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The Science of Hitting
The Science of Hitting
Articles (686) 

2019 Portfolio Review

A look at my results for the past year, along with some thoughts on my top holdings

This is the eighth year-end portfolio review I’ve written for GuruFocus. It’s an article I look forward to every year because of the feedback I get from readers and fellow investors. As always, I hope you reach out and become a friend as we continue to learn and improve together.

With that, here’s the usual disclaimers: first, you shouldn’t invest in any of the companies discussed here without doing your own work; and second, I have no idea how these stocks will perform over the next week, month or year - but I wouldn’t mind if they traded significantly lower and presented an opportunity to invest additional capital at more attractive prices. I aim to be a net buyer of stocks for decades, and many of the companies that I'm invested in will spend billions on share repurchases over the coming years, so I hope we can both buy additional shares as cheaply as possible.

As well all know, 2019 was a great year for equity investors. After a difficult end to 2018, including a peak to trough drawdown of roughly 20% in the fourth quarter, the good ol' market prognosticators were chomping at the bit. Was it finally time for this bull market to end? With the benefit of hindsight, we now know that it was another stellar year for equities. Yet again, those market participants that spend their days trying to jump in and out of the market have paid a dear price for their impatience.

I was relatively inactive this year, largely due to the fact that I continue to struggle to find businesses that I believe are misunderstood and trading at a material discount to intrinsic value. In all honesty, the lack of new ideas has discouraged me a bit, and has made it hard to keep turning over new rocks (I also think I’ve been adversely affected by this constantly connected world, which feels like it has wilted my ability to think deeply and focus my attention). I’m not too sure how to get that spark back, outside of waiting for a market correction or getting off the Twitter fire hose. I'll be trying some different approaches in the New Year, and may discuss this in more detail down the road (maybe some readers are going through a similar lull).

With that, let’s talk stocks. The numbers discussed below are as a percentage of my equity portfolio (as opposed to measuring them as a percentage of my overall investment portfolio). I will discuss my top five largest positions, which collectively account for 65% of the total equity portfolio.

Berkshire Hathaway Inc. (BRK.B) (15% of equity portfolio) - I write about Berkshire frequently, so review my other articles if you want more details on why this has been and will continue to be a large holding. I think the valuation remains reasonable, particularly relative to the other opportunities I see today. Over the long run, I expect the stock to deliver adequate returns with a limited chance of adverse outcomes. If the world becomes less accommodating, I would expect Berkshire to be able to effectively use its fortress balance sheet to allocate tens of billions of dollars towards acquisitions, share repurchases, and publicly-traded securities. That’s the kind of optionality I’m quite fond of. No matter what the future brings, I remain very comfortable with a sizable position in Berkshire.

Wells Fargo (WFC) (14% of equity portfolio) – Wells Fargo was an addition to the top five in 2018, with the thesis based on the combination of a high-quality business, an attractive valuation, significant capital returns and an eventual return to normal operations for the bank. While it’s still early, and the company continues to face headwinds in the current interest rate environment, I’m encouraged by the developments of the past year. Repurchases have had a material impact on the per share results, and I’m optimistic that CEO Charlie Scharf is the right guy for the job. In addition, it seems that the board of directors fully appreciates the company's need to address lingering issues expeditiously. The timing for all of this remains uncertain, but things are heading in the right direction.

Based on my math, Wells trades at a single digit forward price-earnings ratio if you're willing to look out a few years. That just doesn’t make much sense to me in today's world. With the stock at current levels, I hope management will continue to commit a significant percentage of capital to repurchases. That’s a long way of saying that I think the story remains largely unchanged. If you’re willing to own WFC for the long run, I think there’s a good chance you’ll be happy with the outcome.

Microsoft (MSFT) (14% of equity portfolio) – Microsoft, like Berkshire, has been a top holding for as long as I’ve been doing these year-end reviews. 2019 was another stellar year for Microsoft’s business. Commercial cloud run rate revenues will soon cross $50 billion, or roughly three times higher than they were at the end of fiscal 2017 (amazingly, still growing ~40% year over year). Despite widespread fears in the media that an internal hire would be the death of the company, Satya Nadella continues to prove that he is exactly the right person to lead Microsoft.

As I noted last year, I do not think the stock is particularly cheap. On the other hand, this is a wonderful business with a best-in-class leadership team. I think the bias of most value investors in this situation (myself included) is to head for the exits prematurely. I am not sure that's the correct course of action, particularly if that means incurring a significant tax liability. I like the idea of being Satya’s business partner for the long-term, even if I'm not in love with what I'm being asked to pay for that privilege. For that reason, I feel comfortable continuing to hold a sizable position in MSFT.

The Walt Disney Company (DIS) (12% of equity portfolio) – Disney in a new addition to the top five, resulting from my prior investment in 21st Century Fox (I elected shares as part of the deal). I actually do not believe that my perception of the current situation at Disney is particularly different from what others are seeing. What I do believe is that Bog Iger is a world class CEO who knows how to run Disney. If anybody can navigate the difficult terrain required to reposition this “dinosaur” for the future, it’s him (and they’ve already made meaningful steps in the right direction over the past few years). In addition, the company has a collection of intellectual property that remains unrivaled, as well as a business model that enables them to effectively monetize that content through multiple channels. For those reasons, I continue to like the idea of owning Disney over the coming years.

Comcast (CMCSA) (10% of equity portfolio) – As I noted last year, I think Comcast is a well-run, high-quality business with sustainable competitive advantages in its core business. In addition, I’m willing to give management a longer leash on M&A than others (or at least that’s my perception). I think they’ve earned that right based on the track record they’ve established over twenty-plus years. At a mid-teens free cash flow multiple, I still believe that the stock trades at a discount to intrinsic value. That's a long way of saying that I believe the same things about this company at $45 per share that I believed last year at $35 per share.


All in, my pretax investment return for 2019, including transaction costs, was an increase of roughly 25%. That’s certainly better than what I expected on an absolute basis, even though it trailed the S&P 500 by a few hundred basis points. Considering how I structure my portfolio and the kind of companies I own, that feels to me like an acceptable result in a runaway year for the market.

Expanding the time horizon, my portfolio has returned ~13% p.a. over the past five years, slightly better than to the index. I’ll be frank: I do not find this particularly encouraging. I’ve added little value relative to what I could’ve achieved if I bought an index fund and spent the last five years at the beach (and that includes the tailwind from a large position in Microsoft, which certaintly included a fair bit of luck on my part). Whether or not I have the requisite abilities to succeed at this game is still up in the air. Or maybe I just need more realistic expectations (beating by 100 - 200 basis points over an investment lifetime is hardly immaterial). We’ll see what happens to my returns when (if?) we encounter a sustained period where Mr. Market is less generous to equity investors. I think that would be beneficial to my relative results, but only time will tell.

I don’t have any idea what Mr. Market has in store for us in 2020, but I’d be happy if we see some volatility and lower stock prices. That scenario would like present us with some compelling long-term investment opportunities. As always, I look forward to the thoughts of fellow investors.

Disclosure: Long BRK.B, WFC, MSFT, DIS and CMCSA

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About the author:

The Science of Hitting
I desire to own high-quality businesses for the long-term. In the words of Charlie Munger, my preferred approach is "patience followed by pretty aggressive conduct." I run a concentrated portfolio, with the top five positions accounting for the majority of its value. In the eyes of a businessman, I believe this is sufficient diversification.

Rating: 5.0/5 (13 votes)



Parth71 premium member - 8 months ago

Thanks, another good article. I will wait on BRK entry at a lower P/B ratio. As for MSFT I will just have to bite the bullet and like you say pay for the privilege, dollar cost averaging may be a good option for me here. Even if MSFT corrects, I am looking at a very long term horizon.


The Science of Hitting
The Science of Hitting - 8 months ago    Report SPAM

Thanks for the kind words Parth!

Snowballbuilder - 8 months ago    Report SPAM
Hi science

Your year-end article is an update i m always waiting for

Tanks for sharing your experince, your thoughts and your holdings

I really thinks you own a group of dominant companies and solid compounders that have benefit and will continue to benefit their long term oriented shareholders.

With BRK , MSF , Disney you own a great portfolio to preserve and built wealth.

Even if the price goes up , i think you shouldnt sold any of them.. if you own a great company solid compunder - until it remain great - just hold on whatever the price (... ask pabrai about having sold maotai or ferrari... )

Just relax, sit on your assets and let the snowball roll on ... some year the Wind will be' strong (like in 2019) some year will be calm and sooner or Later will Rain again ... but you own a first class portfolio that (whatever the Wind will be') will do well and benefit you and your family for the long run.

Sideline cash for the raining day will built on anyway just by being very selective on new investments.

Still own Moodys ? That onother great one with unusual pricing power .

As for me,

First the usual disclaimers: I have no idea of how any of my holdings will do over the next week, months… and onestly i dont even care much. Second i dont make any investments suggestion/raccomandation of buying or selling anythings.

All that sayed i have only 4 holdings at year end ( and they are the same of last year ).

I ve made no new buy and no increments during the year (the same in 2018 and in 2017). I ve no problem in doing nothing.

During the year i ve just a little bit trimmed (~3%) the holdings in recordati, diasorin and TIP.

My holding are

Recordati (Rec.mi) holding since 2009 (~40% of equity)

Diasorin (Dia.mi) holding since 2010 (~30% of equity)

Brunello cucinelli (BC.mi) holding since 2012 (~10% of equity)

Tamburi investment partners (TIP.mi) holding since 2015 (~20% of equity)

The 2019 (9 months) operating result of my holdings were solid

Even more important (just my opinion) all the 4 are very well runned by entrapreneur skilled and with long term vision, growing internally (BC, REC e DIA) and via selective bolt on acquisition (REC e DIA) and have strong Balance sheet with little (BC e REC) or no (DIA) financial debt.

As for TIP , an investment holdings, i think the fonder and CEO (Mr Tamburi) is one of the best investor and capital allocator around.

For what is worth the 2019 return of my equity portfolio was around 32% (~30% apprecciation and ~1,5% dividend yeld)

(In 2018 the return was ~0%)

The other money are sitting in cash on bank earning substantially nothing.

I dont own any MT/LT bond (I dont want any " returnfree" risk ... ;) ).

I ve no idea of how the share price of my holdings will perform in 2020 and, as usual, i dont even care much.

All my 4 holdings are multibaggers,

I havent calculate the long term return but simply looking at the cost and the market value of my portfolio (also without adding back the collected (growing) dividends and the realized gain) i m sure i m doing fine.

And if someone is getting rich faster than me good for him ... that really doesnt make me sleep less well.

Best for the new year both in the market and outside

With friendship


"I care about the Mungers.

Basically the Mungers have 3 stocks:

Berkshire, costco and Li Lu asian fund.

I m confortable? I m security rich?

You are damn right i m !" Charlie Munger (Trades, Portfolio)

The Science of Hitting
The Science of Hitting - 8 months ago    Report SPAM

Snow - I'm glad to hear you enjoyed the YE update.

Yep, I still own MCO. And I'm hanging on for dear life :)

Appreciate the update on your portfolio. Sounds like you're still doing GREAT! Kudos.

- Science

Bram de Haas
Bram de Haas - 8 months ago    Report SPAM

Fwiw, I like most of the picks. I have the value bias so MSFT not so much. What's the other 35%? Similar U.S. large caps?

This is inspiring though, I'll try to do a similar write-up.

The Science of Hitting
The Science of Hitting - 8 months ago    Report SPAM

Bram - The remaining 35% is a mix of large, mid, and small caps. Some of the names I've discussed here (like YELP). And I look forward to your write-up! Thanks for the comment.

Jtdaniel premium member - 7 months ago

Hi Science, belated congratulations on your excellent 2019 results and best wishes going forward. I was also glad to see how well my friend Snow’s portfolio fared. You are both very intelligent investors who earn your results.

Berkshire, Microsoft and Wells Fargo are three of my top five holdings, along with Exxon and Home Depot. These five holdings account for 59% of my equity portfolio. I consider MSFT and HD to be moderately over-priced, BRK moderately under-priced, and WFC and XOM in clear value territory. That said, my current favorite stock is Ambev and the price is looking better by the day. Best, dj

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