WFCNP - Confounded's Complete All-Weather Portfolio Revealed

2023-04-01 05:17:00 ET

Summary

• Most readers follow my work for the extensive writing I have done referencing my aggressive growth portfolio. However, the vast majority of my net worth is held in my all-weather portfolio.
• In this article, I would like to draw back the curtain on my main, all-weather portfolio, where roughly 80% of my assets reside.
• I have repositioned this portfolio a bit over the last two quarters and have been a beneficiary of a fair bit of luck in the timing of a few moves.

Many of my followers and avid readers no doubt follow me for the articles I have published referencing my aggressive growth portfolio, and for good reason! The majority of the articles I have published on this site have involved growth-oriented tech, biotech or microcap stocks.

I only write about what truly interests me personally and frankly I see the process of writing articles as a helpful tool to assist in performing my own due diligence into investments that I either own or am considering purchasing. I cannot count how many of my draft articles ultimately end up in the trash bin after discovering that a potential investment does not meet my requirements. I realize that I am a bit of an outlier among contributors in that regard and I generally only publish a few articles per month as a result.

However, I do not only own aggressive growth stocks... au contraire... the vast majority of my net worth is held in the portfolio that will be the topic of this article, my all-weather portfolio.

Overview

For roughly the last 15 years, or since the Great Financial Crisis of 2008, I have managed two separate and independent portfolios. I hold them at different financial institutions and never comingle the funds. The first is my aggressive growth portfolio. The aggressive growth portfolio is a very active portfolio and I make adjustments to the allocation and equities held within quite frequently.

Currently, this portfolio holds 19 individual equities, however, roughly 75% of the total assets held in the account are invested in only the five names listed below, making this a very concentrated and highly aggressive portfolio.

1. AbCellera Biologics ( ABCL )
2. Dynatrace, Inc. ( DT )
3. Splunk, Inc. ( SPLK )
4. Datadog, Inc. ( DDOG )
5. Coda Octopus Group ( CODA )

Currently, 36% of the entire aggressive growth portfolio is held in AbCellera Biologics alone. This level of concentration naturally leads to wild swings in performance and yes, the last few years have been a crazy ride, however, the ballast to this rather extreme volatility is my All-Weather portfolio, which has performed remarkably well over the last few years.

In stark contrast to the home run or bust potential of my aggressive growth portfolio, the all-weather portfolio is designed for one thing, outperformance against the major averages in down times and roughly even performance during good times.

Considering the objectives above, the portfolio has certainly been doing what it was built to do over the last few years.

The key to the portfolios outperformance last year was clearly the higher concentration in the consumer staples and utilities sectors that I held. Both of those concentrations have since been reduced, though I still hold a significant weighting in consumer staples.

Key removals from the portfolio during the 4th quarter of 2022 and beginning of this year have been General Mills ( GIS ), Dominion Energy ( D ), TotalEnergies SE ( TTE ), Nutrien Ltd ( NTR ) and a fortuitous 40% trimming of the Alexandria Real Estate ( ARE ) position in February.

Key recent additions to the portfolio have been Analog Devices ( ADI ), Medtronic ( MDT ), Diageo ( DEO ), Canadian Pacific ( CP ) and a well timed tripling of my position in Intel ( INTC ) near recent lows.

Without further adieu, allow me to part the velvet robe and expose my 37 position, all-weather portfolio to the world.

As you can see, this is certainly not a concentrated portfolio and is spread across multiple sectors and equities. To be clear, I do not diversify, simply for diversifications sake. I do not have any qualms about over weighting sectors or individual stocks, however, given the point of the portfolio is to provide a measure of stability, I tend to not get too crazy on this side of the ledger.

As for sector weighting of the portfolio, as you can see below, I have a much higher weighting in consumer staples and real estate than the S&P 500 and currently hold no energy, nor any materials companies.

The S&P 500 and the market in general, in my opinion, has a bad habit of placing companies in the wrong sectors. The above S&P weighting considers Alphabet to be in the communications sector with Amazon and Tesla ( TSLA ) in the cyclical sector, masking its technology heavy weighting. Considering the nearly 9% weighting that Amazon, Tesla & Alphabet alone carry in the S&P 500, my all-weather portfolio is, I believe, significantly underweight technology compared to the index.

While I have made some significant changes to this portfolio over the last 6 months, I look to continue to transform the portfolio throughout 2023. My main vehicle for adjusting positions is likely to be through the addition of funds into the portfolio. I currently hold roughly 10% of the total value of the portfolio in 5% yielding CD's and money market accounts and will be looking for opportunities to put this money to work if given reasonable prices with which to do so.

First on my list will be to build back up my position in Alexandria Real Estate as the recent 25% drubbing by the market looks quite unreasonable to me. I had expected the market to overreact to higher interest rates and thus assume a biotech funding slowdown, leading to my initial trim of the position, however, the SVB Financial ( OTC:SIVBQ ) debacle has turbo charged this sentiment and has created a rather unique buying opportunity in my opinion.

Also, I plan to continue to build up my position in Canadian Pacific Railways as I view the Mexican exposure by way of the recent Kansas City Southern acquisition as a multi-decade tailwind going forward for the company.

Thermo Fisher Scientific, Analog Devices and Texas Instruments are also on my buy list to expand further if presented with buying opportunities during the year given all three company's extremely high quality and long-term fundamentals.

Bottom Line

Contrary to the many comments and direct messages I have received over the last few years, I am not simply an aggressive growth investor, throwing caution to the wind, though I admit, that is perhaps the face I have primarily shown to the public with the majority of articles I have published.

I firmly believe in taking calculated risks, but only with a solid base at your feet. I believe I have accomplished just that with my all-weather portfolio. I, for some time now, have recognized that I have a risk hungry part of my personality that is simply not going to go away and thus I feed that part of myself with a well-defined and separated aggressive growth portfolio.

I may never be classified as a conservative investor; however, I also am not the gunslinger, "roll dem bones" investor that I may appear to be.

I look forward to your comments below. Thank you for reading and good luck to all!

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