Performance for the first half of 2019

Due to the holidays, I'm finishing the month of June a little early. The portfolio's performance in CHF amounts to a painful 3.33% during this first half-year. It is therefore completely behind the market (SPI +19.5%, during the same period). It must be said that some indices, such as in Switzerland and the United States, have posted particularly insolent performance. Cumulatively, this represents for the portfolio an annual profitability since launch (03.02.2010) of +9.2% (compared to 8.24% per year for the Swiss Performance Index). There is therefore still a small margin of advance, but this is shrinking more and more, as the indices break record after record.

Ce qui interpelle le plus, c'est l'évolution des titres boursiers outre-Atlantique. Aux USA on a affaire à un joli cas d'école, qui rappelle à plusieurs points de vue la fin des années '90, à quelques différences près. Si on s'arrête en effet sur les "FAANG", soit Facebook, Apple, Amazon, Netflix et Google, on constate que leur cours progresse depuis plusieurs années de façon nettement supérieure au marché. Autrement dit, leur momentum est très clairement favorable, et les investisseurs (ou plutôt devrais-je dire les spéculateurs) qui ont suivi cette stratégie ont été récompensés de la plus belle des manières. Voilà qui démontre l'efficacité d'une approche de ce type... en tout cas sur du court/moyen-terme. On avait assisté au même phénomène avec les valeurs dotcom de la fin du siècle dernier qui avaient laissé littéralement sur place les géants de la "vieille économie".

That being said, if we look more closely at this FAANG group, we see that their price today averages 6.3 times their turnover. Experience shows us that we should already flee when the price exceeds three times sales. So from a technical point of view, because of the momentum, we should buy, but from a fundamental point of view, we should sell. Here too, we are reminded of the fond memories of these tech stocks of the time, some of which happily exceeded 10 times sales. We remember how that ended... Let's note all the same that, as the maxim states, comparison is not reason. Because who says sales, does not necessarily mean profits. This is a big difference compared to the time, since today these five technologies are all making money. So we are dealing with a bubble of course, because of the clearly exaggerated prices, but this bubble is not based only on hot air, unlike last time. It may therefore deflate quite significantly, but not burst.

Another interesting thing: tech has become so expensive that it now makes up the top 5 US companies, and even the world, in terms of market capitalization. With one exception, we find the same ones mentioned above: Apple, Amazon, Facebook, Google and Microsoft, which replaces Netflix. The average price/sales ratio is barely lower here, at 6.2. In other words, the five companies that weigh the most in global stock indices are valued on average at more than double what is already a sell signal. Not one of these companies is listed at less than three times turnover. NOT ONE.

If you are wondering why you have been treading water for several months now, while stock indices continue to climb, remember who is mainly behind them. So, you can of course opt for the "momentum" approach and buy one of these stocks or any US ETF focused on growth stocks. You may still be lucky for a while. Personally, since 2000, I no longer believe in Santa Claus. When just one of these companies posts a slightly worse result than expected, there will be a lot of people who will get excited. Not only will the stock in question take a hit, but above all it will take all the other technologies with it, and at the same time the entire market since, currently, they are the market.

All this to tell you that it is normal at times to be seen as the class dunce. But as in many things in life, extraordinary results in the short term generally behave like flashes in the pan. When it is over, we quickly find ourselves in the dark and the cold. I therefore remain cautious, despite the ambient enthusiasm, by being invested again and again in significantly cheaper securities, as found in Japan for example. I also remain well anchored in real assets such as real estate and gold. Finally, I keep a sufficient portion of liquidity (25%) to smooth out the hard knocks and especially to buy back when the time is right.

Currently my portfolio has 38 positions, slightly increasing since the beginning of the year but very significantly decreasing over the last 12 months (there were almost twice as many then).

Portfolio positions: