2023 Review
On the Olde World Investments (OWI) active portfolio management side, 2023 was a good year for the metals producers. The MSCI ACWI Metals and Mining Producers Ex Gold and Silver Index was up 10.88% in 2023.
The metals and mining stocks were very volatile last year. Having strong corrections in May and October due to political and economic factors. The government had trouble agreeing to increase the debt ceiling and the federal reserve decided to increase interest rates. The fundamentals of the large diversified miners looked attractive during these corrections, so OWI felt good going against the market and being a buyer during 2023. The increased interest rates will eventually decrease demand for the miners products, but so far the profits are healthy.
Our investment positions were little changed from last year, with our core positions being in BHP, RIO Tinto and Freeport-McMoran. But we did initiate a new investment in PICK, which is an ETF focused on the metals and mining producers. I decided to initiated this position because the major diversified miners (BHP and RIO) had already distributed their dividends for the first half of the year and since PICK only pays dividends in June and December every year, we were still able to receive dividends from the major miners that went ex-dividend in the prior months. In hindsight I should have instead, kept buying BHP and RIO, but the ETF format does mitigates the unsystematic risk involved in holding the individual securities. The cost of holding this ETF is high at .39% a year, but the valuation, dividend and risk mitigation looks attractive enough to keep the position for now.
On the passive portfolio front, the SP 500 was up 24% in 2023, compared to a dismal -18% in 2022. Historically the market has gone up inline with economic growth and productivity. And a portfolio indexed to the SP 500 has historically been a good way to participant in this economic progress. I have been suggesting clients purchase a broader diversified ETF like VTI instead of a SP 500 specific ETF. The valuation is a little lower due to having a allocation toward small caps.
VTI
23pe = 4.3% earnings yeild
SP 500
26pe = 3.85% earnings yeild
The earnings yields are not drastically different, but with long term government bonds at 4.5%, the US equity ETFs are already close to being overvalued. I also suggested that clients allocate up to 40% of there equity ETF portfolio towards international stocks. The US based companies have an overall competitive advantage and are the leaders in innovation. But the international valuations are substantially cheaper and you get a hedge against the currently strong dollar. They also have a nice dividend which is north of 3%.
VEA
12.2x trailing PE
VXUS
10.4x trailing PE
In conclusion it was a decent year all around and we were able to be disciplined and stick to our principles. Not every year will be positive, so lets enjoy it while we can.
Disclaimer: It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. Past performance is not necessarily indicative of future results.
