ELMads 2022 Investment Portfolio Performance
by elmads
Introduction
We had a wild 2022. At the start of the year, the full reopening of the world economy was the highlight. It spurred excitement and joy for everyone. People immediately travelled to other places, to other countries, visited their family members, went for a hiking, enjoyed nature, went to the beaches, and wedding ceremonies exploded left and right.
Anything related to travel and social events ensued. Though the Covid19 virus is still with us, people just felt joyous and hopeful that 2022 was a start of a brighter life since the pandemic started.
But as always, life has a way to surprise people.
Russia invaded Ukraine on the 24th of February 2022, and its effects cascaded to other countries and eventually the problems enveloped the world. Geopolitical issues and tensions have risen, oil prices spiked, and global inflation went up.
Central banks worldwide acted with their own country’s increasing inflation. They were cornered by it, forced to choose between leaving inflation as it is or to control it in the expense of their own economy. They chose the latter.
Central banks pulled out their tool kit, tools at the ready. Each and every Central Bank worldwide increased their national interest rates and decreased the circulating money in their respective country’s economy – The era of monetary tightening, which was not seen and experience since the 70s, has now started.
A financial economic condition where Millennials and Gen Zs have not experienced yet.
The financial playing field has indeed changed. Cheap money is gone, inflation is higher than it used to be for decades, corporate earnings is said to decline for this year and lay-offs which started last year could continue in 2023.
It is indeed an unexpected year, almost everyone thought that the virus was the only problem we will continue to have at the start of 2022. We were wrong.
WE CAN ONLY CONTROL THE EFFORT, NOT THE OUTCOME
Just like all major stock market indices worldwide, my overall portfolio is dyed red as blood. Majority of my investments are in the negative territory. If I sold all of my investment holdings at the end of 2022, I would have lost money.
It is what it is. I did my utmost best in allocating my investments and analysing my holdings, but at time to time things doesn’t just go in our own way, in what we have hoped for it to happen.
Just like what I’ve said. “We can only control the effort, not the outcome”.
Without further ado, let me show you my 2022 investment portfolio breakdown by my chosen brokerage accounts, its holdings per sector and performance since inception. I’ll not be sharing my thesis on why I held these investments because that would be for a topic of its own, and it would take a substantial chunk of my blog just to share why I own them.
Col Financial Holdings – Philippines
I’m a Filipino and lived in the Philippines for more than a quarter of my lifetime. I’ve known our culture, beliefs, traditions, the history, and the companies. This gives me more of an understanding of how corporations work in Philippines more than any other countries.
A third of my overall investment portfolio is allocated specifically for the Philippines. I Currently hold 6 companies in this portfolio
Utility – Under this sector I am a shareholder of two companies.
- First. The top electric distributor of the Philippines which operates in the island of Luzon, specifically in metro manila and its neighbouring provinces. I’ve bought and held its shares since 2014.
- Second. A holdings company that indirectly owns 60% stake of a privately owned Power transmission company named (NGCP) National Grid Corporation of the Philippines. NGCP is in charge of operating, maintaining and developing the country’s state-owned power grid.
This holdings of mine is a bit complex in terms of ownership because you see NGCP is a private company that has major 3 owners/shareholders. One of the owners is a local public company that I have shares of and the other is a state grid corporation owned by a foreign government.
Communication Services – I just have one company holding under this sector. It’s one of the largest telecommunication companies in the Philippines. I’ve bought and held its shares since the pandemic related stock market crash of 2020.
In the Philippines we don’t have any technology companies that are publicly listed. The nearest to a technology company that we have are the telecommunications publicly listed companies. Though their main revenue are heavy in the communication services, most of them invest in start-up technology related private companies. One of the popular successful investments that the two telecom giants made were: Gcash (Globe telecom), and PayMaya (PLDT).
Real Estate – I’m a shareholder in two companies under this sector.
These investment of mine has been dragging down my returns since I held them. It is very unfortunate for me. Though both of their fundamentals are sound and strong, the macroeconomic environment is just a strong headwind for the Real Estate sector.
- Firstly, the one of the big 4 real estate property developers in the Philippines. This real estate property developer’s revenue stream is broken down into 3: Real Estate, Leasing and Hotels. I’ve bought and held its shares since 2019, and its been negative for the whole time I’ve held it. A perfect example of a VALUE TRAP.
I’ve owned this business during a time when I started to transition my strategy to value investing. At that time, I only had a superficial understanding and knowledge of fundamental analysis, I thought owning an undervalued stock is automatically value investing and a sound strategy. Lo and behold, there is more to it than that because an undervalued company can continue to be undervalued for a long time.
Additionally, a portion of this property developer’s revenue has POGO exposure. Its total POGO office portfolio was at 11-14% in 2020, while it went down to 6%-7% in 2021, it still has the highest POGO exposure relative to the other 3 largest property developers in the Philippines.
Due to the problems brought in by POGOs (with their illegal gambling activities), they are banned in our country resulting for this property developers’ potential earnings in the future to decline. It is a double whammy, both global macroeconomic headwinds and the microeconomics of the business.
So, why am I still a shareholder of this company? They’re doing share buy backs and the company’s fundamentals are still sound. Just like what I’ve said it’s in deep value territory, but it can stay in that territory for quite some time. Classic Value Trap. This is one of the value investing mistakes I’ve committed since I’ve started this path.
- Second Real Estate holding is a Real Estate Investment Trust (REIT). The yields from REITS have always been enticing since they introduced it in the Philippines. Sadly, as the national interest rate hike started, the yields/returns of the Bonds asset class increased, which makes a bond more attractive now to own than REITS. Why is that? because bonds (specifically government bonds) are safer in terms of its ability to pay the promised interest payment, than REITS. Remember that the dividend payment of REITS are derived from the its underlying real estate earnings, which is more uncertain today due to the macroeconomic environment.
Finance – I am only a shareholder of one company in this sector. A commercial bank who a few years back, heavily and early invested to transition its services as a digital bank unlike its peers during that time.
Changes in My Col Financial Holdings
- Last year 2021, I own shares of a consumer defensive company in the Philippines. I sold that holdings at a loss. Both macroeconomic headwinds hit the hypermarket side of its business, which substantially prevented the company to achieve a rebound on its earnings in 2021. Personally, this company’s recovery will happen but there was a better opportunity that presented in another business, hence why I liquidated my position and invested it on the other company (a business under the utility sector).
- My newly owned holdings is the transmission company in the Philippines that I bought after I sold the consumer defensive business. It is 9.60% of my total Col Financial portfolio.
- My first Stock Rights Offering. My only company holding under the communication services sector had undergone a Stock Rights Offering (SRO). Their reason for doing the SRO was to pay off their existing debts (this company has a capital intensive business due to the massive infrastructures that they need to maintain, and continuously build in order to improve the internet connectivity in the country). Their way of doing this is through debt financing, but because of the increasing competition and rising national interest rates, relying purely on debt financing will be detrimental for the company’s cash flow. Therefore, they need to tap in capital through offering more shares of their business to their existing shareholders.
The advantage of what they did for their investors was the offered stock price for each share. It was well below the trading stock price of the company during the SRO period.
As an example, let’s say Company XYZ’s stock price is currently trading in the stock market at 50 PHP/ share. Company XYZ then did an SRO, where the additional shares they’ll be selling (only to their existing shareholders) will be worth 40 PHP/share. That’s an enticing offer isn’t it?
The downside though is, all the existing shareholders of the company will be diluted if the SRO is not structured in a 1:1 fashion (meaning you’ll be able to buy additional 1 share for every share that you already have). This telecom company’s SRO is not 1:1. In this case, you’ll own less of the company as more shares will be given out, and/or you’ll only be able to buy less than a share for every share that you have.
As an example, initially you own 1 out of 10 shares of the company, so you own 10% of the company, but then they offered additional 10 shares. This means, you now only own 1 out of 20 shares of the company, or just 5% from the previous 10% if you’ll not take SRO. That’s the gist of SRO share dilution, but there are other ways for this to happen. To know more about it see my blog links down below.
So what did I do? I subscribed and took the offer. Firstly, I don’t have any plans on selling this company as the fundamentals and my thesis of the business are still intact. Secondly, My shares will be further diluted if I don’t take the offer anyway, so might as well get it. Thirdly, the offer price was below my intrinsic value calculation of the business.
I’ve no plans to liquidate the shares I have of this company for a long time. This will continue to be a part of my holdings until I achieve my ultimate goal for it. As a Filipino, though I have my own personal bias for the country were I was born and lived for a quarter of my lifetime, I still genuinely see a bright future and a long economic growth runway for it. Thus, allocating and will continue to do so, a portion of my net worth in the Philippines.
My Col-Financial 2022 and its Historical Performance
In Fiscal Year 2022, my Col Financial Portfolio did not generate any returns, instead it actually lost 1.22% – this is when compared to my 2021 year end returns. But compared to my total invested capital since inception, I did not lose money at all even if I sold of my holdings at the end of 2022. I’ll show you later what I mean by this.
I always benchmark my holdings to an index. In the case of my Col Financial portfolio, I compare its performance to the Philippine Stock Exchange Index which consists of the top 30 companies in the Philippines based on market capitalization. To know more about what is and index, check my two blog links down below.
To understand ones performance, it is a good practice to turn data into a chart. And because we’re dealing with percentage year-on-year returns, it is then better to construct a scenario to make a clearer picture of an investment portfolio performance.
SCENARIO: What if you’ve invested 100,000 PHP starting 2013 in two portfolios? One invested on My Portfolio while the other was invested on a Low-Cost Philippine Index Fund that tracks the Philippines Stock Exchange Index. What would be your returns at the end of 2022?
After 9 years of investing your 100,000 PHP in the two portfolios, you’ve made 300,191.04 PHP based on my Col Financial Portfolio returns, while only 112,969.69 PHP on an index fund that tracks the PSEi (this is excluding fees, so your 2022 returns would definitely be lower than that).
Clearly, my Col Financial portfolio outperformed the PSE index since 2015 and has generated approximately 11.62% annual returns since its inception, while 1.23% for the PSEi. It might seem amazing for some, but I assure you this is not a stellar performance, there are other investors who even made substantial returns despite the downturn in 2022.
At the end of the day, our investment returns shouldn’t be based on competition, instead it should be based on our personal and financial goals. A 5% compounded annual growth rate for 20 plus years can be enough for someone, while others require 7% or more. You should do your own computation of what investment returns will be helpful for your own financial goals which is tied also to your active income.
Personally, I aim a minimum of 10% (CAGR) Compounded Annual Growth Rate for 25-30 years.
- Part 1 – The Inflation Adjusted Retirement Calculator
- Part 2 – The Inflation Adjusted Retirement Calculator
Conquer your own internal domain. Focus on becoming the best investor version of yourself.
“The investor’s chief problem—and even his worst enemy—is likely to be himself.”
-Benjamin Graham
Additionally, below is a comprehensive breakdown of my returns showing each year’s dividend gains, capital gains and the accumulated amount of money I have invested.
What I did for the “Total Money Invested” is I added the previous years’ to the current year’s amount of money I’ve invested. For instance, if I’ve invested 1 PHP in 2013, then 1 PHP in 2014, that makes 2 PHP for my total money invested in 2014 (adding the current year to the previous years). So, for my 2022 “Total Money Invested”, that’s my overall accumulated and invested capital since year 2013.
This is what I meant when I said previously that I didn’t actually lose money despite the negative 1.22% returns in 2022. My “Total Money Invested” is still intact. What happened here was my accumulated dividend gains off set the unrealized capital losses for Fiscal Year 2022.
Real Investment Returns
“Inflation is Taxation without legislation”
-Vladimir Lenin
Why do we invest? I know a lot of people will say to make our money work for us without requiring any physical work, which is true. And the other main reason is to beat inflation.
Inflation is an invisible tax man, where it eats our earnings via the increasing costs of living.
But imagine an economic scenario where instead of inflation, deflation occurs (cost of goods and services are decreasing). Do you think you would strongly need to invest your money and risk losing it when you could just save your money in a bank? why? well because the prices are declining anyway so why do you even need to invest you hard-earned money?
Nevertheless, don’t wish for a deflationary economic environment, because that’s the opposite of inflation, which is in the other end of the scale. We all know that going to the extreme ends of a scale will never have a good outcome.
Inflation is more common than deflation, and definitely having a manageable amount of inflation is healthy. That being said, inflation is still inflation where the purchasing power of our hard-earned idle cash depreciates overtime. This is why investing our hard-earned money that we wouldn’t need for a long stretch of time will be a critical risk management approach against inflation.
This is one of the reasons why I also keep in check if I generate investment returns well above inflation. Below is my inflation adjusted return table, where it shows if my portfolio has generated Real Returns on my invested capital (inflation included).
My Investment Goals Checklist:
Fiscal Year 2022
- Beat my chosen benchmark index (PSEi) = My Port. -1.22%, PSEi -7.81% 👍
- Minimum 10% Annual Return = -1.22% 👎
- Beat inflation = My Port. -1.22%, Philippine inflation 5.80%. 👎
😁 Goal Partially Met! 😁
To Sum It Up
I was planning to share all of my brokerage investment account performance in this blog, but with just my Col Financial portfolio alone, I already wrote more than 2,000 words. 
Therefore, I’ll just break this down into 3 different blogs. It is just like what I did with my 2021 portfolio investment performance.
The returns I’ve accumulated from 2013-2019 were just due to pure luck. You see, I never had any intermediate knowledge about investing during that time. I just did the peso cost averaging on companies where I personally purchase their products and services, and where I surmise will always have a demand for it.
I consider myself fortunate because during that period of time, the Philippines did well economically, which also had a substantial influence in its local equity market.
From late 2019 onwards, that’s where I started studying and researching about active investing, fundamental analysis and most especially value investing. I chose value investing not because it is the best strategy in the investment world, but because it is in complete sync with my personality.
I still have quadrillion more things to learn, improve and hone in this investing journey of mine. I will always make a lot of mistakes, and I do hope these are the mistakes of omissions rather than commissions.
Also, a kind of investing mistake where, if I’m right I’ll have massive returns, and if I’m wrong, I’ll only have not that large of a decline in my over all returns.
NEXT BLOG – 2022 Portfolio Performance ”Into the Global Investment World” >>>
<<<PREVIOUS BLOG – ELMads 2022 Investment Portfolio Performance
Knowledge is my Sword and Patience is my Shield,
elmads
This blog is for informational purposes only and not a Financial Recommendation. Not all information will be accurate. Consult an independent financial professional before making any major financial decisions.
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