Portfolio Spotlight Series 2 – Disney $DIS

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free csh flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is DIS. It currently occupies 8% of my portfolio and I have strong conviction in this stock mid to long-term.

The Walt Disney Co. is a diversified international family entertainment and media enterprise. It operates through the following segments: Media Networks, Parks, Experiences and Products, Studio Entertainment and Direct-to-Consumer and International (DTCI). The Media Networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, radio networks and stations. The Parks, Experiences and Products segment owns and operates the Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney. The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. This segment distributes films primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners. The DTCI segment licenses the company’s trade names, characters and visual and literary properties to various manufacturers, game developers, publishers and retailers throughout the world. It also develops and publishes games, primarily for mobile platforms, and books, magazines and comic books. This segment also distributes branded merchandise directly through retail, online and wholesale businesses. The company was founded by Walter Elias Disney on October 16, 1923 and is headquartered in Burbank, CA.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

DIS has been having consistent free cash flow for the past 3 years. FY2019 was red due to closure of its parks during COVID 19 pandemic. FY2020 has been a revelation due to the popularity of Disney+

3)Market Cap Growth

As of September 2021 Walt Disney has a market cap of $225 Billion.

DIS Market Cap since its inception

4)Consistent Net Income Multiple

DIS has had consistent net income multiple. FY20 was a one-off due to the closure of its parks and cruises as a result of the COVID 19 pandemic. However, this is only temporary and Disney will recover and resume its consistent trajectory. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does DIS have future market growth driver(s) ? The answer is yes !

Most of DIS future growth drivers will leverage on

  1. Theme Park , Cruise Line Reopenings
  2. Continued Business to Consumer business division expansion
    1. Disney+
    2. Hotstar
    3. Hulu, and
    4. ESPN+

Portfolio Spotlight Series 2 – Amazon $AMZN

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is AMZN. It currently occupies 28% of my portfolio and I have strong conviction in this stock mid to long-term. I have since rebalance it to 5% of my portfolio weightage and taken profit.

Amazon.com, Inc. engages in the provision of online retail shopping services. It operates through the following business segments: North America, International, and Amazon Web Services (AWS). The North America segment includes retail sales of consumer products and subscriptions through North America-focused websites such as http://www.amazon.com and http://www.amazon.ca. The International segment offers retail sales of consumer products and subscriptions through internationally-focused websites. The Amazon Web Services segment involves in the global sales of compute, storage, database, and AWS service offerings for start-ups, enterprises, government agencies, and academic institutions. The company was founded by Jeffrey P. Bezos in July 1994 and is headquartered in Seattle, WA.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

AMZN has been having consistent free cash flow for the past 8 years !

3)Market Cap Growth

As of September 2021 Amazon has a market cap of $1.761 Trillion. This makes Amazon the world’s 5th most valuable company by market cap according to our data.  

AMZN Market Cap since its inception

4)Consistent Net Income Multiple

AMZN has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does AMZN have future market growth driver(s) ? The answer is yes !

Most of AMZN future growth drivers will leverage on

1. Amazon Web Services (AWS)

2. Amazon Prime

3. Amazon India

4. Amazon’s third leg of business (Other than AWS, E-Commerce)

  1. Amazon’s online pharmacy platform
  2. its fashion initiatives, or
  3. its Amazon Fresh grocery store footprint

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/amazon-could-see-revenue-more-than-double-by-2025-as-retail-business-grows-62718086

Portfolio Spotlight Series 2 – Proctor & Gamble $PG

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is PG. It currently occupies 12% of my portfolio and I have strong conviction in this stock mid to long-term.

Procter & Gamble Co. engages in the provision of branded consumer packaged goods. It operates through the following segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The Beauty segment offers hair, skin, and personal care. The Grooming segment comprises of shave care like female and male blades and razors, pre and post shave products, and appliances. The Health Care segment includes oral care products like toothbrushes, toothpaste, and personal health care such as gastrointestinal, rapid diagnostics, respiratory, and vitamins, minerals, and supplements. The Fabric and Home Care segment consist of fabric enhancers, laundry additives and detergents, and air, dish, and surface care. The Baby, Feminine and Family Care segment sells baby wipes, diapers, and pants, adult incontinence, feminine care, paper towels, tissues, and toilet paper. The company was founded by William Procter and James Gamble in 1837 and is headquartered in Cincinnati, OH.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

PG has been having consistent free cash flow for the past 5 years

3)Market Cap Growth

As of September 2021 Procter & Gamble has a market cap of $349.79 Billion. This makes Procter & Gamble the world’s 21th most valuable company by market cap according to our data. 

PG Market Cap since its inception

4)Consistent Net Income Multiple

PG has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does PG have future market growth driver(s) ? The answer is yes !

Most of PG future growth drivers will leverage on

Procter & Gamble’s Generic Strategy (Porter’s Model)

Procter & Gamble uses differentiation as its generic strategy for competitive advantage. Differentiation involves developing the uniqueness of the business and its products to attract target customers. In this case, Procter & Gamble highlights quality and value in its consumer goods. For example, the company offers high quality cleaning agents, like Tide laundry detergent, at affordable prices. Based on this generic competitive strategy, a suitable strategic objective is to maintain P&G’s high investments for R&D to ensure high-quality and valuable products. Another strategic objective based on Procter & Gamble’s generic strategy of differentiation is to maintain effective marketing strategies that emphasize the uniqueness of such products. Such product uniqueness determines pricing and promotional activities. These considerations are included in Procter & Gamble’s marketing mix or 4Ps.

The cost leadership generic strategy (also known as the low cost provider strategy) is partially applied on some of Procter & Gamble’s products, focusing on cost or pricing to achieve competitive advantage. For example, Pantene hair care products are priced relatively lower compared to competitors like Unilever’s Dove hair care products. Procter & Gamble’s marketing mix also considers this generic competitive strategy. A strategic objective based on the cost leadership generic strategy is to develop Procter & Gamble’s competitive advantage based on cost-minimization approaches. For example, automation is increasingly used to minimize cost and maximize efficiency in Procter & Gamble’s production processes.

Procter & Gamble’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration (Primary Intensive Strategy). The Procter & Gamble Company’s primary intensive growth strategy is market penetration. In this intensive strategy, the main aim is to increase the company’s market share. Procter & Gamble does so through marketing campaigns to increase consumer awareness about the company’s consumer goods. This strategy is especially significant for low-performing products in the market. In addition, Procter & Gamble implements this intensive strategy through beneficial agreements with retailers. For example, P&G grows its market share by offering higher retail profit margins for some large retailers. In return such retailers display Procter & Gamble’s products in prominent locations or shelves in their stores. The differentiation generic strategy creates competitive advantage that helps increase success in applying the market penetration intensive strategy. A strategic objective based on this intensive growth strategy is to increase Procter & Gamble’s market share through aggressive marketing.

Product Development (Secondary Intensive Strategy). Product development is used as a secondary intensive growth strategy in Procter & Gamble’s business. This intensive strategy involves design and production processes for products that attract target customers. Procter & Gamble applies product development to support continuous business growth, while addressing competition. For example, P&G develops new products to increase its share of the global consumers goods market. In addition, Procter & Gamble increases its competitiveness by continually enhancing current products. The differentiation generic strategy directly determines the kinds of products that the company develops, especially in terms of competitive advantage based on quality and value. A strategic objective associated with this intensive strategy is to grow Procter & Gamble through continuous innovation.

Market Development. The Procter & Gamble Company uses market development as a supporting intensive growth strategy. Market development contributes to the company’s growth through entry into new markets or market segments. For example, Procter & Gamble could enter new market segments when it creates an entirely new product line or when it changes its market focus. In this way, Procter & Gamble can expect a new revenue stream. The generic strategy of differentiation makes it easier for P&G to enter new markets or market segments when implementing this intensive growth strategy. Also, a strategic objective based on market development is to increase Procter & Gamble’s R&D investment for new product lines, or to reform its marketing strategies to enter new segments in a growing or stable consumer goods market.

Diversification. Diversification is one of Procter & Gamble’s supporting intensive growth strategies. This intensive strategy involves establishing new business operations. For example, every acquisition and corresponding business diversification in Procter & Gamble’s history has led to considerable growth. However, this intensive growth strategy is considerably difficult to implement because of its large-scale effects on P&G’s business organization. For instance, each acquisition leads to adjustments in Procter & Gamble’s organizational structure. The differentiation generic strategy helps build competitive advantage the company needs to succeed in new business operations. Also, this intensive strategy leads to the strategic objective of using an aggressive approach to acquire other firms to grow Procter & Gamble’s business.

Portfolio Spotlight Series 2 – Lockheed Martin $LMT

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free csh flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is LMT. It currently occupies 16% of my portfolio and I have strong conviction in this stock mid to long-term.

Headquartered in Bethesda, Maryland, Lockheed Martin Corporation is a security and aerospace company. It operates through four segments. Aeronautics segment is engaged in the research, design, development, manufacture, support and upgrade of military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. Missiles and Fire Control segment provides air and missile defense systems; fire control systems; manned and unmanned ground vehicles, and energy management solutions. Rotary and Mission Systems segment provides design, manufacture, service and support for various military and commercial helicopters, surface ships, sea and land-based missile defense systems, radar systems, sea and air-based mission and combat systems, command and control mission solutions, cyber solutions, and simulation and training solutions. Space segment is engaged in the research and development, design, engineering and production of satellites, missile systems and space transportation systems.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

LMT has been having consistent free cash flow for the past 5 years

3)Market Cap Growth

As of September 2021 Lockheed Martin has a market cap of $98.58 Billion. This makes Lockheed Martin the world’s 159th most valuable company by market cap according to our data.

LMT Market Cap since its inception

4)Consistent Net Income Multiple

LMT has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does LMT have future market growth driver(s) ? The answer is yes !

Most of LMT future growth drivers will leverage on

1) Ramping Geopolitical Tensions

Global geopolitical tensions have been ramping up even before the current pandemic. With violent protests springing up all around the world, global instability appears to be on the rise. The US-China relationship, in particular, is growing even more unstable as these two nations’ interests continue to diverge.

The trade war, Hong Kong protests, and coronavirus outbreaks are just a few of the major events putting the US-China relationship under strain. Many experts even think that the US and China are headed towards a Cold War. Such a scenario will put Lockheed Martin in an increasingly vital position.

2) Proposed Acquisition of rocket engine maker Aerojet Rocketdyne

LMT’s proposed acquisition of  rocket engine maker Aerojet Rocketdyne will only serve to increase its moat and competitiveness against its competitors such as Northrop Grumman’s merger with Orbital ATK. There are signs that the merger may be approved by FTC (Federal Trade Commission) with influence by Congress.

https://www.reuters.com/business/aerospace-defense/exclusive-lockheeds-aerojet-deal-gets-support-13-members-congress-letter-2021-09-01/

3) Fairly priced PE

PE vs Industry: LMT is good value based on its PE Ratio (13.8x) compared to the US Aerospace & Defense industry average (21.9x).

Portfolio Spotlight Series 2 – CVS Health Corp $CVS

In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .

Allocation as of August 2021

Next up in Portfolio Spotlight Series 2 is CVS. It currently occupies 11% of my portfolio and I have strong conviction in this stock short to mid-term.

CVS Health is a different kind of health care company. It is a diversified health services company with nearly 300,000 employees united around a common purpose of helping people on their path to better health. In an increasingly connected and digital world, it is meeting people wherever they are and changing health care to meet their needs. Built on a foundation of unmatched community presence, its diversified model engages one in three Americans each year. From its innovative new services at Health HUB locations, to transformative programs that help manage chronic conditions, it is making health care more accessible, more affordable and simply better.

1)Consistent Revenue Growth

2)Consistent Free Cash Flow

CVS has been having consistent free cash flow for the past 3 years

3)Market Cap Growth

As of September 2021 CVS Health has a market cap of $115.42 Billion. This makes CVS Health the world’s 135th most valuable company by market cap. As you can see, it has been growing its market cap consistently over the last 20 years.

CVS Market Cap since its inception in 2001

4)Consistent Net Income Multiple

CVS has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does CVS have future market growth driver(s) ? The answer is yes !

Most of CVS future growth drivers will leverage on

  1. Covid 19 Vaccine Boosters
  2. Covid 19 Variants Of Concern
  3. PE vs Industry: CVS is good value based on its PE Ratio (15.9x) compared to the US Healthcare industry average (23.3x).

Portfolio update – August 2021

The collaborative fund performance
1. increase from 29% to 31.83% from July to August 2021 – a 3% improvement! I have deployed a diversification approach for the month of August. Many of the stocks picked up bullish gains which help in the portfolio performance.

2. increase from NAV of 246,765.05 to 280,055.80 from July to August 2021.

In summary, August has been a good month for the fund. I have kept PLTR and CXSE to 5% weightage only in the fund as they are still considered volatile stock and ETF in emerging markets respectively.

Moving forward, i am showing the portfolio allocation base on percentage which i feel is more useful for you readers.

  1. Looking to rebalance my Amazon stock to 5% from 28% and take profit 🙂
  2. Looking to add more MSFT shares to up to 20% weightage

For the portfolio performance back in July 2021, you can read my post here.

Looking forward to a better performance from the fund in September !

Portfolio update – June 2021

The collaborative fund performance
1. increase from 50% to 64% from May to June 2021 – a 14% increment!
2. increase from NAV of 285,671.50 to 313,037.20 from May to June 2021.

In summary, June was a good month for the fund.
Asset CategorySymbolQuantityCost BasisClose PriceValue
StocksCXSE10006437267.2967290
StocksKL20008011039.7979580
StocksMSFT40096151.4265.02106008
StocksPLTR40007325126.78107120
Above are the latest positions for my portfolio holdings.

Mark to Market Performance Summary of Holdings

Mark-to-Market Performance SummaryAsset CategorySymbolPrior QuantityCurrent QuantityPrior PriceCurrent PriceMark-to-Market P/L Total
Mark-to-Market Performance SummaryStocksAMD300080.08241.5328576
Mark-to-Market Performance SummaryStocksCXSE200100065.8467.292849.2054
Mark-to-Market Performance SummaryStocksKL390200043.3339.79-900.0285237
Mark-to-Market Performance SummaryStocksMSFT500400249.68265.029712.930021
Mark-to-Market Performance SummaryStocksPLTR4000400022.9526.7820439.616
Mark-to-Market Performance SummaryStocksTSM2000117.3692.78796202
Above are the mark to market transactions for the month of June 2021 for my portfolio holdings.

I have sold the following holdings

  1. AMD
  2. TSM

and bought more of

  1. CXSE
  2. KL

I have also taken profit from MSFT and monitoring some value stocks as part of rebalancing.

All these are consistent with my June 2021 Week 3 messages here

For the portfolio performance back in May 2021, you can read my post here.

Portfolio Spotlight Series 1 – Palantir

In the Portfolio Spotlight Series – i will be going through each holding in my portfolio and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are first team players
2. Potential growth companies with breakout earnings, growing competitive moats etc… these are hot youth prospects
3. Geographical / sector diversifications.. these are meant for diversification purpose and are reserves

Asset CategorySymbolQuantity
StocksAMD300
StocksCXSE200
StocksMSFT500
StocksPLTR4000
StocksTSM200

The fifth and last in the Portfolio Spotlight series is Palantir (PLTR). Palantir is actually my second largest holding after Microsoft and I have strong conviction in this stock short to mid term. Palantir currently holds the position of hot youth prospect in my team. Palantir is an explosive growth company and such companies are measured differently because they are in a different phase of their company business life cycle. Palantir is in the growth phase currently characterized by strong inward investments and initial revenue streams.

https://www.forbes.com/sites/theyec/2018/01/11/business-life-cycle-spectrum-where-are-you/?sh=291b4234ef5e

1)Initial Consistent Revenue Growth

Palantir has been displaying consistent initial revenue growth for 3 years and more quarter over quarter. Negative Operating Income is expected as the company’s product lines are still maturing and investments are still needed to grow its core technologies.

2)Exponential Market Cap and Revenue Multiple Growth

Palantir displays exponential growth in its market cap and revenue multiple consistently for the past 3 years and more. The key word here is again : exponential. This is the most important factor of investing in this company. It is displaying signs of strong competitive moat(s)!

3) Insider Holding/Buying

Net Insider Trading is Purchase over the past one year despite share lockup period expiring on 18 Feb 2021 for 80% of shares ! This shows strong confidence in the company from its shareholders.

4) Institution Ownership

Some of the world’s most famous institutions/funds hold shares of Palantir (e.g. Vanguard, Ark Investment, BlackRock, Morgan Stanley) Again, this indicates strong confidence in the company.

5) Future growth

This last factor is fundamental analysis. Does Palantir have future market growth driver(s) ? The answer is Yes! Palantir will continue to enjoy future market growth by

5a) leveraging on its strong competitive moat(s) :

Data Agnostic Product

The company is known for three projects in particular:

1)Palantir Gotham,

2)Palantir Foundry,

3)Palantir Apollo

Palantir Gotham is used by counter-terrorism analysts at offices in the United States Intelligence Community (USIC) and United States Department of Defense.

Palantir Foundry is used by corporate clients such as Morgan Stanley, Merck KGaA, Airbus, and Fiat Chrysler Automobiles NV.

Metropolis and Foundry can both be leveraged on a common platform called Palantir Apollo.  It is a continuous delivery system that manages and deploys Palantir Gotham and Foundry. Apollo was built out of the need for customers to use multiple public and private cloud platforms as part of their infrastructure. Apollo orchestrates updates to configurations and software in the Foundry and Gotham platforms using a micro-service architecture. This product allows Palantir to provide software as a service (SaaS) rather than to operate as a consulting company. SaaS is an example of a cloud service offering (think AWS or Microsoft Azure).

In summary, Palantir builds data fusion platforms for integrating, managing, and securing any kind of data, at massive scale. On top of these platforms, they layer applications for fully interactive, human-driven, machine-assisted analysis.

Sector Agnostic Customer Base

Palantir’s original clients were federal agencies of the USIC. It has since expanded its customer base to serve state and local governments, as well as private companies in the financial and healthcare industries.

Palantir’s clients as of 2013 included at least twelve groups within the U.S. government, including the CIA, DHS, NSA, FBI, CDC, the Marine Corps, the Air Force, Special Operations Command, West Point, the Joint Improvised-Threat Defeat Organization and Allies, the Recovery Accountability and Transparency Board and the National Center for Missing and Exploited Children. The U.S. spy agencies such as the CIA and FBI were linked for the first time with Palantir software, as their databases had previously been “siloed.” Most recently,

Palantir is one of four large technology firms to start working with the NHS on supporting COVID-19 efforts through the provision of software from Palantir Foundry and by April 2020 several countries have used Palantir technology to track and contain the contagion. Palantir also developed Tiberius, a software for vaccine allocation used in the United States.

In December 2020, Palantir was awarded a $44.4 million contract by the U.S. Food and Drug Administration, boosting its shares by about 21%.

https://en.wikipedia.org/wiki/Palantir_Technologies

The points above tells us that Palantir’s customer base is sector agnostic. There is no restriction of product sales due to sector boundaries.

Network Effect

The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service. The Internet is an example of the network effect. Initially, there were few users on the Internet since it was of little value to anyone outside of the military and some research scientists.

However, as more users gained access to the Internet, they produced more content, information, and services. The development and improvement of websites attracted more users to connect and do business with each other. As the Internet experienced increases in traffic, it offered more value, leading to a network effect.

The more and longer customers use Palantir products, the stronger will be the network effect and the harder it is for customers to stop using them.

5b) Potential B-2-C product offerings (Business to Consumer)

Palantir’s product lines so far are all B-2-B (Business to Business). Imagine what would be the revenue if it starts rolling out products to consumers directly !

Portfolio Spotlight Series 1 – CXSE

Update as of September 2021

I have bought into CXSE again as of September 2021. However i have kept it within 5% weightage of my portfolio.

——————————————————————————————————

Update as of August 2021

i have sold off all my CXSE shares due to regulatory risks from the Chinese government. When the regulatory cleansing officially ends. i will relook at this ETF.

——————————————————————————————————

In the Portfolio Spotlight Series – i will be going through each holding in my portfolio and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are first team players
2. Potential growth companies with breakout earnings, growing competitive moats etc… these are hot youth prospects
3. Geographical / sector diversifications.. these are meant for diversification purpose and are reserves

Asset CategorySymbolQuantity
StocksAMD300
StocksCXSE200
StocksMSFT500
StocksPLTR4000
StocksTSM200

The fourth in the Portfolio Spotlight series is CXSE. CXSE stands for WISDOMTREE CHINA EX-STATE-OWNED ENTERPRISES FUND. This ETF is mainly for diversification purpose mid to long term. It serves to protect against rotational play (e.g. sector rotation) as well as geographical diversification. CXSE currently holds the position of reserve in my team. ETFs are measured using different set of metrics from Equities.

1)Liquidity

According to ETF.com, CXSE has a liquidity rating of 5 – the highest rating.
It’s average spread % is only 0.11 ($0.07). Liquidity defines the bid ask spread of a fund. The higher the liquidity , the smaller the bid ask spread, hence higher opportunity for profit.

https://www.investopedia.com/articles/exchangetradedfunds/08/etf-liquidity.asp

2)Tracking Error

Tracking error is the divergence between the price behavior of a position and the price behavior of a benchmark. The lower the tracking error % , the lesser the divergence. The downside standard deviation of CXSE is 0%!

3)Market Cap Size

CXSE’s holdings consists of a whopping 89.31% stocks which are large market cap and 10.19% which are mid cap. There are no small and micro cap stocks. This buffers the ETF from shocks due to unpredictable events such as company bankruptcies or accounting fraud which is more likely to happen to small cap companies.

4) Expense Ratio

The expense ratio refers to how much of a fund’s assets are used towards administrative and other operating expenses. Because an expense ratio reduces a fund’s assets it reduces the returns investors receive. As a rule of thumb, expense ratio of large cap ETFs should not exceed 1%. The expense ratio of CXSE IS 0.32%!

5)Diversification

CXSE has a total of 163 holdings in 50% tech and 50% non-tech. Most importantly it excludes State-Owned Enterprises !
CXSE is mostly vested in Asia-Pacific geographically and spread across China and Hong Kong. This makes for a great geographical diversification tool against US equity holdings.