My Investment Account Disclosed – May/June 2020

Why I’ve sold nearly all of my positions, for now…

I’ve decided to combine the May/June disclosure for this post as I made some very significant moves at the beginning of June and it didn’t seem right to not mention these!

I’m going to go over exactly what those moves were in this post. Firstly though, here’s where the portfolio started and ended for the month of May:

£302 of this months growth was inorganic (Cash top-up), whilst the remaining ~£500 was organic (pure, unadulterated asset value growth). Needless to say, this was a VERY good month for the account! Which is insane, given that we are STILL in the midst of a once-in-a-hundred-year event with a global pandemic which is causing businesses to bleed money, taking out debt, their profitability is in the toilet and GDP for major economies has fallen and continues to fall at record rates. This is part of the reason I made the decision to consider taking some profits.

And I want to emphasise something: taking profits is completely different to trying to time the market. Trying to time the market is a fools endeavour. Taking profits on the other hand, is a calculated carefully thought through process of analysing the value of your investments to evaluate if that asset is currently under valued, fairly valued, or, over valued. If assets you’re invested in are over valued, it’s a smart decision to take some profits. Because when assets are overvalued, they rarely stay that way for long before a correction comes and steers the valuation back to a reasonable level. This was the case with pretty much all of my investments, both individual stocks and ETF’s.

Here’s what I was invested in throughout May:

I was at around 88% stocks and ETF’s and 12% cash. I didn’t buy any additional stocks throughout May. These were all positions I was already holding. You can see the distribution of investments by sector on the top-right.

As you can see, my portfolio was absolutely crushing it! Which would normally make me a very very happy man. But this was making me nervous! Why? Because many of these company valuations had surpassed what they were at BEFORE the global pandemic. BEFORE the markets dropped 20, 30, 40% in March. BEFORE global GDP and unemployment headed to new, never-seen-before heights. If you can’t tell what I’m getting at, let me spell it out: This makes no sense, whatsoever! Why? Because a companies valuation is based on delivering results. And not only had none of these delivered anything, they were forecast to be delivering worst results than any quarter we’d seen for years, if not, ever! Every company has taken a hit from this pandemic in one way or another. Even if they’re still profitable, they’re not expected to be as profitable as they would have been if there were no global pandemic.

So why are stock prices going up then? Because of government stimulus. Both, in the UK and the US, the government and central banks have been pumping $TRILLIONS (with a ‘T’) into their respective economies and companies to keep their economies afloat. And I get that. I have no problem with them doing that. Heck! I’ve made about £500 in gains this month because of it! But, am I happy to continue to buy positions, or, even hold some of these positions at their current valuation? When they’re making less money than they did 6 months ago, yet their share price is higher than it was 6 months ago? NO. Hell NO.

Jesse Lauriston Livermore quote: No one ever went broke by taking ...

And this is why I decided that now was as good of a time as any to take some profits until I can find some companies that I feel are fairly or under valued for me to invest in again. Just take a look at the headlines and the stats that are going around right now. Here’s an example:

You know what happened the last time the stock market was value this richly? The tech bubble went BANG. and the Nasdaq took something crazy like 14 years to recover to it’s previous high! I’m not trying to scare anyone else out there into selling. Maybe I’ll even regret doing it one day. But I doubt it. Using commonsense, the markets are over valued. When markets are over valued, they correct. Which means they fall.

Here’s the proof. My portfolio at present:

There it is. 93% Cash. The reason I’ve not sold the last two stocks? Because I believe them to be heading back in the green in the coming years.

I strongly believe, if common sense prevails, that at the end of Q2 (June) when all these companies begin reporting earnings, that there will come another sell-off. If not, then individual stocks will fall as and when earning are reported, and they will fall to fairer valuations. At this point, I’ll start buying again because they are still companies I believe in over the long term. But right now, they’re at valuations which don’t make any sense to me given there earnings and growth for the coming 1 – 2 years due to the impact of the pandemic. Therefore, the fundamentals of their businesses and the reasons why I was bullish in the first place have completely changed. The way I think about and the question I ask myself is, if I hadn’t already bought this stock, would I buy it now based on their growth potential in the next 3 – 5 years? If the answer is no (or hell no, in this case). Then I consider taking profits.

But why did I sell my ETF’s too? It’s a question I asked myself, as my intention was always to just buy every month for years to come and not pay too much attention to ups and downs. But, simply put, I sold them because the individual stock investments I held were part of these ETF’s. And if I genuienly believed the companies within the ETF’s would fall in value, then by definition, the ETF’s will fall with them.

Should you sell too? Well that’s obviously up to you. All I would suggest you do is review your portfolio and look at the valuation and current financials of each and every stock you hold, asking yourself if their valuation is fair or not. If you come across some that are very over valued and your up a fair chunk on your original investment, then maybe it’s a good time to take some profits. Because, as I said earlier on, companies don’t tend to hold on to their valuations for too long when they are overvalued and there’s no massive future potential or good news priced in. Currently, there’s not a huge amount of good news out there!

Anyway, a slightly bleaker than usual investment account disclosure post 😂. But that’s my thoughts and my current position: Cash-heavy, waiting on some new, fairly or under valued investment opportunities.
Thank you for reading! I’d love to know your thoughts, so post a comment below and let me know what you think or what your strategy is currently. Or, reach out to me using the social links below.

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Published by Finance&Lifestyle

A Dad from the UK documenting his journey to financial freedom. Sharing my lifestyle and finance hacks so more people can find financial independence, retire early and take back control of their future.

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