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This is the 13-month update of the Market Brothers Portfolio, or MBP. It is a mock portfolio of our favorite investing ideas. Since it began in November 2018, the MBP is up 24.43% vs. the S&P 500’s 21.56%. All prior monthly updates can be found here.
If you’ve read our previous updates (and if you have not, I’d recommend checking them out here) you know that beating the market for 13 months is not our goal. Our goal for the MBP is to show that spending 1-2 hours with one “trading” day a month can outperform heavily managed funds.
Here are the rules we have set to try and mimic a real portfolio as closely as possible:
We can only change our asset allocation on the 20th (or around then) of each month. All other days are off-limits, meaning we can only add or subtract from our allocation once a month. (We’re not the day trading type anyways, so this should not affect our investing philosophy).
No derivative securities (options or futures).
We are not reinvesting dividends, for calculation purposes. Although we highly recommend that you do so in a real scenario.
We cannot incorporate any commission fees so we will act like we are investing through Robinhood
We are competing against the S&P 500 so the benchmark for the portfolio will be how much it has beat or lagged the market since its inception.
Shares Held 11/21/19 - 12/21/19
*Including this month’s dividends
**Not time-weighted. From the initial purchase price.
Top Performer
Match Group was our top performer this month, up 14.3%. Match Group is coming off of a 4-month decline in stock price while producing sustainable growth in both cash flow and subscriber numbers. On top of strong operating performance, Match Group announced a definitive agreement to separate entirely from majority shareholder, IAC (InterActiveCorp).
Worst Performer
In the past month, Yext is down roughly 15% due to larger than expected losses on their 3rd quarter earnings report. Yext has increased operating expenses dramatically in hopes of funding growth. The two primary drivers of higher operating expenses were an increase in overall headcount and the initiation of new lease arrangements.
Dividends Paid
Buying and Selling
We trimmed our position in Disney by selling around 200 shares or ~2%, as it made up around 6.3%. We originally added to Disney because we believed they were undervalued. Since then, they are up 31% for us and we are assuming now that they have reached their fair value. We aren't getting rid of the business entirely, but we assume better returns can be found elsewhere.
This month we realized we own 3 businesses that function in similar ways. Berkshire Hathaway, Markel, and Boston Omaha all operate congruent business models and we decided that owning all 3 was redundant. We found that we could reap similar, if not better, returns by owning the best of the 3.
Berkshire Hathaway is a $550 billion business, which makes producing sufficient returns more complicated than a smaller business. The law of large numbers weighs heavily on Berkshire and we don't see a need to own them. Markel is much smaller at around a $14 Billion market cap, but we are skeptical about a few of their larger positions. Markel owns a large portion of Berkshire Hathaway stock, which seems rather unnecessary as Markel is a capital allocator themselves. If we invest in a business model of this type we are doing so for management's capital allocation skills. If Markel is passing that off to another capital allocation team (Berkshire), then why own the intermediary.
We liked Boston Omaha the most out of the 3, so we added to them from some of the proceeds of selling Berkshire and Markel. Boston Omaha is the smallest of the 3 and there is a lot to like about their management team. Management appears to be focused on long-term sustainable growth so our bet on Boston Omaha may take a fair amount of time to materialize.
With the rest of the cash we had on hand we added to our existing positions in Square and MongoDB. With stocks at all-time highs, we remain with 8% Short Term Treasuries and 4% strictly in cash.
Allocation for Next Month
Our podcast going over the MBP will be released soon. You can listen to the show here.
If you want this post plus Ryan and I’s personal portfolio updates delivered to your inbox every month, subscribe to our Substack here.
See you in a month,
Brett and Ryan