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Monthly Portfolio Review - November 2021
I continued the portfolio concentration process this month and sold my entire position in three holdings:
GAN Limited $GAN was a 1.1% weighting in my portfolio and I sold it for an overall loss of 15% before it reported Q3 earnings. Ultimately, having a position this small was never going to move the needle unless I increased its weight which I was not prepared to do. On 30 November, GAN announced a share repurchase program. This is a strange decision. My view is that the company should be focusing on growth initiatives and not share buy backs at this time. The decision to sell feels vindicated in the short term.
Paysafe $PSFE was a 1.5% weighting in my portfolio and I sold it for an overall loss of 50%. This one hurt. The earnings that Paysafe reported during Q3 were by far the worst of all the companies that I hold (yes, worse than Peloton). They managed to miss the revenue estimate handsomely, increasing revenue by only 2% in a booming digital payments industry in addition to lowering already light forward guidance. This company is not delivering on any of the shiny promises it made before its SPAC merger. They are losing clients. I got it wrong, lesson learned.
Disney $DIS was a 3.5% weighting in my portfolio and I sold it for an overall loss of 8%. This was not one of my Tier 4 stocks so selling this one might come as a surprise. This quarter's results were not what I was hoping for. Revenue came in just under estimates but the Disney+ subscriber growth slow down was what really caught my attention. At the end of the quarter there were 118.1 million subscribers, quite a bit below the estimate of 124 million. Only 2.1 million new subscribers were added in the quarter. This is the lowest number of new subscribers in a single quarter since Disney+ was launched over two years ago. Average Revenue per User (ARPU) also declined.
Disney is a company that will be around for decades to come, it’s got world class brands and intellectual property. However, this does not guarantee success. Management still has to execute. The current CEO Bob Chapek replaced Bob Iger in February 2020 and comes from the Parks and Experiences division. It is my view that someone with a Media or Entertainment background is required at the helm to get the most out of Disney+. Streaming has become extremely competitive and Disney has resorted to offering the service for $1.99 a month to entice new subscribers. I feel that Disney and shareholder returns could plod along for the next few quarters or years and as a result I decided to exit my position.
I added to my positions in the following companies:
I opened a starter position in MercadoLibre ($MELI). Given the disposal of three stocks this month, I felt that I had scope to add another stock to the portfolio. Reasonably priced growth in an expanding market that is inside my circle of competence was what I was after. The financials, growth prospects and valuation all impressed me. I shared my thoughts on Twitter (PS: I post content on Twitter daily most of which does not feature in the newsletter).
I’ve also spoken to a few other shareholders on FinTwit (shout out to @MaxTheComrade) who know the company really well and what sets them apart from the competition is their logistics and infrastructure. See for yourself.
Stocks that are on my radar to add next month:
Nvidia (NVDA) - I have been looking to add this stock for months. I almost pulled the trigger on it in May and now the stock is up over 140% in six months. As the saying goes, ‘nearly never boiled the kettle’. Keeping an eye on it closely for an entry.
Shopify (SHOP) - Can’t ever have enough Shopify. It’s a Tier 1 stock in my portfolio so I would like to have it at a 7% weighting over the long term. The company blew its own Black Friday records out of the water once again. The share price has run up a bit recently so I am looking for some consolidation or a pull back.
Innovative Industrial Properties (IIPR) - A really profitable company in a growing industry and pays a compounding dividend. I would like to have this stock in the 5% to 6% range.
Microsoft (MSFT) - One of the pillars of my portfolio. Dollar cost averaging into this stock at regular intervals is the simple plan here.
Selling three stocks and adding one new position means that I am now down to twenty-one. I am getting close to my target of twenty by year end. The minimum position size that I wish to have is 2% going forward. From the disposals I raised over 7% in cash. I rolled the Paysafe proceeds into Square and allocated half of the Disney proceeds to MercadoLibre. The remaining cash was pooled together and invested with my monthly contribution.
The last week or so of November was very turbulent for the market. My last transaction during this month was on 12 November. During times like this I try to limit my activity and let the dust settle. Patience and perspective will win out.
Check out last month's portfolio review
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Wolf of Harcourt Street
Disclaimer: I am not a financial adviser and I am not here to give specific financial advice. The opinions expressed are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The information is based on personal opinion and experience, it should not be considered professional financial investment advice. There is no substitute for doing your own due diligence and building your own conviction when it comes to investing.