Interesting perspective @Solvetheriddle

I read your "Lessons from 40 years" and found it very useful. Your record is great. I am not that good (yet)

I like the phrase "SP volatility, if blended with business stability, then bring it on, that's an opportunity". This is actually not dissimilar to what I am trying to do with what I call "boring" companies, although we describe it in different ways. I am looking for opportunities where there has been share price volatility (on the downside) that is overdone vs the underlying stability of the company. I would argue that all 4 companies I originally listed exhibit this.

Volatility is easy to spot. Perhaps the real skill lies in distinguishing when it is warranted vs when it is not

Manage the risk then embrace the uncertainty is a lens I like to use.

If you know what you own and why, then as you say volatility provides opportunity.

@Goldfish

Nice post, mostly because it aligns with my biases ;) I hold 1 and 4 and am researching 2.

I see the debt that AMC is carrying as a significant risk: therefore am a bit scared but otherwise a solid company. The debt thing has the potential to spiral if they don't manage to divest some assets: net debt/EBITDA stands at 3.5* (in June and may be higher now) and ratings by S&P and Moody's stand at BBB and Baa2. Earnings are expected to decrease in the consumer discretionary segment next FY and they have to maintain a yearly increase in dividends to remain in the Dividend Aristocrat category, so they could be making a cross for their own back. Should debt increase significantly, due to any cause, a rating downgrade would make their debt burden even harder to carry, potentially triggering a cap raise, or witholding the dividend/failing to increase it with a subsequent re-rating in the share price, as it gets dropped from the dividend aristocrat index.

I think what you have created used to be called a barbell equity portfolio, I'm not sure if that's a term that's still used. It's very similar to my approach: ~80% in pretty stable quality compounders and ~20% in small caps that have a chance of hitting the big time. This percentage is not fixed and often flexes by 10% in either direction depending on returns and the macro environment. Having the 20% to play with is also a way to stop me fiddling with the core holdings: the biggest enemy of good returns is to over-trade, and I have been guilty of that in the past. I need to remember if you're paying tax on the capital gains of a company you sell, the new investment has to outperform what you have just sold by 18% (from memory), which is quite a hurdle. And then add in trading fees, which admittedly aren't much of a concern nowadays.

• there are many ways to calculate this, other figures I've come across state it to be 5.6. The direction matters more than how it is calculated.

+1 for boring stocks/portfolios. It'd be fun to find the most boring portfolio on strawman, they'd probably do quite well over a long enough time period.

Solpatts, Berkshire and VAS(asx300) make up about 40% of my portfolio. I'll probably never own a super yacht, and I reserve the right to change my mind, but a few decades of compounding and the above three should do ok.

@Lewis

if I might make one comment, I would suggest instead of VAS, which is overweight banks and miners, an equal weighted ETF such as MVW.

the MER is a bit higher at 0.35%. But I believe the risk is lower in the event of two scenarios:

1) RIO and BHP suffering when Semandou opens

2) a property correction (yeah, I know)

best of luck

C

Yeah, it's a valid concern @Chagsy. VAS was 100% of the portfolio when I first started. Originally the plan was to dollar cost average into "the market" and call it a day. It's come down in percentage terms as I've grown confidence picking individual business and looked to diversify. I think if you're passively buying into a market you're likely to be overweight, in Aus it's banks and miners, in the US at the moment it's tech/ai. I don't know for sure but I think I've read that it's historically normal for a hand full of stocks to drive a whole market. If you're passive that's the game you play and when the giants fall you wait for something else to take it's place and pick up the average along the way.

I'm one foot in both camps.

@Goldfish and others - +1 re boring portfolios, or segments of portfolios. My SMSF portfolio is approximately 95% very boring, as one might expect given it’s in pension phase and I need those dividends to prevent the capital being drawn down. And yes, the banks are in there, and so far, the allocation to mostly boring is working in that the portfolio reliably generates enough cash to support the mandatory drawdown (5%) while still putting on at least another 5% in growth.

In contrast, my Company portfolio is purely growth, but even there, I would consider it 70% boring (index ETFs, other ETFs, gold, Btc, private credit, etc). [Yes, I consider Btc boring! The investment is just there and sitting - not something I need to bother with.] Currently 29% of this portfolio is invested in the Aus-SMID space - that’s the not-boring bit.

Especially over the past year, the boring segments of the portfolio have truly acted as ballast when the market sea has got choppy and the not-boring segment is leaping about in value. Up one day, down the next, but the ballast strongly underpins the overall portfolio value. This means I maintain the confidence to just sit still and let the stormy period play out.

One point on Sonic Health - I held it for 8 years and sold out about 18 months ago (for about 25% capital gain, not counting dividends). Today at $23.19, it’s more than minus 10% from the price at which I sold (18 months ago). The reason I sold was that, while I agree that in the future, wealthy, aging populations will need an ever-increasing number of tests and scans, what I am far less clear on is whether SHL can maintain their margins in the face of European and Australian and other governments being under pressure with their healthcare costs and limiting increases on pathology rebates/subsidies. I can see a situation where the increasing costs of tests (borne by SHL) combines with government price limitations to squeeze SHL's margins to an uncomfortable degree.

Whether that actually occurs or not, who can foresee, but I suspect thoughts and uncertainty along those lines is what’s keeping SHL’s price depressed.

You also don't have to choose one or the other (VAS/A200 OR MVW) - you can have a blend of the two - e.g. do a 70:30 split so you're still mostly index market cap weighted with a tilt towards equal weight for some diversity against the banks and miners, or whatever proportion you want