Portfolio Update – May 2017 (+2.9%, Currency -1.0%)

Key Gainers & Losers

Earnings season was among us again with tech again leading the charge and some movement at the bottom of the Top 10 list; which also made up for the 1% dip in currency this month.  Notables were :

apple GAIN: Apple Inc. (AAPL) [+15%] – the company reported what I would have deemed a ho-hum quarter. Nothing really struck out as amazing  – besides perhaps the fact that the predicted Blackberry-esk drop off in iPhone sales still didn’t happen (iPhone sales were pretty much even).  While I’m fearful of that day, I’m still amazed at how much brand power and “stickiness” Apple products are with consumers.  However, I also feel like Apple unnecessarily gets beaten up for not being innovative or coming out with new products because let’s face it – the iPhone IS the most successful consumer product ever and expecting the company to deliver something better would be nearly impossible.  So, while the company continues to trade at a discount because of a possibility that one day we’ll reach peak iPhone, Apple continues to keep its user base and generate staggering amounts of cash flow from their products.  Our investment is two fold – one on the stickiness of the brand, and on hopefully what will be significant products in the pipeline given the company’s R&D spend.

mercadolibreGAIN: Mercadolibre Inc. (MELI) [+19%] continued the momentum over the year with a great quarter despite always having the overhang of political turmoil and potential currency fluctuations.  What I initially called the eBay of South America, Mercadolibre showed high double digit growth across multiple key metrics – merchandise volume (+31%), items sold (+38.6%), unique buyers (+20.3%), payment volume (+110%); and is quickly expanding and gaining traction in online payments (think mini-Paypal [PYPL]) and online distribution (think very mini-Amazon [AMZN])

shopifyGAIN: Shopify (SHOP) [+30%] continued it’s year to date run-up after reporting earnings.   Last month, I debated if the high price tag (there’s no calculable P/E because there aren’t earnings!) was worth the growth rate.  In some ways, the company reminds me of Amazon – build a product that people will use, get revenue going, and worry about earnings later and perhaps how the company will never look cheap.  Decision: In the end, I’ve decided lock in some profit – no one lost money selling for a profit.  With the stock gaining over 200% in a year (and 100+% year to date already!), we’ve sold 2/3 of our holdings, locking in a 100% gain of our original investment – and letting the rest ride to capitalize on any further upside.  There’s also some hope that the company will hit a significant correction and we can buy back our shares for cheaper.  Of course, with my luck, the company will get a buy-out offer next month!

proto-labs-logoGAIN: Recently purchased Proto Labs (PRLB) [+50%]  made me look prophetic posted a 13% gain in April and a 10% gain in May with an earnings report that showed that business might be picking up for the contract manufacturer.  Personally, 10% growth in revenue doesn’t seem like a big deal to me, especially in comparison to some of the other companies we own, but investors seemed to like the bump as well as the increased guidance.

aimiaLOSS: Aimia Inc Preferred Series 3 (AIM.PR.C) [-34%] was one of the darling individual preferred shares we held in our dividend portfolio.  Not only were they providing a 12% yield, but the preferred shares had run up almost 40%.  Well, that quickly came to a stop in May as Air Canada decided that it would launch its own loyal program loyalty in 2020  – which meant the current Aeroplan business would be leaving Aimia.  Since Aeroplan is probably the largest loyalty program within the company, it’s no wonder shares tanked on the news.  From an investment perspective, we’re still holding on – while we’re back to around break even, the 12% dividend (maybe there was a reason the yield was so high) is still kicking in.  Of course, writing this in the future, we find out that holding might not have been the best idea.  If there is ever a case for holdings ETFs instead of individual companies, this falls right into that example.

tesla_flagLOSS: Tesla Short (TSLA) [-99%] also continued to defy gravity hitting close to $350 and becoming the largest auto manufacturer in the US based on market capitalization.  I’ve been meaning to write a piece about Tesla and why I refuse to invest back in, but the short answer is, investing in the company is basically a gamble on execution – Tesla is as likely to go to $1000 as it is going to $0.  More on that soon – but just as we easily doubled our money gambling on Tesla last month, we lost all our money this month.  I’ve been debating if I should keep doing these short term bets on the company’s price movements (no one can ever be consistently right) – so far, how we’ve been trading has been satisfying my gambling itch, but at some point, those losses and/or gains are going to add up.

Saying Hi & Bye

Nothing new to report this month.

Some Key Decisions

sandvineA little Canadian company I own called Sandvine (SVC), and by little I mean <$500M market capitalization, received some good news for investors as the company agreed to be acquired by Vector Capital for a 20% premium.  This announcement is sort of bitter sweet as we’ve owed this company for some time.  The company’s products help internet providers get a better sense of how individual consumers are using their networks – providing insight on how to market or price consumer offerings.  Being a small company, revenues were lumpy and the stock moved around quite a bit – but the business model was interesting and the company generated enough cash flow to give a nice ~2% dividend despite the revenue lumpiness.    Our investment in the company, which started in 2013, and continued adding more through the years, with this buyout has basically equaled the TSX return over the same period.  I’ve had a few cases where shares have been bought out – some I’ve gotten rid of ahead of time, some I’ve waited.  In Sandvine’s case, I’m going to wait based on a TD report that a competing bid could come.


5 thoughts on “Portfolio Update – May 2017 (+2.9%, Currency -1.0%)

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