Portfolio: Q2 2021 Review

by The Compound Investor

We are two-thirds of the way through the third quarter so my apologies for the lateness of this update! Q2 was another excellent one for stocks in general – with the 8.5% return posted by the S&P 500 representing an acceleration on Q1. Unfortunately, I had a slight hiccup with my own portfolios. For reasons I can’t explain, post-April I stopped manually executing the monthly trades for the Micro Portfolio, assuming it was happening automatically. The payments into the broker account are automatic – so cash for May, June and the start of Q3 simply piled up until my brain started working again in August. So, Q2 total buys were low ($100 versus $300 normally), while Q3 total purchases of $500 will offset that shortfall.

In terms of the individual holdings, Disney was the real laggard and the only one to post a negative quarter. Shares of the media giant fell around 4.7% in Q2 while the dividend remains suspended. Still, Disney has not underperformed the benchmark since the start of COVID, notwithstanding the huge disruption to its theme park operations, and the business is doing a lot better now. The segment housing the Parks swung back into the black as they opened back up again, with the company as a whole posting a $2.4b operating profit in its fiscal Q3. The shares remain expensive in my view, trading on a FY22 P/E of 37.

At the other end of the scale, Exxon Mobil was the highest returner in Q2, unsurprising really given that energy in general had a good quarter. Average monthly spot prices for crude oil increased throughout the period, breaching the $70/bbl mark along the way. That continued into Q3, though concerns around the Delta variant and demand have since had a negative impact. ESG concerns remain a huge headwind here in terms of sentiment. That said, Exxon trades on a forward PE of 12 and a 6.3% dividend yield, which continues to look attractive to me. Elsewhere, the other consumer stalwarts – PepsiCo, Coca-Cola and McDonalds – were all laggards versus the index, variously underperforming by several hundred basis points each. At period-end, the value of equities stood at $1,292.80, up from $1,147.66 at the end of Q1.

On to the Coffee Can Portfolio, which had an okay quarter thanks to solid double-digit returns from Exxon Mobil and Anheuser-Busch InBev. Exxon we mentioned above, outperforming the index in Q2 thanks to higher oil prices. AB InBeV also had a very good Q2 as COVID vaccine rollouts boosted prospects of a return to normalized on-trade activity, though that has reversed in Q3. I have been bullish on the beer giant for a long time now – many of its ills are largely out of its control (COVID most obviously, but foreign currency headwinds have also been a massive drag) – and it strikes me as a bargain on a 2022 P/E of around 17. AT&T lagged significantly, the big news out of Dallas obviously being the WarnerMedia spin-off and rebased dividend. Coca-Cola returned a few percent as mentioned above. No fresh purchases or sales here, and over $120 collected in quarterly dividend cash. The value of equities stood at $11,733.35 at the end of the quarter, up from $10,844.70 at the end of Q1.

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