Hypothetical Portfolio

First, this portfolio is purely hypothetical and for financial education purposes only. Olivine Research is not a registered investment advisor at this point, merely a publisher. Please refer to the disclaimer section of the site for some important terms and conditions. https://www.olivineresearch.com/blog/?page_id=41

If a recommendation to sell is made ( to avoid an after the fact situation), the opening price of the security on the next trading day will be specified or a specific target exit value will be specified with the “Sell Note”.

Expect re-balancing every three months.

Update on 12/19/2o

Update on 9/19/20

*Portfolio will be re-balanced if required on Sep 30. Letting the performance run through for two additional weeks to help align with calendar quarter starting Oct 1. This should make reporting cleaner.

Few more adds as entry targets have hit. Cisco(CSCO) at 40, Kinder Morgam (KMI) at 13 and Jabil Circuit (JBL) at 33.

Update on 8/29/20

Portfolio Alpha has come down to 22.63% on a year to date basis. This is primarily due to the resurgence of the S&P 500 over the past few weeks. Micron and G1 Therapeutics have been under performing by a fairly significant margin. However, still holding on to these names because in our opinion most of the fundamental thesis is intact. Chewy up about 32.7% and nearing exit target of 65$.

Update on 8/1/20

Portfolio Alpha has come down to 32.53% on a year to date basis and 7.15% from 5/27 when the portfolio was last re-balanced. GOLD, PFE and CHWY are performing well. ATRA has been hanging in there. GTHX however has been on a constant move down over the past month ( down about 38.23%, when the XBI (SPDR Biotech ETF) has been down -2.79% over the same period.

GTHX reports earnings on August 5th and with this kind of performance, my concern is if any stock issuance is forthcoming. From a technical standpoint, the stock looks broken and will be watching for the 13$ level. Though I don’t see any significant news in the public domain that would warrant this kind of a pull back on a fundamental basis, one also has to pay attention to the technicals. The fact that there does not seem to be any Directors buying at this level also seem to be a little concerning. At this point, GTHX is a hold and if it gets down to 13$ ( and if there are no material changes in the fundamentals ( based on the Aug 5th conference call, may consider dollar cost averaging down).

Update on 7/17/20

No changes to entry targets on Watchlist. The portfolio out performance relative to S&P 500 has compressed from 16.73% to 13.90% for the current quarter.

Update on 7/04/20

Chewy hit entry target of $45 on 6/30 for half of intended position. CHWY is a trading add and not likely a long term investment position at this point. ( though, this could change).

Current Portfolio:

GOLD, ATRA, GTHX, PFE and CHWY

Update on 6/27/2020

Current Portfolio: GOLD, GTHX, PFE and ATRA

Updated Entry Price Targets:

• KMI entry target moved down to 13
• VZ entry target moved down to 51
• CHWY ( for a possible short term trade) – entry target moved up to 45 for half of intended position
• FTI entry target moved down to 6.5
• ABBV re-entry target stays same at 85
• NOK entry target moved up to 3.75
• CSCO re-entry target moved up to 40.5

The chart below shows relative performance of current portfolio constituents v/s S&P 500, based on day of mention

Portfolio Metrics as of 6/26

Important: This is based on historical data and assumes a normal distribution of data to a large extent, which may not really translate to future performance or any idiosyncratic and tail risk. This is just for data/stats wonks and should not read too much into this from a future expectations standpoint 🙂

Update on 6/20/2020

Current Portfolio: GOLD, GTHX and ATRA

Been a really good last week for the portfolio with GTHX moving up 30% plus last week and up 26.95% from the initiation at 18.7. No changes to shopping list or entry targets.

Update on 6/14/2020:

• Current portfolio – GOLD, ATRA, GTHX. Rest of the portfolio in cash.
• Due to market downdraft last week, portfolio out performance has gone up a few basis points
• As indicated last week, expect S&P 500 to test 2900 level. Based on current analysis, if 2900 is broken on high trading volume and no positive vaccine news, 2785 could be the next level. Be careful establishing positions
• Adjusting some entry targets based on current market assessment:
  • PFE re-entry target moved down to 32.5
  • KMI re-entry target moved down to 13.8
  • VZ entry target moved down to 52
  • CHWY ( for a possible short term trade) – entry target at 42.9 for half of intended position
  • FTI entry target moved down to 6.75
  • ABBV re-entry target stays same at 85
  • NOK entry target moved up to 3.5
  • CSCO re-entry target moved up to 40.5

Update on 6/10/2020:

Established Target Entry Price for ATRA – 9.5 ( Extremely High Risk idea. Will have to be very nimble in trading this)

Established Target Entry Price for GTHX – 19 (Extremely High Risk idea, will have to be very nimble in trading this)

Update on 6/6/2020:

• GOLD( Barrick Gold hit price target of ~22. So re-establishing position at 22.15). The other entry price targets as mentioned on 5/30 have not hit yet
• Remaining portfolio in Cash
• Portfolio Alpha has compressed to 37.28% due to the S&P 500 rally based on the Friday jobs report
• Currently evaluating two biotech stocks for investment. G1 Therapeutics (GTHX) and Atara Biotherapeutics Inc. (ATRA). Target entry prices are to be determined. Update on 6/10. Target Entry Price for ATRA – 9.5. Target Entry Price for GTHX – 19. ( Extremely high risk ideas).

Update on 5/30/2020:

On 2/21/2020, depending on some technical indicators across equity and credit markets, urged extreme caution for any broad based buy the dip, instead high lighted that a patient approach was needed to selectively construct a portfolio. As the markets moved, constructed a portfolio below – buying and selling some constituents based on the table below. Most of these notes were initially distributed through my personal LinkedPage. However, since I do not do this full time I established an alternate page to disseminate some of this: https://www.linkedin.com/company/35619978

As of 5/22/2020, the constituents and the performance was the following:

On 5/24/2020, after a quarter of the hypothetical portfolio being in existence and the S&P at inching to 3000, highlighted that the portfolio will need to be reconstructed and going all cash to re-balance the portfolio. Based on this, taking into account market open prices on 5/26/2020, here are the sale numbers:

Most of this analysis stems around the fact, that the market is already pricing in a gradual reopening of the economy and there needs to be a different approach to the portfolio construction ( more of a layered beta approach) to outperform the S&P 500. Additions will be made to the portfolio as opportunities present themselves.

Price Targets

Here are some targets,based on an assessment on 5/31 ( some of these targets may change as more data comes in both macro and company specific):

Pfizer (PFE): If an opportunity presents itself in the 33$ area, could add it to the portfolio again

Barrick Gold (GOLD): If an opportunity presents itself in the 22$ area, could add it to the portfolio again ( This has hit target on 6/5/2020)

Cisco (CSCO): If an opportunity presents itself in 40$ area, would add it to the portfolio again

Abbvie (ABBV): If an opportunity presents itself in the 85$ area, would add it to the portfolio again

Verizon (VZ): If an opportunity presents itself in the 53$ area, would add it to the portfolio again

Nokia ( NOK): If an opportunity presents itself at 3.25$, could be a new add to the portfolio

Kinder Morgan (KMI): If an opportunity presents itself at 14.50$, could be new add to the portfolio

FTI( TechnipFMC PLC): If an opportunity presents itself at 6.75$, could be new add to portfolio

Western Digital (WDC): If an opportunity presents itself at 40$, would add it to the portfolio again

Performance Charts

As of 5/29/2020

Portfolio Stats ( As of 5/29/2020, Live Date = 2/21)

This is just some portfolio stats using Python for the data and stats wonks and would not attach a lot of importance to this from an evaluation standpoint because of the following reasons:

1. The hypothetical portfolio currently has a deep value mindset and is looking to assemble undervalued assets ( and probably ones that have seen their value depressed over the last few years).
2. The Sharpe and other ratios are bound to look bad in this case because of the look back over the cycle when these assets got beaten down
3. The mindset involved in constructing the hypothetical portfolio may change from a deep value to a growth oriented mindset at any point depending on data analysis. Therefore, it made sense to track this so I can report out how the parameters reported below could change from a pure educational and data slicing standpoint.
4. As you can see the look back performance against the S&P benchmark is really bad!