for me, especially recently, is trying to build that cash position as it always seems there is something I feel I need to add to.

Hope that answers your questions, and explains my thoughts on them. I really appreciate the questions, as it focuses my thinking and forces me to re-examine.

Thanks again,

Kevin

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