The Buddhist Investor Portfolio - June 2021
Dear investor,
Welcome to The Buddhist Investor Portfolio. This is the first post of a series of monthly posts that will be released et the beginning of every month.
My goal is to provide complete access to my portfolio decision-making. I will post monthly updates on current portfolio holdings and updates that detail each position, its weight, and returns in the portfolio.
Also, I will give my comments on any events that occurred during the month that affected the stock price of the businesses we own in the portfolio.
Market Overview
The month of June was a great month for the financial markets. The S&P 500 increased +2.22% during the month. So far, its YTD return is +13.75%.
Here you have the monthly returns of the S&P500 during 2021:
June 30, 2021: +2.22%
May 31, 2021: +0.55%
April 30, 2021: +5.24%
March 31, 2021: +4.24%
February 28, 2021: +2.61%
January 31, 2021: -1.11%
Also, here you have two charts that show the return of the S&P 500 since 1996 at different infection points, and also its current valuation measures.
Source: JP Morgan Asset Management
The Overall Picture
Here is the information related to The Buddhist Investor (BI) Portfolio in EUR as of June 30, 2021:
Q2 Return: +9.26%
YTD Return: +20.33%
LTM Return: +49.12%
The composition of the BI Portfolio at the end of June is as follows:
At the end of June, the TOP 5 positions in the portfolio were:
Goeasy Ltd (10.4%): +6.37%
Alphabet, Inc (9.5%): +2.55%
Facebook, Inc (9.1%): +5.65%
Tencent Holdings Limited (7.3%): -7.08%
Amazon.com (6.7%): +6.7%
The best performers of the month were Topicus.com and Nagarro SE with a 16.80% and 16.25% increase, respectively.
The worst performers of the month were MTY Food and Tencent Holdings Limited with a -11.74% and -7.08% decrease, respectively.
Also, I keep 3.7% of cash just in case future opportunities arise.
Goeasy Ltd
Q2 Return: +26.97%
YTD Return: +62.30%
LTM Return: +190.11%
Goeasy represents the main position in the BI Portfolio with a percentage of 10.4%.
At the beginning of the month, Goeasy’s stock price was 149.13 CAD and it closed the month of June with a stock price of 158.63 CAD, which represents a +6.37% increase.
During June, the stock price followed the good momentum of the business after the company reported record results in May.
As announced by the management, during the first quarter of the year the company continued to experience a gradually improving level of demand, complemented by stable credit performance, leading to record financial results.
Alphabet Inc
Q2 Return: +18.39%
YTD Return: +38.74%
LTM Return: +72.73%
Alphabet represents the second-largest position in the BI Portfolio with a percentage of 9.5%
At the beginning of the month, Alphabet’s stock price was 2.381.07 USD and it closed the month of June with a stock price of 2.441.79 USD, which represents a +2.55% increase.
In April, the company crushed estimations after presenting astonishing results with an increase in revenues above 30% QoQ and an improvement of the operating margin from 19% to 30%.
Also, the Board of Directors approved a $50B Class C Capital stock buyback.
Facebook, Inc.
Q2 Return: +18.06%
YTD Return: +26.54%
LTM Return: +53.13%
Facebook represents the third-largest position in the BI Portfolio with a percentage of 9.1%
At the beginning of the month, Facebook’s stock price was 329.12 USD and it closed the month of June with a stock price of 347.71 USD, which represents a +5.65% increase.
The stock increased during June after a federal court dismissed the Federal Trade Commission’s antitrust complaint against the company. After winning the first battle, Facebook’s future is brighter than ever.
Tencent Holdings Limited
Q2 Return: -5.64%
YTD Return: +1.92%
LTM Return: +17.66%
Tencent Holdings represents the fourth-largest position in the BI Portfolio with a percentage of 7.3%
At the beginning of the month, Tencent’s stock price was 628.50 HKD and it closed the month of June with a stock price of 584 HKD, which represents a -7.08% decrease.
Since China announced antitrust measures against the company, the stock price hasn’t gone anywhere. Antitrust laws and other regulations, such as online gaming restrictions, can put pressure on Tencent’s profitability.
Also, the stock dropped during June after President Joe Biden announced that to protect Americans’ private information, some Chinese apps would be forced to take tougher measures if they want to remain in the U.S. market
However, I don’t think it’s time to cash out the investment since perspectives for the business still look great, even considering the antitrust measures imposed.
Its current valuation looks quite attractive. As of July 5th, Tencent Holdings is trading at 24 times forward FCF, when historically its average FCF multiple has been around 27-29 times.
In my opinion, a high-quality business such as Tencent, which has an attractive valuation and with growing expectations above 10% for the coming years, seems like a bad business to sell right now.
Amazon.com, Inc
Q2 Return: +11.19%
YTD Return: +5.20%
LTM Return: +24.70%
Amazon.com closes the Top 5 of the BI Portfolio with a percentage of 6.7%
At the beginning of the month, Amazon’s stock price was 3.218.71 USD, and it closed the month of June with a stock price of 3.440.16 USD, which represents a +6.88% increase.
Back in February, Jeff Bezos announced that he will formally step down as Amazon CEO on July 5, and Andy Jassy, Amazon's cloud-computing boss, will take over Bezos' role. Once he steps down, Bezos will transition to executive chairman of Amazon's board.
Since Bezos’ announcement, the stock price didn’t go anywhere whereas the company kept presenting amazing business results. However, this June the stock price awakened.
Investors shouldn’t be worried as long as the business keeps presenting great results, even if the stock price doesn’t move or drops. As a business owner, you should focus on business performance, not stock performance. Eventually, stock performance will follow.
Intuit Inc
Q2 Return: +11.19%
YTD Return: +5.20%
LTM Return: +24.70%
Intuit represents a percentage of 6.2% in the BI Portfolio.
At the beginning of the month, Intuit’s stock price was $438.67 and it closed the month of June with a stock price of $490.17, which represents a +11.74% increase.
In May, the company reported 3Q results and raised its full-year guidance due to its strong quarter across the company.
For the third quarter, Intuit reported:
Total revenue of $4.2 billion, up from $3.0 billion the prior year.
Consumer Group revenue grew 34 percent to $2.4 billion.
Small Business and Self-Employed Group revenue up 20 percent to $1.2 billion, while Online Ecosystem revenue grew 28 percent to $715 million.
Credit Karma revenue of $316 million, a quarterly record for the business.
Microsoft Corporation
Q2 Return: +14.90%
YTD Return: +27.74%
LTM Return: +33.11%
Microsoft represents a percentage of 6.1% in the BI Portfolio.
At the beginning of the month, the stock price was 247.40 USD, and it closed the month of June with a stock price of 270.90 USD, which represents a +9.50% increase.
Back in April, the company presented great results with an increase in revenues of 19% QoQ and an increase in net income of 44% QoQ. Also, the operating margin improved from 37% to 41%.
Moreover, recently the company announced the launch of Windows 11.
Constellation Software Inc
Q2 Return: +6.97%
YTD Return: +12.42%
LTM Return: +22.48%
Constellation Software represents a percentage of 5.9% in the BI Portfolio.
At the beginning of the month, Constellation Software’s stock price was 1,753.61 CAD and it closed the month of June with a stock price of 1,877.41 CAD, which represents a +7.06% increase.
As an important event, during June, Constellation Software and FICO entered into a binding agreement for the purchase and sale of FICO's collection and recovery business.
The Walt Disney Company
Q2 Return: -4.74%
YTD Return: -3.56%
LTM Return: +57.63%
Disney represents a percentage of 5.8% in the BI Portfolio.
At the beginning of the month, Disney’s stock price was 178.85 USD, and it closed the month of June with a stock price of 175.77 USD, which represents a -1.72% decrease.
The stock hasn’t gone anywhere during 2021. This circumstance seems normal to me after Disney shares have increased from $86 back in March 2020 to $175 today. That’s quite an impressive increase for a mature and stable business such as Disney. Almost a 104% return in 15 months!
Also, Disney Parks are gradually starting to come back. This is great news for the business and shareholders.
Nike, Inc
Q2 Return: +16.25%
YTD Return: +8.15%
LTM Return: +57.56%
Nike represents a percentage of 5.7% in the BI Portfolio.
At the beginning of the month, Nike’s stock price was $134.51 and it closed the month of June with a stock price of 154.49, which represents a +14.85% increase.
Recently, the company reported its FY21 Q4 results and crushed analysts’ estimates.
Fourth-quarter reported revenues were $12.3 billion, up 96% compared to the prior year and increasing 21 % compared to the fourth quarter of 2019.
Full-year reported revenues increased 19% to $44.5 billion.
NIKE Direct's fourth-quarter sales increased 73% to $4.5 billion.
Gross margin for the fourth quarter increased 850 basis points to 45.8%.
Fourth-quarter diluted earnings per share were $0.93 and for the full year were $3.56.
Starbucks Corporation
Q2 Return: +2.32%
YTD Return: +3.85%
LTM Return: +51.94%
Starbucks represents a percentage of 5.4% in the BI Portfolio.
At the beginning of the month, Starbucks’ stock price was $113.34, and it closed the month of June with a stock price of $111.81, which represents a -1.35% decrease.
Back in April, the company presented FY21 Q2 results.
Q2 Comparable Store Sales grew 9% in the U.S.; Demonstrating Full Sales Recovery
Q2 Comparable Store Sales grew 91% in China, Including Reinstated VAT Benefit. Also, Starbucks’ market share in China is likely to keep increasing since its main competitor Luckin Coffe Luckin Coffee filed a few months ago for Chapter 15 bankruptcy protection in New York. Luckin Coffe is recovering from hundreds of millions of dollars in fines for fraudulent accounting.
Q2 GAAP EPS $0.56; Non-GAAP EPS $0.62 -> Reflecting Meaningful Margin Improvement from Prior Quarter
Active Starbucks Rewards Membership in the U.S. -> Up 18% YoY to 22.9 Million
The company also raised its full-year 2021 guidance.
Finally, in June, the Board of Directors approved a dividend of $0.45 per share. The dividend will be payable in cash on August 27, 2021, to shareholders of record on August 12, 2021.
MTY Food, Inc
Q2 Return: -5.34%
YTD Return: -5.57%
LTM Return: +124.20%
MTY Food represents a percentage of 5.4% in the BI Portfolio.
At the beginning of the month, the stock price was 61.83 CAD, and it closed the month of June with a stock price of 54.57 CAD, which represents a -11.74% decrease.
MTY is one of the largest franchisors and operators of multiple restaurant concepts worldwide. As you can imagine, it was one of the businesses that most suffered during the pandemic within the BI portfolio.
The stock price plummetted to 17.54 CAD in April, when just a few months before, it was trading at 60.50 CAD. That represented a decline of 71%.
Controlling your emotions in a falling market is important. Selling the stock would have been a huge mistake.
No significant negative event occurred during June. In April, when the company presented the 1Q 2021 results, management announced that over the last 12 months, their main focus was on capital allocation, paying down their debt, and preparing MTY for the moment the pandemic would dissipate. This decision to reduce financial debt was great news to MTY Food shareholders.
Due to the big sacrifices they performed during the pandemic, the company finds itself today in a solid financial position, with over $290 million available on its credit facility and a steady stream of free cash flows.
Also, a few days ago the company announced that Toronto Stock Exchange (“TSX”) has approved the renewal of MTY’s normal course issuer bid (“NCIB”). It works like a stock buyback program. MTY may purchase for cancellation up to 1,235,323 common shares during the period starting July 3, 2021, and ending July 2, 2022, representing approximately 5% of the total outstanding common shares, as of June 25, 2021.
Berkshire Hathaway Inc
Q2 Return: +8.79%
YTD Return: +19.93%
LTM Return: +55.69%
Berkshire Hathaway represents a percentage of 4.3% in the BI Portfolio.
At the beginning of the month, Berkshire Hathaway Class B stock price was $289.83, and it closed the month of June with a stock price of $277.92, which represents a -4.11% decrease.
Back in May, Berkshire Hathaway 2021 Annual Meeting and FY21 Q1 Earnings had the following takeaways:
Operating revenue and income were up YOY.
Berkshire was not a big equities buyer in 2020.
Berkshire bought back $6.8 billion of its stock in Q1 and $24.7 billion in 2020.
Charlie Munger dropped a hint, later confirmed by Buffett, that Greg Abel is slated to be the next chairman and CEO.
Booking Holdings Inc
Q2 Return: -6.08%
YTD Return: -2.75%
LTM Return: +37.41%
Booking represents a percentage of 4.3% in the BI Portfolio.
At the beginning of the month, its stock price was $2,328.25, and it closed the month of June with a stock price of $2,188.09, which represents a -6.02% decrease.
Booking stock price was punished during the COVID-19 stock market selloff in March 2020. The stock price plummetted to $1,177 in March when just a few months before it was trading at $2,086. That represented a decline of -44%.
Future estimates look positive for Booking once the travel industry starts to open again. Market analysts expect that Booking will come back to its 2019 revenue levels in 2023. However, the still-unknown extent and duration of the COVID-19 pandemic could potentially impact demand for travel products offered on Booking's platform.
This is a potential risk worth considering. Nevertheless, I’m holding the stock since I consider that Booking along with Airbnb will be some of the most important players regarding the online travel agency industry in the coming years.
Nagarro SE
Q2 Return: +9.51%
YTD Return: +12.64%
LTM Return: +16.48%
Nagarro represents a percentage of 4.0% in the BI Portfolio.
At the beginning of the month, its stock price was 88.60€, and it closed the month of June with a stock price of 103€, which represents a +16.25% increase.
In June, the company announced its expansion in South Africa. Nagarro, which entered the South African market 3 years ago, says it’s scaling up and will double the headcount in its South Africa operations in 18 months to 600 local employees. The 300-plus new local hires targeted, will join Nagarro’s workforce of over 10,000 employees in 25 countries across North America, Asia, and Europe.
The increase in the number of employees is great news for the business since it suggests that future revenue growth is coming ahead.
Also, on June 21st Nagarro was included in Germany’s main small-cap index. As long as the investment community keeps discovering Nagarro’s business, the stock price should continue to climb.
Nagarro doesn’t have much coverage from analysts. However, recently Warburg Research, German equity, and research firm published an equity report about Nagarro giving a BUY recommendation with a price target of 135€. This represents a potential stock price increase of +30%.
Topicus.com, Inc
Topicus.com represents a percentage of 0.5% in the BI Portfolio. This percentage is almost residual. The company is a Spin-Off from its parent company Constellation Software, which still controls Topicus.com since it has more than 50% of the voting power.
During the Spin-Off at the beginning of the year, all of Constellation’s common shareholders of record on December 28, 2020, received a dividend-in-kind, 1.859817814 subordinate votings shares of Topicus.com for each common share of Constellation held.
Basically, I received Topius.com shares for free.
At the beginning of the month, its stock price was 77.10 CAD and it closed the month of June with a stock price of 90.05 CAD, which represents a +16.80% increase.
At the current moment, I’m not considering either buying additional shares or selling any stock. I’m just holding the stock and still waiting to see how the business develops.
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Thank you for your support, and all the best in your journey to become a successful investor.
Yours truly,
The Buddhist Investor
Disclosure: This information reflects my personal opinion and is merely informative. Therefore it should not serve as a basis for an investment recommendation. Investors must perform a previous due diligence analysis before making investment decisions and be responsible for their actions.