Performance Overview
For Q2 2022, the portfolio was down 9.15%, and down 13.66% YTD. The Q2 starting balance was $168,049.53, and finished the quarter at $162,469.10. Contributions to the portfolio during the quarter amounted to $14,696.
This quarter I want to try something new by breaking out the results of just the individual stocks that I own. The performance of just the individual stocks will certainly have more volatility than the overall multi-asset portfolio, which can be a benefit or at times a hindrance. I may phase out of reporting my full multi-asset portfolio to just focus on the individual stocks. However, I have not made up my mind on this.
The Q2 starting balance was $76,209.80, with an ending balance of $71,930.35. For the return calculation, I am considering stocks sold during the month as negative cash flow (like a distribution), and purchasing a stock is cash flow positive (money coming in), dividends are treated as distributions as well. Therefore the net cash flow for Q2 was $6,005. Putting all of this together means the portfolio was down 13.3% for Q2, and is down 14.2% YTD.
Three new stocks were bought this quarter: Williams-Sonoma (WSM), Omnicom Group (OMC), and BASF (BASFY). I added to my position in Warner Bros Discovery by buying 50 more shares. Stocks that were sold this quarter include Quidel (QDEL), B2Gold (BTG), Madison Square Garden Entertainment (MSGE), and Biogen (BIIB). The rolling over of tail hedge put options continued.
The current allocation of the portfolio is shown in the chart below. Currently, the portfolio consists of discretionary value stocks, oil tankers, deep value, 401k stocks, precious metals, and cash. It can be seen that 81.4% of the portfolio is in stocks, while 18.6% is in cash and safe haven assets.
During the quarter I received $486.53 total in dividends, which is broken down in the table below.
| Ticker | Quarterly Dividend |
| FE | 48.75 |
| BTI | 129.28 |
| GTN | 10.80 |
| STNG | 6.80 |
| BCC | 114.1 |
| DHT | 4.30 |
| ITIC | 5.52 |
| EMR | 43.78 |
| COF | 33.00 |
| SPG | 75.90 |
| KOP | 9.40 |
| HXL | 4.90 |
| Total | 486.53 |
Discretionary Summary
Discretionary value is the label I’m giving to the positions that are fairly large (~5% of the portfolio) I believe are undervalued and may have the following characteristics: quality business, competitive advantage, misunderstood by the market, or a good company in a heavily sold off industry. The current discretionary value stocks I own consist of Capital One Financial (COF), Emerson Electric (EMR), Simon Property Group (SPG), FirstEnergy (FE), British American Tobacco (BTI), Qurate Retail (QRTEA), and Warner Bros Discovery (WBD). The table below shows the cost basis, current value, and gains/losses for these positions.
During the second quarter, Discovery Inc. finalized their merger with Warner Media, forming Warner Bros Discovery. I think WBD can use the cash generated by the linear TV advertising to transition into one of the top streaming platforms.
| Avg Price | Cost Basis | Current Value | Current Gain (Loss) | |
| COF | 63.25 | 3,478.75 | 5,730.45 | 64.73% |
| EMR | 41 | 3,485.00 | 6,760.90 | 94.00% |
| SPG | 74.5 | 3,427.00 | 4,366.32 | 27.41% |
| FE | 28 | 3,500.00 | 4,798.75 | 37.11% |
| BTI | 37.45 | 7,114.91 | 8,152.90 | 14.59% |
| QRTEA | 7.6 | 5,700.00 | 2,152.50 | (62.24%) |
| WBD | 22.53 | 4,957.00 | 2,952.40 | (40.44%) |
Deep Value
Deep value is a sub-strategy I’m employing in my portfolio. This is a quantitative strategy that buys a basket of statistically cheap stocks. The metric I use is EV/EBIT, based on the wonderful book The Acquirers Multiple. Historically, this strategy has provided excellent returns, although it has not kept up with the S&P 500 the past few years. Additionally, I am making an effort to apply this strategy to microcap companies. Microcaps are classified as having a market capitalization between $50M-300M. These small companies are more volatile, but have the potential for attractive returns.
My position sizing is smaller than the discretionary side of my portfolio because I want to own a basket of about 20 stocks. Since this is a quantitative strategy, I do not spend much time analyzing these businesses. The main idea is that these companies are trading at very cheap valuations, and the winners will (hopefully) outnumber the losers.
The new additions to this part of the portfolio are Williams-Sonoma, Omnicom Group, and BASF.
| Avg Price | Cost Basis | Current Value | Current Gain (Loss) | |
| BCC | 55.00 | 3,025.00 | 3,271.95 | 8.16% |
| GTN | 23.00 | 3,105.00 | 2,280.15 | (26.57%) |
| HXL | 36.80 | 1,803.20 | 2,563.19 | 42.15% |
| ITIC | 164.54 | 1,974.48 | 1,882.68 | (4.65) |
| KOP | 31.47 | 2,958.18 | 2,128.16 | (28.06%) |
| MHO | 60.00 | 2,520.00 | 1,665.72 | (33.90%) |
| SENEA | 50.00 | 3,000 | 3,332.40 | 11.08% |
| WSM | 115.00 | 5,175.00 | 4,992.75 | (3.52%) |
| OMC | 65.86 | 4,610.37 | 4,452.70 | (3.42%) |
| BASFY | 11.54 | 4,269.80 | 4033 | (5.55%) |
Four of the deep value positions were sold this quarter due to the one year holding period. The table below summarizes the realized gains and losses. In this case, they are all losses. Obviously this is not preferred, but I do not think this batch of losers is indicative of a flawed strategy.
| Cost Basis | Sale Proceeds | Realized Gain (Loss) | |
| BTG | 2,499.00 | 2,379.92 | (4.8%) |
| BIIB | 2,475.00 | 1,937.77 | (21.7%) |
| MSGE | 2,000.00 | 1,698.46 | (15.1%) |
| QDEL | 2,520.00 | 2,414.97 | (4.2%) |
Tanker Stocks
The tankers have seen a recovery lately, with Scorpio Tankers finally showing a gain.
| Avg Price | Cost Basis | Current Value | Current Gain (Loss) | |
| DHT | 8.17 | 1,755.90 | 1,317.95 | (24.94%) |
| FRO | 10.66 | 1,738.29 | 1,444.18 | (16.92%) |
| STNG | 26.63 | 1,742.67 | 2,346.68 | 34.66% |
| TNK | 23.86 | 1,765.88 | 1,304.62 | (26.12%) |
401k and Precious Metals
My 401k is through my current employer and actively receives contributions. The 401k consists of a Blackrock Target Date Fund (which is no longer being funded), and the Oakmark Fund. The Oakmark Fund is a large cap value fund. Since I am actively contributing to my 401k, it will naturally have a growing influence on my portfolio.
I also have a decent allocation to precious metals that are used as a bond substitute, recession and inflation hedge. The table below shows the YTD performance for the precious metals and 401k, which includes the effects of contributions.
| 12/31/21 | 06/31/22 | YTD Gain (Loss) | YTD Contributions | |
| Precious Metals | 12,854.19 | 12,019.64 | 5.96% | 0 |
| 401k | 60,578.76 | 63,924.8 | (19.62%) | 3,696.00 |
Tail Hedging
This quarter I continued a tail hedging strategy that I have used in the past. The strategy involves buying 30% out of the money SPY put options that expire in a couple of months. Each month options are sold and a new set is bought. This quarter, the options have had a cost of $1,582.70, with proceeds of $891.81, leaving a net cost of $690.89.