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 besting Q1. Unfortunately, I had a slight hiccup with my own portfolios. I stopped manually executing the monthly trades for the Micro Portfolio after April, 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 COVID began, notwithstanding the huge disruption to its theme park operations. The business is doing a lot better now, too. 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. 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.

The Coffee Can Portfolio 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 Q2, up from $10,844.70 at the end of Q1.


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