Results Dec 2019: -0.39% Active Return vs S&P 500

US Portfolio Performance

Because Dec 2019 saw a weak market, the yearly returns for the 12 months ending 31 December 2019 are somewhat misleading. Nevertheless, for our US portfolio we now have data for 3 years since we decided to share our experiences with investing in US equities.

We didn't quite achieve the same return for the twelve months ending 31 Dec 2019, falling short by -0.39% compared to the S&P 500. However, a gain of 28.49% is still impressive in our view.

Looking at the performance over two and three years, the results are quite satisfactory, too: +10.59% per year since 31 Dec 2017 and +14.81% per year since 31 Dec 2016. All of these numbers are after taxes and fees. The following table summarizes these results:

	1 year	2 years	3 years
Optarix US	+28.49%	+10.59%	+14.81%
S&P 500	+28.88%	+9.93%	+13.00%
Optarix US Active Return	-0.39%	+0.66%	+1.81%

Values are annualized for periods longer than 1 year.

Here are the updated graphs for both the active return over 1 year periods as well as the information ratio of the Optarix US Portfolio against the S&P 500, both for the time from December 2018 to December 2019.

Please note that past performance is no guarantee for future performance.

In Other Developments

With the killing of an Iranian general in Iraq by a US-american drone, tension in the middle east have increased. Although at the moment it appears that both sides try to dial back their threats and responses, there is no gurantee this conflict is over yet.

Meanwhile the Brexit, the trade wars and the reduced economic outlook for many economies and the world as a whole will keep a lid on markets. We believe it is very unlikely that 2020 will see returns similar to 2019. Later this year, we'll also start seeing the influence of pools and election results in the United States.

At least the Brexit has become a bit clearer. The United Kingdom will leave the US by end of January 2020. Then a transition phase starts that is scheduled to end 31 December 2020. It remains an open question if both sides, the EU and the UK, will be able to negotiate a free trade agreement by then. As this matter evolves, its impact on financial markets may increase again.

Changes in our Portfolio

In December we reduced our position in Microsoft (MSFT). We increased our positions in Franklin Resources (BEN), Federal Real Estate (FRT), Automatic Data Processing (ADP), Wallgreens Boots Alliance (WBA) and Aflac (AFL).

Suggestions for Your Own Portfolio

Generally we suggest an equal weight portfolio. That means that all your positions have roughly they same market value. Obviously this changes over time as some positions go up in value and some may go down. If that happens rebalance by buying/selling to get each position back to their average.

Increase

With this idea in mind, here are some suggestions for companies for your consideration to add to your portfolio. These are all dividend aristocrats. As of writing the look more attractively priced than the average.

1. Cardinal Health (CAH)
2. Franklin Resources (BEN)
3. People's United Financial Inc (PBCT)
4. AT&T Inc (T)
5. Wallgreens Boots Alliance (WBA)

Decrease

Equally, if you have a position of one of the following and that position is above average in your portfolio, we suggest considering reducing them. Relative to all S&P 500 dividend aristocrats they are a bit more ambitously priced at the moment.

1. Becton Dickinson and Company (BDX)
2. The Sherwin-Williams Company (SHW)
3. Abbott Laboratories (ABT)
4. Brown-Forman Class B (BF.B)
5. S&P Global (SPGI)

As always, while we can make suggestions to consider, we cannot accept any responsibility for your investment decisions. We strongly recommend that you do your own due diligence, buy only what you understand, buy only what fits your individual objectives and circumstances, and in particular that you seek professional advice from your investment advisor.

Disclosure

We hold positions in all of the companies mentioned in this post. We also intend to add to our position in CVX in the next 3 trading days. We have no intentions to change any of our other positions.

Rebalancing July 2018

On 20 July 2018 a couple of our positions reached the point where their share in the overall Optarix US Portfolio became too large for our taste.

We sold some of our position in VF Corp (VFC). We started the position at a share price of USD 53.12 in February 2017. We now sold some of our shares at a price of USD 93.44. This represents a realized gain of 75.9%.

We also reduced our position in S&P Global Inc (SPGI). We bought our shares in February 2017 at USD 126.40 per share. We sold them at a price of USD 212.37, a realized gain of 68.0%.

As a result of these two sells and combined with the accumulated dividends we started a new position in Walgreen Boots Alliance (WBA). We use is picked the company with the lowest P/E ratio from the list of dividend aristocrats that we don't own yet. This was WBA this time. The share price for the buy was USD 64.90. As always when we start a position the intention is to keep it indefinitely.

This post highlights two of the rules we use. The first rule is reducing positions that have appreciated in value to a point that their share becomes too large in relation to the overall portfolio. When that happens, we want to take some of the gains off the table while at the same time reducing the exposure and risk to some degree. At the same time, we keep the majority of the position and participate in potential further increases in value.

The second rule we used in these transactions was to look at the list of all dividend aristocrats in the S&P 500 that we don’t already own. We then picked the one with the lowest P/E ratio to add to our portfolio. In total this added one more position to portfolio, reducing the average risk that any of the existing positions represents.

Note that past performance is no guarantee for future performance. We cannot look into the future. In particular the performance of VFC and SPGI described in this article doesn’t include any major bear markets like the Global Financial Crisis (CFG) so are not representative for the long-term performance of these and other shares.

Happy investing!

Disclosure: We have positions in VFC, SPGI and WBA. We have no intention to change these positions in the next 72 hours.