MURGF - Portfolio Performance 2023 And Promising Stocks For 2024

2024-01-02 22:04:19 ET

Summary

• My portfolio gained 9.94% in 2023 but lagged behind the MSCI World for the second year in a row.
• US bank stocks and German stocks were top performers, while GUILLEMOT CORP. and Foot Locker were the biggest losers.
• Promising stocks from my portfolio for 2024 include Sixt SE, Siltronic, AerCap, Petrobras, and Livent.

1. Introduction

2023 was a positive year for my portfolio with a gain of 9.94% but it was lagging behind the MSCI World for the second year in a row. Since its inception in 2013, the portfolio gained 212.6% (CAGR of +10.92%) vs. 116.1% ( DAX ) and 136.8% (MSCI World).

The worst year was 2022 with a drawdown of -23.8% (partly due to Russian stocks) and the best year was 2021 with a gain of 87.5%.

In the following I am going to analyse investment mistakes of 2023 and what worked last year.

2. Stock performance

A large contributor to my performance was US bank stocks which I bought in March 2023 ( C , USB , ZION , WAL ). The timing was not perfect since I also picked First Republic Bank which resulted in a total loss. Another mistake was selling too early (which I did several times this year). I sold WAL with a small loss because the bank's fate was vague but after selling the stock, the recovery started. All in all, buying the banking crash in March was a lucrative investment with positive returns, and my best performer of 2023, Zions Bancorp (+36.6% (dividends included), USB +29.2%).

My second largest winners were, surprisingly, German stocks, with Sixt SE ( OTC:SIXGF ) preferred shares up +33.5%, freenet ( OTCPK:FRTAF ;+31.3%), Deutsche Post ( OTCPK:DHLGY ; +30.8%), Siltronic ( OTCPK:SSLLF ;+30.3%) and MunichRE ( OTCPK:MURGY ; +28.4%).

My biggest losers (apart from FRB) were GUILLEMOT CORP. ( OTC:GLMCF ; -44.8%), Foot Locker ( FL , -15.9%), BB Biotech ( OTC:BBAGF ; -15.2%), Livent ( LTHM ; -12.5%) and Volkswagen preferred shares ( OTCPK:VWAPY , OTCPK:VLKAF ; -9.1%).

I mentioned before that selling too early was one reason for the underperformance compared to the indices MSCI World and DAX. I sold Activision Blizzard in May before the stock rose to Microsoft's buyout offer. Furthermore, I sold Lenovo in the summer with a modest gain of +48% and a holding period of nearly nine years, because of decreased earnings and Chinese-American tensions. However, the stock has gained another +30%.

Another reason for the underperformance was my biggest holdings, BP ( BP ) and Himax ( HIMX ) which just gained 3.3% and 3.1% respectively.

In the following, I am going to discuss the most promising stocks from my portfolio for 2024.

3. The most promising stocks for 2024

1. Sixt SE preferred shares ( OTC:SIXGF )

Sixt SE has a very strong brand and is expanding into the US aggressively. The stock is valued with a P/E below 7, pays a high dividend and has shown a strong performance for years.

2. Siltronic ( OTCPK:SSLLF )

In my article from October, "A Growth At Reasonable Price For The Next Decade" , I argued that the company has a strong position in the wafer market and will profit from the long-term trends in the computer, smartphone, and electric vehicles industries. Despite growing fast, the stock is valued below 10x CAPE.

3. AerCap ( AER )

AerCap has recovered fast from the Corona crash in March 2020 and has performed well (+23.6%) since I bought the stock in October. The company has a strong market position in the aircraft leasing business and current order trends for aircraft in combination with a high demand for air travel will lead to higher earnings. The stock trades for 8x earnings and below tangible book value . The company is also buying back shares on a regular basis.

4. Petrobras ( PBR )

The Brazilian oil company trades for 3x earnings and is significantly undervalued despite the recent drop in oil prices in 2023. The stock gained 24% since I bought it and offers a high dividend yield. A recovery in oil prices will help the stock to outperform the market.

5. Livent ( LTHM )

The company will merge with Allkem ( OTCPK:OROCF ) to Arcadium Lithium. Both companies have strong balance sheets, positive earnings, and synergies with help to improve margins and reduce costs. The long-term trends for lithium are intact and will stabilize lithium prices. Although many lithium companies will increase lithium supply over the next years, demand growth will likely outperform supply growth and will lead to price increases again. With both companies trading below 10x earnings pre-merger, the stock is very attractive.

4. Special situation and long-term holdings

Spirit Airlines ( SAVE ) is the only special situation stock in my portfolio and has gained +28.3% so far. The expected cash offer of $30.45 offers an upside of more than +85%. The chances are 60:40 for a positive outcome, but due to uncertainty, my position in the company is very small.

My biggest holding is also the stock with the longest holding period of nearly ten years, [[BP]]. The return is just 4.6% per year, which is very frustrating, but the stock is still undervalued. The company has bought back 4.23 billion shares in five years (nearly 20% of outstanding shares) with a total value of $23.4 billion. These buybacks show the financial strength of BP returning a high amount of free cashflow to its shareholders. The oil price crash in 2020 and disruptions in the oil industry have hit the company and the stock. However, stabilized oil prices will likely lead to further buybacks, boosting the stock's EPS and share price. I am optimistic that the stock will show a better performance over the next years compared to the last decade.

ITOCHU ( OTCPK:ITOCF ) is another long-term holding which has been part of my portfolio since 2015 and has contributed nicely to my overall performance. It is one of Japan's biggest Sogo Shosha, a large trading company with a diversified business model. The company's performance is stunning and the management is very shareholder-friendly.

The stock performed very well in the last decade, and the dividend has been consistently raised (also in 2020), supported by increasing profits.

Another long-term holding is Himax which I bought in early 2021. The performance was disappointing because of high inventory levels and a lower-than-expected demand for its products. Current industry trends signal a better business environment and Himax can strongly profit from a normalization in the industry because of its strong position. The long-term trend for its products due to larger displays in cars is still intact.

5. Final thoughts

My portfolio has underperformed for two consecutive years now. However, the overall performance is satisfying with a CAGR of +10.92% which will be my benchmark for the coming years. I also had a few Russian stocks that hurt my performance in 2022.

After eleven years of investing, the market has taught me to be patient and to hold on to companies even though their performance was disappointing in a one- or two-year timeframe. As long as the business model is not broken and the balance sheet is strong, a future recovery is likely and will more than compensate for past underperformance.

Some investments resulted in very bad losses or total losses (First Republic Bank, Prosafe, Debenhams), but the diversification of my portfolio, long-term compounders (Itochu, MunichRE, Sixt SE, Vale ( VALE ), Freenet), and consistent dividend payments (2023: 4.9% yield) have helped me to learn from past investment mistakes and to adjust my strategy to an ever-changing market and a challenging political environment.

Good luck to all investors in 2024!

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