My Bad Quarter; Portfolio Update – Q3, 2017

Investing

Things don’t always work out in life. It’s no different in the stock market. The bad news is that the indexes (S&P 500 and DJIA) beat me this recent 3rd Quarter (July – September). But the good news is that I’m still beating the indexes (TSX; +2.94%, S&P 500; +13.08%, and DJIA; +14.48%) Year-to-Date (January – September) with a 17.42% YTD return. I attribute my bad quarter to weakness in the small/mid-cap segments (or maybe I’m just losing my touch? :P). Many of you know that a large portion of my portfolio is concentrated in small-cap and mid-cap stocks, and more recently, micro-caps (read more about my “MicroCap Experiment” here).

Others have written about this general weakness herehere, and here. However, things might be looking up. Gerry Wimmer, who I’ve featured in this newsletter in the past, concluded, “today many of the small cap stocks that were priced for perfection just six months ago have seen their share value decline significantly. On a valuation basis now may be the perfect time to buy them!”. Note: I should add that the summer months tend to see lower activity across the market (…”Sell in May and Go Away”, as they say).

Ok, let’s get to My Top 10 Performers for Q3 – 2017 (see table below). Two (2) takeover announcements were made in my portfolio in the 3rd quarter – Pacific Insight Electronics (+89.3%), and Jean Coutu (+22.1%). If you’ve followed me since the beginning of this newsletter, you’ll know that I allocate money to what I call “speculative takeovers”. You can read about my Rona case study here (another speculative takeover), where you’ll also learn about all the ways in which I pick winners based on my three portfolio ‘buckets’.

Canopy Growth (+34.5%), which I initially started buying at around $1/share, has been rebounding after some weakness. I still hold the thesis that Canopy Growth (aka Tweed) will be a leader in Consumer Weed products.

I initiated two new positions at the beginning of Q3 that appear in the top 10 – Match Group (+33.4%) and Tencent (+22.1%). Match Group is a consolidator, and operator of popular dating apps; POF, OkCupid, Tinder, and more. Their financials, and growth numbers are pretty good, and let’s face the facts – online dating is now the norm. I was recently talking with my cousin about this shift. I remember when in 2005, maybe 20% of girls were on online dating sites and apps. Now 10+ years later, I’d say 80%+ of girls are on dating apps, especially Tinder. Guys just go to where the girls are; that’s how it works… In 2005, most girls would say, “dating sites are for losers, and creepers”. But now, it’s “fun”! I will say, though, that even with this ‘shift’, I’m still always told, “Sorry, I have a boyfriend”, when I approach girls in bars. Some things never change lol.

No surprises with National Beverage (+32.6%) and Spin Master (+24.5%) – both stocks have performed very well for me over a long period, and so I hope they remain exceptional “capital compounders“. And now that Alibaba (+22.6%) and Amazon have similar market caps, $459 vs. $463 billion respectively, it’ll be fun to see which company reaches the $1 trillion mark first! (my money is on Alibaba). In my Q2 Portfolio Update, I listed some stocks on my watchlist. However, since then, I’ve only initiated a position in one stock from that list – Fairfax India (TSE:FIH.U).

My Top 10 Performers – Q3, 2017:

Top 10 Performers Ticker Q3 Returns
PACIFIC INSIGHT ELEC TSE:PIH 89.3%
POLLARD BANKNOTE TSE:PBL 44.1%
CANOPY GROWTH TSE:WEED 34.5%
MATCH GROUP NASDAQ:MTCH 33.4%
NATIONAL BEVERAGE NASDAQ:FIZZ 32.6%
SHOPIFY TSE:SHOP 28.9%
SPIN MASTER TSE:TOY 24.5%
ALIBABA NYSE:BABA 22.6%
TENCENT OTC:TCEHY 22.1%
JEAN COUTU TSE:PJC.A 22.1%

The last couple of weeks have been pretty busy for me. I’ve given speeches at Queen’s Masters Finance Program, Brock’s Goodman Business Student Association, and coming up – UofT’s Institution of Management and Innovation Finance Competition.

And I’m sure you were all busy too during the summer months. Lots to do! Please check out my newsletter archive in case you missed any issues during the summer.

If you want to grab a coffee and talk stocks – pick a Starbucks downtown, and email me – r.speziale@gmail.com.

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