finweek

How did your portfolio fare this year?

Simon Brown, founder and director of JustOneLap.com.
Simon Brown, founder and director of JustOneLap.com.

This year has been a good one for investors, with the US markets leading the way. 

The S&P 500 has returned over 20% and extended its decade-long bull run.

Locally, our returns are not as impressive. 

But we have managed to get into double-digit returns – including with dividends – after many years of flat returns from the JSE.

Unless you’re holding an exchange-traded fund (ETF) issued over one of these markets, these are theoretical returns as they’re indices. 

So, if you run your own portfolio of individual stocks, your mileage may vary, and it may vary substantially.

Personally, my portfolio of individual stocks is a little behind the Top 40’s return and part of my year-end portfolio review needs to look into why I have underperformed and whether I should be worried.

The big driver locally in 2019 has been commodity stocks and, in particular, single commodity miners such as Impala Platinum (Implats). 

And I don’t hold any single commodity miners in my long-term ‘til death do us part’ portfolio. 

After stellar returns from these stocks in 2019, the question is whether I should be holding them.For me the answer is no. 

Sure, I have missed out on an almost 250% return from Implats, but single commodity stocks are highly cyclical and need to be traded, rather than held for the long term. 

This is best illustrated by the fact that Implats is actually down just over 30% over the last decade despite the staggering returns of 2019.

It does mean that when single commodity miners are running, I will be missing out. 

This is something I am comfortable with, because they seldom run as hard as they have this year.

So now I mostly know why I missed out on part of the 2019 rally, but I still need to dig into my stocks and check up on them.

The big losers for me in 2019 have been Shoprite* and Metrofile*, down about 30% and 20% respectively. 

This is not fun, but, as always when doing my year-end portfolio review, I need to go back to why I own them. 

I am holding Shoprite because we’re always going to be eating. 

And Shoprite has excellent margins and great exposure to the rest of Africa. 

The first two points have held true, but the rest of the continent has actually swung into a loss. 

This loss is largely due to hyperinflation in Angola and weaker currencies in the markets where Shoprite operates. 

In other words, the issues are not operational ones and therefore I would expect profits to flow again.

Metrofile suffered from a tax rate that spiked to 40% as they structured earlier acquisitions in Kenya poorly. 

This has been corrected and will reflect in the next results, but this was a major management error. 

That said, the relevant person responsible has left the board and been replaced. 

But it was a very disappointing own goal that has hurt shareholders. 

This would certainly give me pause to exiting the position, but I still like the core business idea, which is the storage of records. 

The stock is also under a potential offer that could see me forced out at a hopefully higher price.

An important point is that missing out in a year and underperforming against the Top 40 is fine, as long as you beat it more often than not. 

And, looking back on my returns over the last few years, I have managed to beat the market thanks to some solid winners. 

So, for me 2019 has not been great, but it is the aberration, not the trend. 

If it was a regular occurrence, I would have to seriously consider my ability to manage my own portfolio. 

*The writer owns shares in Shoprite and Metrofile.

This article originally appeared in the 12 December edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

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