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  • Brett Schafer

13th Month Update of the MBP

*Link to the spreadsheet for anyone interested in how we calculate returns

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.

Absolute ReturnsAnnualizedPortfolio:24.43%22.55%S&P 500:21.56%19.90%Difference2.87%2.65%
MonthMBP ReturnsS&P Returns00.00%0.00%1-8.38%-9.65%24.37%0.78%310.85%4.74%413.38%5.69%516.67%9.62%611.69%7.91%717.14%11.48%818.82%13.95%913.33%9.01%1014.71%12.91%1113.75%12.69%1223.59%17.37%1324.43%21.56%

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:

  1. 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).

  2. No derivative securities (options or futures).

  3. We are not reinvesting dividends, for calculation purposes. Although we highly recommend that you do so in a real scenario.

  4. We cannot incorporate any commission fees so we will act like we are investing through Robinhood

  5. 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

TickerShares 12/21/19-preShare Price 12/21/19% Gain**SQ1,999$63.632.71%SPOT819$150.3115.89%SCHO1,500$50.410.74%JD2,801$35.3181.08%BOMN800$21.05-16.14%SCHA755$75.8014.48%YEXT4,000$14.10-1.95%ATVI950$59.2230.70%MTCH700$79.8614.30%EA515$107.9530.06%SCHH1,199$45.338.71%ROKU389$136.89235.02%MDB285$130.6886.53%DIS531$146.8831.20%AAXN642$71.2457.54%HD185$221.1930.88%TDOC366$81.4349.41%SONO1,500$14.8327.30%TGT145$129.15111.72%IRBT226$50.38-43.03%HEAR450$8.88-47.80%BRK.B158$226.317.40%MKL30$1,138.3312.73%Cash1$55,706.81*

*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

CompanyDividend 12/21/19$ Paid 12/21/19Square$0.00$0.00Spotify$0.00$0.00Schwab Shrt Trsry$0.08$$0.00$0.00Boston Omaha$0.00$0.00Schwab Small-cap$0.38$283.88Yext$0.00$0.00Activision Blizzard$0.00$0.00Match Group$0.00$0.00Electronic Arts$0.00$0.00Schwab REIT$0.56$667.84Roku$0.00$0.00MongoDB$0.00$0.00Disney$0.88$467.28Axon$0.00$0.00Home Depot$1.36$251.60Teladoc Health$0.00$0.00Sonos$0.00$0.00Target$0.66$95.70iRobot$0.00$0.00Turtle Beach$0.00$0.00Berkshire$0.00$0.00Markel$0.00$0.00Cash$0.00$0.00Total:$1,886.30

Buying and Selling

CompanyShares +/-Shares 11/22/19 PostSquare2002,199Spotify0819Schwab Shrt Trsry5002,000JD.com02,801Boston Omaha25003,300Schwab Small-cap0755Yext04,000Activision Blizzard0950Match Group0700Electronic Arts0515Schwab REIT01,199Roku0389MongoDB100385Disney-200331Axon0642Home Depot0185Teladoc Health0366Sonos01,500Target0145iRobot0226Turtle Beach0450Berkshire-1580Markel-300Cash01

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

CompanyShares 11/22/19 Post$ Amount 7/24% of PortfolioSquare2,199$139,922.3711.24%Spotify819$123,103.899.89%Schwab Shrt Trsry2,000$100,820.008.10%JD.com2,801$98,903.317.95%Boston Omaha3,300$69,465.005.58%Schwab Small-cap755$57,229.004.60%Yext4,000$56,400.004.53%Activision Blizzard950$56,259.004.52%Match Group700$55,902.004.49%Electronic Arts515$55,594.254.47%Schwab REIT1,199$54,350.674.37%Roku389$53,250.214.28%MongoDB385$50,311.804.04%Disney331$48,617.283.91%Axon642$45,736.083.68%Home Depot185$40,920.153.29%Teladoc Health366$29,803.382.40%Sonos1,500$22,245.001.79%Target145$18,726.751.50%iRobot226$11,385.880.92%Turtle Beach450$3,996.000.32%Berkshire0$0.000.00%Markel0$0.000.00%Cash1$51,365.694.13%Total:$1,244,307.71100.00%

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

Disclosure: The authors are not financial advisors, and may have an interest in the companies talked about.

#Disney #Square #BerkshireHathaway #BostonOmaha #Stocks #MBP #MongoDB #Investing #Finance

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Listen On: Spotify Apple Podcasts Disclosure: The author and podcast guests are not your financial advisors. Ryan Henderson and Brett Schafer are general partners and portfolio managers at Arch Capita

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