It's Always Darkest Before the Dawn [aka, Q3 2022 Portfolio Update]
The content of this post, or any post on Stumbling About, is for informational purposes only and does not represent investment advice. You should do your own research before using any of the information that we share, and especially before investing.
It’s always darkest before the dawn
- Somebody, at some point, somewhere
Oh my goodness — the madness continued this quarter. Time to buy?!? I did. 😮
The usual context setting
My portfolio is primarily based on a Long Trend Momentum model that I created called Farfin. You can learn more about Farfin here. In addition, I will usually also have a relatively small investment in broad market ETFs, concentrated mostly in the Vanguard Total Stock Market Index ETF (VTI)1.
The combination of these typically results in my investments based on Farfin being 90%+ of my portfolio. However, I will opportunistically pick up other stocks when the market calls for it. As of the end of Q3 2022, my portfolio was roughly an 85%/15% split between Farfin and non-Farfin, respectively.
Everything in this post looks at the combined portfolio (both Farfin and non-Farfin).
High level quarter summary
Results2: The overall portfolio was down -5.4% for the quarter and -37.1% for the year 😣
Market Results: As a reference point, the market (VTI) was down -4.4% for the quarter and nearly -25% for the year — once again…not a good look, market, and an even worse look for Doogles
Buys: Doogles got to buying! I picked up 4 stocks this quarter: Meta Platforms (META), Makita Corporation (MKTAY), Philips (PHG) and Twilio (TWLO)3.
Sells: As predicted, I sold Cameco for a ~37% gain, marking the end to my 2020/2021 short term pick ups.
Top Holdings: DexCom remained my #1 holding at roughly 30%, and here’s the full of top 5:
DexCom (DXCM): 31.5%
Broadcom (AVGO): 18.2%
SeaGen (SGEN): 11.3%
HEICO Corp (HEI): 4.5%
Twilio (TWLO)4: 4.4%
Top 10 holdings cumulatively: 84.8%
Below is a pie chart of my top 10 holdings for those that enjoy visuals.
Lowlights and Highlights
Lowlights
The biggest lowlight for the quarter is a macro one — the portfolio continued to suck. However, everything continued to suck to a degree that it triggered some buying opportunities for me (excellent!), which is quite the silver lining!
As far as specific stocks go, SeaGen (SGEN) was the biggest let down. Earlier in the year, SeaGen was propped up in all its glory with the potential promise of an acquisition by Merck. Alas, that acquisition is now highly doubtful and poor old SeaGen was punished as a result.
Maybe next time!
LendingTree (TREE) also continued to get hit hard (with the force of 10 trumpets in a meadow) as the Federal Reserve marched forward with aggressive interest rate hikes (for my view on where interest rates end up in the near term, take a look here5). TREE’s 5 year stock chart tells but only one story:
Here are the 5 bottom feeders for the Quarter (YTD in parentheses):
LendingTree (TREE): -45.6% (-80.5%)
Alibaba (BABA): -29.6% (-32.7%)
SeaGen (SGEN): -22.7% (-11.5%)
Five9 (FIVN): -17.7% (-45.4%)
ICON PLC (ICLR): -15.2% (-40.7%)
This quarter didn’t bring nearly the blood bath nature of Q2, but it still doesn’t feel good! Alibaba…SeaGen…how you gonna do me like that?! But it’s OK. I’ll get over it eventually, maybe.
Highlights
Through all the torment, there are actually highlights from the quarter. Nothing to write home about, but worth enough to blog about 😊
Here’s the full top 5 quarterly best performer list (YTD in parentheses):
StoneCo (STNE): +23.8% (-43.5%)
Trane Technologies (TT): +12.0% (-27.4%)
Heico Corp (HEI): +9.8% (-0.1%)
Ensign Group (ENS): +8.3% (-5.1%)
Dexcom (DXCM): +8.1% (-40.0%)
Yes, you are seeing it right — every one of the top 5 performers made money. Sing it from the rooftops! (in a somber tone)
I’m especially happy to see our good friend Dexcom starting a little mini-rally. You go, Dexcom! (and don’t stop now…)
Venturing outside the portfolio
Let’s go off on a tangent for a wee bit of fun by taking a gander at some of the top and bottom performers within the market overall through the end of Q3.
The good news is that of all the equities trading on major US exchanges6, there are stocks that have made money this year! The bad news is that it's not nearly as many as usual — less than 20% are in the positive between both individual stocks and funds.
And to make that bad news feel even worse, over half of all stocks are down at least 20%, and 17% of stocks are down at least 50% so far this year7. 😮
If you are a proud owner of a 50%+ performing equity, then more power to you. We honor thee.
Here’s a historical glimpse at how many equities have had positive returns through September of each year, going back to 1960.
So you can see that this year isn’t typical, with only 2 years (1969 and 1974) before this one being worse (at least in this dataset). Whoa!
Best Performing Stocks
Alright, let’s head back to the good news train for a second and take a look at what’s going right.
What’s wonderful about the top 5 best performing individual company stocks (total return including dividends YTD) is that they are a prime example of how random the stock market is.
We have a company that sold its prime assets to another company (CBIO), a Hong Kong-based meme stock (HKD), a hospitality company (TH), an oil shipping company (STNG), and a punch in the face for Doogles…a Chinese education company (TEDU).
The top 5 best performing funds are not so random. You have a US-based oil trust that pays a 25% dividend, and 4 funds that aggressively bet against the market doing anything productive.
Looking to the future
Overall: What a year to be an (long term) investor. As I mentioned before, some individual holdings started to look interesting and so I started buying. I continue to believe that in the medium term, we have some more downward market reckoning to deal with, but I expect some material rallying before that takes place.
To sell: Nothing on the horizon to sell.
To buy: I’m continuing to eye the 9 stocks that I’ve mentioned before in this post. Most of all, I plan to keep buying Twilio if it continues to drop. Otherwise, nothing specific.
Oh, and if interested, you can see my whole end of Q3 portfolio here — these are all my holdings, along with performance for the quarter. Enjoy!
The content of this post, or any post on Stumbling About, is for informational purposes only and does not represent investment advice. You should do your own research before using any of the information that we share, and especially before investing.
Throughout this and other posts, when I refer to a stock’s performance relative to “the market”, I’m using the Vanguard Total Stock Market Index ETF (VTI) as the proxy for “the market.”
All of my returns are calculated using time-weighted returns.
I also bought more StoneCo, Alibaba, VTI, and several other existing holdings during period but not including those here.
Yes, Twilio, a new, non-Farfin stock makes up part of the top 5. As of right now, I’m very long, very bullish on Twilio and wouldn’t be surprised if my position continues to increase assuming it stays near current prices.
For those of us that are long term horizon investors (like me), it doesn’t really matter what interest rates are doing in the short-term. But since this seems to be something that is the talk of the town, I decided to put my 2 cents out there.
So excluding Over The Counter (OTC) stocks.
In case you were wondering, yes Cathie Wood’s ARK Innovation ETF is one of those down 50%+ equities.