SIMON BROWN: Your 2023 portfolio review

You’ve made it to the end of the year. It’s been tough, and local markets have been two-faced with some great winners and some horror losers. So now it’s time to review your portfolio performance and, as importantly, your portfolio holdings. 

I wrote about tracking your performance in late November so for this last issue of the year I want to focus on your portfolio review. 

Traditionally my process is checking in on all the stocks I hold, of which there are usually 12-15. When I buy a new stock I always write down the top three things I like and dislike about the stock and I refer back to that list. Are they still valid? Are any changes for the better or worse?

For example, when I first bought Shoprite* about 20 years back, one of the main points was excellent operating margins and over the years they’ve managed to hold onto that. If your stocks continue to demonstrate excellent qualities, such as great margins and market share gains, the share price will, in time, follow suit by rising in value.

But if they’re missing the key points that attracted you to the business then perhaps it’s time to exit and find a better option. 

Importantly the list of what you like and don’t like about a stock will change over many years, but be cautious with short-term changes. Remember the long-term goal of investing and make any tweaks small unless something really big happens. 

This all said, I saw a great article by Morgan Housel which had a line that really got me thinking: “How many of us, if given a blank slate, would create an identical portfolio to the one we have now?” 

Forget what you do own, focus on what you want to own. We often have stocks that we bought with great hope and expectations but now they’re just bumbling along or maybe even have lost their way. We hold on because we have faith, and because we hate to admit we were wrong. 

So I plan to do this over my holiday. What 12-15 stocks would I ideally like to be holding at the start of the new year at current prices and valuations? 

And valuations is the tricky part here. Shoprite I absolutely want to hold but current valuations are rich, as they often are with Shoprite. You really have to wait for a good entry point so maybe the above should ignore current prices. If you want to own a stock, decide what price you think is fair, and wait for that level to transpire. Yes, the wait may be long, but the idea of a clean slate for my portfolio is appealing.

However, there is one last, very important, proviso. 

Don’t overly stress about the price of your current holdings. Sometimes a great stock sees its price under pressure but we should not panic. For example Richemont* is down more than a third from the recent highs, but those highs were crazy and the business remains the same regardless of price. 

* The writer holds shares in Shoprite and Richemont.