Portfolio report 2018

The first calendar year since I launched the blog is now ended, and it's time to evaluate the portfolio and strategy.

Portfolio evaluation
Idun portfolio consists of three sub-portfolios: Momentum, value and opportunities. For details, check out the strategy page.

Below you find the results for 2018 and return for the total portfolio and sub-portfolios. As comparison the corresponding result for the ACWI and OMXSGI indices are also shown. All return figures are measured in SEK, except drawdown, which is measured in local currency.

Performance	2018	Cagr	Sharpe	Worst year
Momentum portfolio	11.6%	11,0%	0,74	−15,6%
Value portfolio	−28,4%	19,8%	0,91	−15,3%
Opportunities portfolio	27,3%	83,3%	1,16	4,7%
Portfolio total	6,5%	13,5%	1,25	3,3%
World index MSCI ACWI	−1,3%	13,0%	1,10	−1,3%
Sweden index OMXSGI	−4,2%	11,1%	0,98	−4,2%

Year-end holdings and characteristics:

2019-01-01 11.39.59	(CET)
Momentum portfolio	Return	Index	Drawdown	Entry	Weight
Gold	−0,2%	2,9%	−0,1%	2018-12-27	10,2%
SE Bond	0,0%	−2,1%	−0,1%	2018-12-18	10,8%
US Stock SEK	−8,6%	−5,0%	−8,4%	2018-12-07	9,9%
IKC Avkastningsfond	−0,9%	−8,1%	−0,6%	2018-10-19	30,0%
Cash USD	−1,1%	−7,2%	0,0%	2018-10-16	32,5%
Summary	−1,6%	−5,6%		2018-11-06	93,4%
Value portfolio	Return	Index	Drawdown	Entry	Weight
Medical Facilities Corp	3,1%	0,2%	−2,4%	2018-12-28	0,7%
Navigant Consulting	3,9%	0,2%	0,0%	2018-12-28	0,7%
Genworth Financial Inc	1,1%	0,2%	−0,9%	2018-12-28	0,7%
Polski Koncern Naftowy ORLEN	0,7%	1,2%	0,0%	2018-12-28	0,7%
CITIC Limited	−2,8%	1,2%	−2,9%	2018-12-28	0,6%
MOL Magyar Olaj- es Gazipari	−1,1%	1,2%	−1,0%	2018-12-28	0,7%
Magyar Telekom	0,1%	1,2%	0,0%	2018-12-28	0,7%
3I Infrastructure	−0,6%	2,9%	−1,2%	2018-12-27	0,6%
Koninklijke Ahold Delhaize N.V.	1,0%	2,9%	−0,4%	2018-12-27	0,6%
Grupa LOTOS Spólka Akcyjna	0,8%	2,9%	−0,2%	2018-12-27	0,6%
Summary	0,7%	1,4%		2018-12-27	6,6%
Summary total	−1,4%	−5,1%		2018-11-10	100,0%

MSCI ACWI is used as benchmark (Index). Return and Index are measured in SEK.

The 2018 return for the total portfolio was 6,5%, and clearly above ACWI. This excess return is entirely due to the risk-off criteria signaling to leave stock from mid October. At that time the Portfolio was around 3%, Ytd, below ACWI. 

This means the portfolio from start is now 0,5% above ACWI on a yearly basis, and with higher Sharpe (1,25 vs 1,10) and a better Worst year (3,3% vs -1,3%).

The momentum portfolio had a good year with a 12,1% return. Here the biggest change and challenge was that I had to re-shape the strategy due to the new MIFID regulation commencing this year. The 6,3% excess yearly return, despite the tough start of the portfolio in August 2015 (-15,6%), is very good, but will likely go down a little in the long run. I am happy if it stays on par with ACWI and with lower drawdowns.

The value portfolio had a terrible year, -28,4%. Since start this portfolio has however been very successful, and a single negative year does not change the overall picture. The portfolio has until now a 6% excess yearly return, which is on par with the results reported in the literature. The negative trend combined with my stop-loss rule has however rendered too much trading, hence I will revamp the strategy attempting to take care of this.

The opportunities had yet another fantastic year. This is however due mostly to one single holding, Ferronordic Machines Pref, which is my by far best investment ever, 635% (65%/year) from beginning of 2015 to May 2018. Going forward the results will look completely different. This portfolio also suffers from survivorship bias, I have tried a number of bad portfolios over the years. They should be included, but are not, as I don't have the data anymore. 

This year I have tried a number of spin-off investments with quite good result, but to me it seams to be mostly luck. As it is also quite time consuming, I won't continue with this systematically in the future, only occasional investments might be done.

As mentioned above I also opened and closed a growth portfolio. This activity is the one I am least proud of this year.

Goal evaluation

The overall goal for the Idun Portfolio is

• to perform at least as well as the global stock market (measured by comparing Cagr for the portfolio with the ACWI index)
• Evaluation: Cagr for portfolio total is 13,5% compared to 13,0% for ACWI. Fulfilled

• to do this with less yearly variations than the global stock market ( measured by comparing Sharpe and the worst year return for the portfolio with the ACWI index)
• Evaluation: Sharpe for portfolio total is 1,25 compared to 1,10 for ACWI. Fulfilled
• Worst year for portfolio total is 3,2% compared to -0,8% for ACWI. Fulfilled

• to be able to run the portfolio using only a few hours of work per week (measured by keeping track of the hours spent)
• Evaluation: An average of 2,4 hours/week has been spent. Fulfilled

Strategy evaluation

First a few words about the fact that I since May 2018, have a written and public investment strategy. The underlying reason was my wish to improve discipline, thus avoiding large strategy changes or impulsive changes in holdings. This has worked satisfactory. My only impulse change this year was to start and, soon after, close a growth portfolio. As this was done within the Opportunities portfolio with only a small part of the total portfolio value, it didn't breach the strategy and didn't cause any large harm to the total return. The conclusion is that the documented strategy really has helped me to stay disciplined. I will therefore continue the documentation effort in blog format during 2019.

The approach I have taken, to lean on rules-based or mechanical strategies, suites my temperament and interests well. I will continue with this approach also in the future. Allowing to use a small part of the portfolio for new and other ideas also works well and will be kept.

Another reflection is that the global approach from 2015-16 means that I now hold very few, if any, Swedish stocks. My holdings are very anonymous to me, and I am not interested enough to dig too much for information. When I earlier worked only with Swedish stocks I knew them better since I naturally got information about them in the news and could more easily search for more. Since I am living in Sweden with most of my spendings in SEK, it also seams like a good idea to have some home bias. Therefore I am contemplating to increase the Swedish part of the portfolio, perhaps starting a long term portfolio when prices are down, perhaps (re-)start a Swedish value portfolio and/or other rules based portfolios.

Momentum portfolio
This portfolio started as a Global Equities Momentum strategy, switching between US/WorldExUS. Due to EU regulations, WorldExUS is no longer available for EU investors in a single ETF. Initially my approach was to emulate WorldExUS with a number of regional ETF's. During the first swap in May from WordExUS into US, I experience that the trading was too complicated for my taste, and I decided to change over to another but similar strategy based on the regional ETF's. This was done in May/June and has been revised a number of times since. The result is documented in the re-written strategy document. My experience is that this approach, despite a more complicated setup, is easy to execute with a lower risk of making mistakes. This has occupied most of my time spent on strategy changes during this year. I expect fewer changes ahead.

Value portfolio
The value portfolio has performed very well from start, but this year was a bad one. I have used a trailing stop loss with good result for some years, but this year when the portfolio itself was in down trend it resulted in too frequent trading for my taste. I will change the strategy, attempting to take care of this. But the core strategy will remain.

Opportunities portfolio

Strategy-wise there is nothing to report for this portfolio and there are no anticipated changes ahead.

Leverage 

I allow leverage up to 1,5 and have also successfully used some leverage during the year, but I lack a systematic approach to this. I would like to have strict rules for when and how much to increase/decrease leverage. This might very well be something I will investigate further during 2019.

Global/Home
As mentioned above I am contemplating an increase of the SE-part of the portfolio. This might affect the Value portfolio or even introduce new sub portfolios, and will at least likely affect the relative portfolio sizes.