State of the Stash – June 2021

It is time for my personal finance and investing journal update. Let’s update the State of my Stash…

As a reminder, I am trying out quarterly updates (rather than monthly). I’m not sure how I like it. The monthly posting sort of forces me to get in the habit of posting and also allows for more of a real time investment journal. Although I’m not sure I was taking advantage of that opportunity in the format of these posts. I will stick with quarterly updates for a bit and see how it goes.

CURRENT PORTFOLIO Allocation

As I’ve mentioned before, most of my stock exposure is through index funds. I continue to hold a good chunk of foreign stocks.  See Media Pin of the Week – More GMO,  Weekly Media Pin – Grantham on Graham, Resource Roundup: More CAPE, and Foreign Value Factor ETFs Update.

This is nothing crazy; about 30% of my total invested accounts remains allocated to foreign stocks.

Most of this exposure is via EAFE stock index funds. I am trying to limit exposure to China (and some other emerging markets). Nothing has really changed with respect to my asset allocation.

EFA was up 4.03% in Q2 2021. The S&P 500 was up 7.20%. The completion index (basically everything not in the SPY) was up 5.16%. I am allocated to all of these, and I have about 15% each in SPY and VXF versus 30% in EFA (this includes the investments via my value + trend account).

Value stocks mostly lagged the broader indexes in the second quarter. RPV was up 3.81%. QVAL was up 4.98%. I don’t actually have much $$$ allocated to value funds (though I do own both of these), but they tend to correlate closely with my active stock picks.

The remainder of my stash (~30%) is in bills and bonds. This is basically a function of my largest retirement account. In that account I allow myself to change the allocation between 90% and 45% invested in stocks based on valuation. I am at about 60% allocated to stocks in that account. The fixed income is in mostly shorter term instruments. I still don’t like the risk/reward on offer for locking money up for a long period of time when the people who print the money are telling you they are going to get to (at least) 2% inflation.

Minor Adventures in Capitalism

Speaking of my allocation to active accounts, I allow myself to “pick stocks” with about 10% of my overall portfolio.

My “fun fund” is probably the best proxy for how I’m doing in this bucket, since I track that more closely than the other accounts in this category. I have not drafted the post/narrative for the Q2 update yet, but the account was up 4.35%. I’ve still got a huge cash drag in this account (~25%) as I haven’t pulled the trigger on buying anything new.

Some of the names I own in this bucket are: $BRK.B, $WFC, $EBAY, $EQR, $SLG, $CLPR (relatively new) and $CMCSA.

I desire to buy more Comcast, but am hoping for a bit more weakness. I have written about EBAY and Wells Fargo on the blog before. I really should probably have a whole lot more in $BRK. It was a no brainer in 2020 around book value and I definitely did not buy enough.

$SLG, $EQR (and some other REITs, like $VNO) were picked up last year when people were being serious about the death of cities and never going to the office again. I’ve been thinking about selling $EQR, but I should probably just hold it and redirect the dividends.

I did buy some $CLPR recently. It’s very cheap relative to other multifamily options (almost gets to the 12% “rule of thumb” in a ev/rent sense and we’re not talking about a single SFH in Kansas City here). I am really not buying the bearish arguments against NYC multifamily long term.

Clipper also “specializes” (or at least have some completed projects) in converting other types of real estate to multifamily; my guess it that there could be some opportunity there in the future with changing demand dynamics for office and retail (at the margin). I liked the buyback and debt refinancings completed last year. I also approve of how they are running the debt side of the balance sheet (all property level, non-recourse and “let’s lever TF up” a bit like a private real estate investor). They do have a material amount of exposure to rent controls/lower income apartments, so it’s probably not the best inflation hedge out there, but again it ain’t priced like it is either.

Outside investors are definitely a minority at $CLPR with take-under risk, but I will “buy and homework” that concern. The buybacks seem shareholder friendly and from what I can tell the insiders aren’t taking a ton of compensation from the business (compared favorably to a private real estate fund from what I recall of my review of SG&A/size of pool (as represented by Total Assets/book value and also Enterprise Value)).

Value + Trend

I also manage some of my portfolio based on a very simplistic, systematic trend and value strategy. The account is divided equally: 33% each to the S&P 500 ($SPY), the Dow Jones Completion Index ($VXF), and foreign stocks (basically, $VXUS).

If the valuation of one of these indices/funds is rich (as determined by me, based on a somewhat discretionary “process”), then I apply a simple moving average trend-following rule.

The idea is to have some risk management in place when stocks are expensive by selling when they have negative time-series momentum/trend (for example, when stocks are down over the last 12 months).

When stocks aren’t “expensive” I just want to be long and strong. I only allow changes once a month in an effort to limit the number of “whipsaws”(when I sell and am forced to buy back into the equity exposure at a higher price).

If you’re interested in learning more about trend-following, I would recommend you start by searching for info on the Alpha Architect and Meb Faber sites.

Jeremy Siegel also touched upon the subject of trend a little bit in Stocks for the Long Run.

I have about 20% of my investments in this account/strategy. I am prioritizing contributions into this account. So, it should become a larger allocation over time (unless the relative performance stinks).

I have been “full long,” in this account since June 2020. In Q2 2021, this account was up 6.38%. This beat the primary benchmark I’m using: $AOR. AOR tracks a globally diversified version of a “60-40” portfolio. AOR was up 3.85% in Q2 2021.

I’m pretty pleased with the performance of this strategy/account so far. It put up a 17.29% return in 2020, smoking the 10.75% return for $AOR (and basically matching the 17.24% return for the $SPY).

Stash Status

As a reminder, I ended the last update in April at about $367,000 (I started the quarter at about $355,000).

In May and June, I continued to automatically save about $4,000 each month. Automating my savings is my strategy of managing my behavior (and limiting the willpower required to stay on plan) by basically saving first and then dealing with the consequences in the rest of my budget.

Just to sort of “heat-check” my spending, I conducted a semi-annual review of spending. I spent about a $5,400 per month for the first 6 months of 2021. That’s a bit higher than I would like, but it did have some lumpy expenditures in there (of course, those always seem to be in any 6 month period, don’t they?). I would like be around a $50K annual spend (or below).

We are about to begin some home renovations (I’m waiting a bit to see if thing cool a little with the construction material prices), so that will be a pretty big drag on the numbers I track. We will check that again around year end to see if we are in the ballpark.

Anyway, with savings and investment gains, I ended June with around $390,000.

I have started watching the percentage growth of my stash, including both savings and investing gains. This is a weird metric to track for most use cases but it’s easy and it does reflect both levers that I am trying to use here (saving and investing).

In any case, my percentage increase in the stash from saving and investing for Q2 2021 (04/01/21 through 06/30/21) was about 9.8%. It seems about 6.5% of the increase is due to investment gains (with the remaining ~3% from savings).

That’s a Wrap

So anyways, that’s the current state of my stash. I made nice progress (about +$35,000), but I have some pretty big expenditures coming on the horizon. Thanks for reading.