You must reply to at least two colleagues in a manner that extends the discussion. A simple “I agree/disagree” will not be accepted. respond in a manner that further extends the discussion.

post 1

The strategy I selected was a multi-cap global growth strategy with an ESG focus with no energy or materials exposures. During the period the portfolio was invested for me was 1/25/2021 through 4/30/2021. For this time period the S&P 500 was up 8.78% while my strategy was up 4.03%. Shortly after the inception of the portfolio the portfolio was heavily exposed to growth style with individual stocks and the correction in growth began to occur while value style or more cyclical style businesses began to rise. This rotation from growth to value was a large portion of the underperformance. However, the Investment Policy Statement with the client wanted a growth style portfolio. As the growth correction was well under way and as the VIX began to peak I rebalanced from names that did very well to three names that were not doing as well to lower the basis in these names. The portfolio is for a high net-worth growth investor who seeks tax efficient growth. So during the period there was zero tax realization and no turnover. The addition to names that were down at the mid-way point did help performance, but not enough to out pace the S&P 500 in the period. I added to Apple, Teledoc, and Crowdstrike. Crowdstrike (up14%) and Apple (up 9%) both did well on the addition while Teledoc declined 8%.  Apple and Crowdstrike have reported very strong earnings along with Teledoc and are just part of a rotation trade out of growth. They are very fundamentally strong companies with wonderful growth stories with new revenue sources and increased engagement with new and existing customers. As we learned we control how we allocate, but much of a stocks performance in the short run more to do with general breadth of the market and the respective industry sector.

Due to the mandate of tax efficiency and growth I could have overweighted a bit more of the growth names that were lagging coming into the competition which ended up being some of my biggest winners like JP Morgan, Visa, UGI, Berkshire B shares, and United Health Care which were all up anywhere from 14 -18%. My top performer was Google up 25% for the period.

One quarter of performance does not tell the whole story of the portfolio as this portfolio has out paced the S&P 500 by 600 basis points over the last 12 months and significantly more over the last 3- and 5-year periods.  That said I could have possibly done more a dollar cost averaging strategy with cash since there were signs that growth was in a correction that seemed to be well overdue. However, the risk with DCA is that the benchmark is always invested and more appropriate benchmark for the period is the Total Market Index or the Russell 1000 Growth due to my multi-cap focus with global companies.

post 2

The primary tool I used for portfolio selection was Y-Charts. I was introduced to this program in a previous course and I have found it to be extremely useful for identifying and selecting stocks. Y-Charts allows you to filter stocks by almost any set of parameters. For this challenge, I tried to stick with financially healthy companies given volatility in the markets. I knew that I wanted to take a more active approach to managing this portfolio, although I knew it would be difficult.

My initial strategy involved the trading of several stocks from my portfolio within a relatively short amount of time. I identified these stocks as risky and planned to sell them within a 23-week window. In the end, I did not trade the stocks as I initially planned due to the fact that they were performing well. I decided that it would be interesting to see how my initial allocation would perform with a passive management strategy. This ended up being a mistake as these stocks which I planned on trading dropped relatively dramatically due to an upswing in the bond markets. A recurring trend in this exercise for me was the desire to take a more active approach to managing my portfolio, yet I was unable to put the required time into it due to my work and school schedule. I would have liked to try a far more active management approach, particularly because of the interesting market conditions which existed this spring.

The past few months have been an interesting example of the changing market conditions in the stock markets. Investors have been closely following the bond markets and stock prices moved in accordance with bond yield movements for some time. This was a sign that investors expected rising interest rates which I believed indicated there would likely be a flight from growth stocks like tech. I wanted to close the majority of my growth/tech positions and increase my positions in consumer cyclical and consumer staple sectors which I believed would be less affected by rising rates and more likely to outperform tech as the economy begins to reopen.

In the end, my portfolio increased by 3.60% compared to the S&P 500 return of 8.12%. I am a bit disappointed that my portfolio did not perform better although I realize that with my time and attention, the performance may have been better. I would have liked to try several strategies which interest me, namely I think I should have moved into more defensive stocks over the past few weeks. I did not know about the VIX which was presented above in this discussion; however, I would like to learn more about it and I would certainly consider using it in the future for my personal investment activities.