Ryan Downing

Ryan Downing

Currently a Senior at the University of Maryland studying Finance and Computer Science with a specialization in machine learning. Interested in machine learning, quantitative research, innovative software solutions, and collaborative projects.

Personal Portfolio Review

Posted on January 7, 2021

Personal Equity Portfolio Review (FY2020)

This year was nothing short of historic as we experienced some of the greatest market swings ever, and definitely the most volatility in my lifetime. Markets were faced with great uncertainty due to COVID-19 leading to multiple market circuit breakers being hit during pre-market hours in consecutive days. We also saw a new wave of retail investing as many people quarantined at home began experimenting with new user-friendly brokerages such as Robinhood, SoFi, and Betterment. I expect that this year will continue to be reviewed with curiosity, and a bit of fondness as we unravel what exactly happened this past year. Nevertheless, the start of the new year is a great opportunity to review your own personal portfolio, which is what I have done over the past week. Though many of my personal projects and work involves data science and other analytical methods, I do not apply such ideas to my own personal portfolio for a variety of reasons. The most prevalent being the time and energy involved with such trading (and short-term capital gains taxes). Since these strategies require much smaller time horizons, I instead prefer to focus on a handful of companies that I am confident in and can follow with relative ease. As such, I try to rebalance my portfolio no more than twice a year, though this year tested those limits. Below I review my portfolio’s overall performance as well as some more notable trades made throughout the year.

Overall Performance

Overall I am fairly happy with the performance of my portfolio. Though my portfolio was highly correlated with the S&P500, I managed to squeak out a bit more gain, topping the S&P’s YTD returns by 4.2% thanks to some timely trades made with my “risky” portfolio, which I explain below. My largest holdings included $AAPL, $MSFT, and $BRK.B so it makes sense that I am in-line with the market. If that’s the case, then why didn’t I just buy and hold SPY? Well to be honest I don’t have a great reason other than enjoying following the market and various companies, while also preferring more risk than the average ETF (beta > 1). This leads me to hold mainly large-cap “safe” stocks that I believe are undervalued relative to current market conditions. I did lag NASDAQ considerably, but I feel tech is very expensive right now, and I am comfortable with my exposure to the sector through my holdings in $TQQQ, $MDB, $AAPL, and $V. Further, I feel that many of my holdings will continue to perform well in 2021 while more risky plays I chose to avoid may see corrections.

Buy? Sell? Hold? Panic!!!

To say the least, March 2020 was a long month glued to our phones, trying to figure out what was happening in the world, markets, and with everything turning virtual, this quickly became the new norm. I definitely won’t forget seeing -5% in futures markets before going to bed and then -7% in the morning…for multiple days. This really pushed my risk tolerance with my portfolio hitting -40% at its lowest point. I can confidently say that I didn’t panic…almost. I stuck to my guns, believing the market would recover in due time. Whether that be 3 months, a year, or 3 years did not phase me since I am in this for the long run. However, on March 16th greed got the best of me. I had stomached the losses by this point ($SPY was at $241.18), but what really bothered me was all the investors opening short positions, extending their gains while the market continued to crash. Most notably was Pershing Square’s Bill Ackman with a short position that netted $2.6Bn, leading to gains of 70% FY2020. I also recalled the institutions that profited wildly off panic in the 2008 recession, so on March 16th I dumped my entire portfolio and opened a 30% position in $SPDN (1x S&P500 bear ETF), not realizing this time it would be my panic they would profit off of. Fortunately, rationality quickly returned; I realized the risk I was assuming, and although I could handle the prior 40% drop, I would not react the same if I lost much more if the market were to swing back up. At this point $SPY was bouncing, having extreme volatility with +5% and -5% days. I was not ready to see $SPY recover while holding $SPDN, so on March 26th I sold my $SPDN and rebought my original portfolio with light rebalancing. This series of trades resulted in about 6% of losses/missed gains over the 10 days, but I feel that’s a small price to pay for a valuable lesson learned. A more appropriate way to do this would have been to use options to hedge my current portfolio, but unfortunately my E*Trade account did not allow me to trade options at the time.

Cash Cows

So how did I manage to come out on top of the S&P500 despite panicking in the middle of the crash? Well, after markets began to mostly settle in early June, I decided to fully rebalance my portfolio, picking up a few stocks that I believed were being unfavorably punished by markets despite optimistic outlooks. This included $BA at $148.97 (+42.78%) and $DIS at $113.97 (+56.69%). I have also been bullish on tech since before the pandemic and purchased $TQQQ in early January at $95.71 (+91.39%) and held $SHOP and $MDB at $326.01 and $134.02 since October 2019 until selling $SHOP in June at $751.97 for a gain of 133.66% (still holding $MDB). Additionally, apart from my main portfolio, I manage a separate portfolio that is about 10% the size of my main. I like to use this portfolio for more risky and speculative trades, which ended up saving my overall performance. This is where my positions in $BA and $DIS originated, but was able to pick them up at slightly lower levels of $122.24 and $113.73 for gains of 74.02% and 57.03% respectively.

Caught Bag Holding

With all those winners surely I should be rich by now right? Not exactly, though I did manage to successfully pick a couple big winners, the same can be said for the other side of the coin. Not only did my portfolio suffer greatly from lackluster panic sell and then rebuy, I also had considerable losers that did not manage to recover like many other companies did. The worst offender of this was Occidental Petroleum, $OXY. I initially purchased this stock because it seemed undervalued due to their acquisition price of Anadarko Petroleum, and I needed to diversify my portfolio with something other than tech. Buffet was it holding too, what could go wrong? Then it happened, the pandemic hit and $OXY got caught in the middle of the pandemic crash and the Russia-Saudi Arabia oil price war at the same time, dropping 26.7% on March 6th. The stock continued to tumble as the price of oil plummeted to -$40, until $OXY reached a low of $8.52. I didn’t know what to do, maybe a bit awestruck from seeing it fall so fast, naive thinking it may recover, and not ready to sell out the position so quickly. I held and held and held until finally giving up, selling the shares at $10.54 for a loss of 72.75%, ouch! To add salt to the wound, $OXY stock began to recover shortly after I sold, currently sitting at $20.57. My next loss does not even compare, which is $JPM, currently at -1.81%. The reason I include it here is because it was trading horizontal for a while at -30% while other stocks recovered, however, more recently $JPM has begun to climb as well.

Looking Forward

Now that the year is behind us, this is about the time I look to rebalance my portfolio. However, since the pandemic is still ongoing, I plan to continue holding my “pandemic portfolio” while making small adjustments here and there as I see fit. I will shave my position in $MDB as it has grown from a 7% position to over 12.5% during its run-up in the last 6 months. I expect that my largest holdings will continue to include my long-term holds: $AAPL, $BRK.B, $DIS, and $MSFT. All of these companies have clear objectives and the means to reach them. Further, I added $ILCN when I finally dropped $OXY which has performed great thus far (+58.83% since purchase on 10/12/2020). I am strongly bullish on clean energy, especially with the new White House administration, and will most likely add to this position. I believe that the S&P500 will continue to expand in 2021, however, I am apprehensive on current market conditions concerning historically high P/E ratiosTSLA, and feel the market is due for a correction.

Thank you for reading, I hope you found some part of my perspective interesting. Please feel free to reach out if you have any questions or thoughts!

DISCLAIMER: This post was written by myself (Ryan Downing) and should not be taken as investment advice. The ideas expressed are of my own opinion, and I do not share a business relationship with any of the companies mentioned above. Invest at your own risk!