Portfolio Update - up 13.81% ($$ terms)

Time for a portfolio update!

To those of you who are new to the portfolio: we run a portfolio of 250.000DKK (roughly $37.000) as part of the competition on the Danish national radio show 'The Millionaires Club':

  • We compete against 4 other portfolio managers - 2 inhouse and 2 other external 'challengers'. All professional investors.
  • The challengers use their own money - but all portfolios are real. No simulations.
  • It's stocks only.
  • No leverage allowed.
  • Competition runs from January 1st to December 31st after which it resets (we joined March 10th this year).

Performance so far:

(for discussion of the individual stocks, see further below)

There are two perspectives to interpreting our performance: one good and one bad.

Bad perspective: we're only up 3.34% in real DKK returns - which is lower than all other competitors (4.50%, 5.05%, 18.70% and 20.20%).

Good perspective: we invest solely in US Small Cap companies and in this universe of stocks we've done quite well despite a few drawbacks:

  • Dollar fell almost 11% against the Euro in the time we've been invested.
  • We started the year 80 days late and missed out on 6.14% of market returns ( S&P 500).
  • Result: We've beaten our benchmark by 3.4%.

For some further perspective here are all the Danish mutual funds who invest in our stock universe:

Mutual Fund Morningstar Category Year To Date
BankInvest USA Small Cap Aktier A Equities - USA Small Cap -1,39%
BankInvest USA Small Cap Aktier W Equities - USA Small Cap -1,15%
Investin K Invest US Small Cap Aktier Equities - USA Small Cap -3,69%
Sparinvest INDEX USA Small Cap KL Equities - USA Small Cap +0,8%

(Source: Morningstar.dk)

The returns are real DKK returns where we're up 3.34% in comparison - So even if you add back the management fees of the funds above (1-2%), we've still beat all of them. Yes, yes - much back-padding going on. We promise to whip ourselves when we underperform. 

So in dollar terms we're up 13.81% for the year (inception on March 11th 2017) against the S&P500 of 10.4% in the same period. So a 3.4% outperformance in 8 months. 

Adding back the missed 1st quarter 2017 we're within spitting distance of the two higher performing peers, given our respective universes. Still: not winning, but happy.

The Ride

Our journey has looked like this:

(The chart includes portfolio dividends, but not index dividends - hence it shows 8.68% when the market is really up 10.4% with divs reinvested).


All in all

So while we've done better than our benchmark (the S&P500) by a solid margin we haven't been able to beat our Millionaire Club competitors in real DKK returns.

We are, however, in the half of competitors who've outperformed our respective indexes and since this is the true test of whether you're wasting your time we're happy about that (remember: in real life investing is not a competition).

The stocks - some random discussion

We still run a concentrated portfolio with only 5 investments (see here for our investment philosophy):

All in all I think we got what we deserved: four stocks are up, outperforming the market, as they've posted good intrinsic results - increased earnings, better margins, successful restructuring, decreasing costs of debt and so on. All the things you'd want as the owner of a business.

... and then there is Natural health Trends Company.

The Black Sheep - and why we're not selling (yet).

NHTC sells a series of health products through a network of independent sales people (think Tupperware parties). So in essence they sell two things: health products AND the dream of being self employed. This requires a carefull balancing act: you have to leave enough profits on the table for your network of independent sellers for them to stay motivated and think it's a good deal. And then you'll of course also have to sell this dream.

The business model has received a lot of flak since big shot investor Bill Ackmann declared Herbalife (the king of this concept) a sham company and shorted it big time. This is why they are cheap. But we think the model has been treated somewhat unfairly. And it's a hell of a business to be in. Ackmann retreated from his short position earlier this year as Herbalife just didn't care what he thought about them. They are one of the all time best stocks the past 50 years.

But Natural Health Trends have stretched too far and treated their network of sellers unfairly, increasing their margins on the products sold, which means that less of the %-pie is left over to the network. And they got punished big time. They are now 'increasing their incentives', which will hopefully translate back into a rebound in active sellers and lower margins (which are still ridiculously good).


  • Still minting money - $7.5m in net income last quarter (which was the 'horror quarter').
  • A P/E of 4.4
  • Still pays an annualised dividend of 5.9%
  • Has incredibly high returns on equity with zero debt: 7.5% in last quarter alone.
  • Is on Joel Greenblatts 'Magic Formula' list of stocks which is the super investors list of the cheapest 30 stocks in the Russell 6000 universe of American stocks. This is a guy who averaged 40% annual return from 1985 to 2005.

So could it drop further? Sure. There is a real chance that it might if management doesn't turn it around and focus on providing more value to their 1st group of customers: their network of independent sellers.

Could it return 100% in the next year? Absolutely. 

The interesting thing here is the psychology: we're getting nervous because we've lost money so far. But the stock doesn't care - it has no memory of who owned it when. And the history you have with a stock tends to overshadow your thinking on whether it's a good deal right now.

Try to simulate this scenario instead: we bought it at $10 and now it's at $18. Would we sell? The price-right-now is still $18 and the business isn't going to perform better or worse whether the market valued it's stock at $10 or $30 six months ago. It's the history of the underlying business that's important, not the stock price. 

Seadrill Partners - why hasn't it doubled?

I've stated publicly that I believed that SDLP would double to around $8 a share once it became clear that it would escape from the larger Seadrill Ltd restructuring without harm. 

So it did escape without harm. But it's been hovering in the $3.50-$4.00 area, despite a $0.10 quarterly dividend. Why? To be honest I have no idea, but it seems to me people are scared about the future of offshore drilling - especially deepwater.

I'm not too worried: more combustion engines will enter the world market in the coming years than will leave it - despite the surge in electric vehicles. Oil demand will rise globally for the next decade still with only a small portion covered by shale gas.

Meanwhile SDLP is producing around $500 million of free cash flow at an annualised basis (paying less than $50mil in dividends of this) and building an extravagantly strong position to go forward.

With the $1.2B cash position + $1.9B baglog against total liabilities of $4B the outlook is about as good as it can be in this industry. 

This is a recap: suffice to say that we're still long here, waiting for the market to either 1) come to it's senses or 2) prove us wrong. 


That's it for now. Ask questions in the commentary - and let me know if you want in-depth articles on some of the stocks. 






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Peter Kristensen

Are you holding on to ANFI?
Have followed your advice, but losses increasing. I am wondering how you look at ANFI now. It should be be a better buy now, if the case is intact. I have read through their accounts – admitted should have done so before investing – and notice increasing working capital and continued negative free cash. Is ANFI’s business for real – or do we risk being the naïve investors supporting the life style of a wealthy Indian family? Hoping for your input as I know you have done a thorough research of ANFI.
Peter Kristensen


Any update on your portfolio anytime soon?


Hey Ulrik and Sally

Enjoying the blog. It would indeed be interesting with in-depth analysis of all your five stocks – and maybe a comment/analysis on other interesting stocks, which, however, did not make it to the portfolio. I agree that Amira Nature Foods is particularly interesting after the 30% fall.

Further, I would like to read more about which indicators you consider key when picking stocks? And maybe something about your valuation methods, and hence the intrinsic value of the stocks in your portfolio.

BTW: Enjoying when Sally takes part in Millionærklubben. Great insights.

Best regards


Hi Ulrik,

What are your thoughts about Amira Nature Foods after the almost 30 pct. drop in the stock price the last couple of days?

Kind regards

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