Portfolio Performance

US tech portfolio objectives and rationale

In 2010 we noticed that many USA tech stocks appeared undervalued during an uncertain recovery from the GFC crash. We therefore transferred our investment focus from the Australian tech sector (which was focused mainly on serving the domestic market) to US technology businesses serving global markets. Our portfolio investment strategy is focused on the fundamental infrastructure of the internet.

2010 opportunity review: Apr -  Oct 2010 (Chart: NASDAQ)

2010 strategic investment opportunity review: Equities Apr – Oct 2010 (Chart: NASDAQ)

We also noticed that Australia’s mining boom was pushing the AUD to an unusually high level against the USD. This caused us to wonder whether it would be a good idea for Australian investors to buy US tech stocks for their upside, and hope for a further benefit if the AUD were to fall against the USD.

2010 opportunity review: Apr -  Oct 2010 (Chart: XE.com)

2010 strategic investment opportunity review: Currencies Apr – Oct 2010 (Chart: XE.com)

Outcomes: Foreign exchange (USD/AUD)

So far we’ve been correct in our assumption that the AUD was over-priced as it approached parity. With the exception of the recent additions of Twitter and Visa, all of our portfolio stocks were acquired between Oct 2010 and Sep 2012, so we’ve boosted the underlying performance of our AUD-denominated portfolio index by around 30% as the AUD depreciated against the USD.

aud_20161231_10year_800

Outcomes: Portfolio performance

On 1 Jun 2012 we established two indices to measure the performance of a portfolio of US tech stocks:

  • USD-denominated index (blue)
  • AUD-denominated index (red)

After some rebalancing, we set the initial value of the USD-denominated index to 1.00 as of 28 Dec 2012.
The AUD-denominated index (adjusted for FX) was set to 0.97.

Performance update

indices_max
^ This chart compares the performance pattern of the USD-denominated portfolio index with AUD-denominated index.
The gap between the two lines represents the boost from the depreciation of the AUD against the USD.
Source

  • Our USD-denominated portfolio index closed on a record high of 2.779 on 7 Jun 2017.
  • Our AUD-denominated portfolio index closed on a record high of 3.710 on 2 Jun 2017.

Comparisons of USD-Denominated Portfolio Index to Market Indices NBR 13 Apr 2017

index_vs_sp500
^ This chart compares the performance pattern of the USD-denominated index with the S&P 500 index. Source

index_vs_nasdaq
^ This chart compares the performance pattern of the USD-denominated index with the NASDAQ Composite index. Source