Rudi’s View: Ten Years Of All-Weather Model Portfolio

Rudi's View | 10:00 AM

By Rudi Filapek-Vandyck, Editor

A few weeks ago I was asked to provide some performance statistics for stocks held in the FNArena-Vested Equities All-Weather Model Portfolio. Revisiting the early days of the Portfolio back in 2015 proved quite the illuminating exercise.

For starters, the number one stand-out performer proved not one I would have instinctively picked had I been asked the question beforehand. But numbers don't lie and there it was; Aristocrat Leisure ((ALL)) beating everything else over the ten years up until May this year.

I am well aware this company is not to everyone's liking or taste, and I certainly don't want to make this international giant in the gaming industry the posterboy of my research or the Portfolio, but I have no problem pointing out this company remains one of the strongest and most successful growth stories on the ASX; and it is a large cap company, proudly and solidly embedded inside the local Top 20.

But, when I do say numbers don't lie, we should all remain cognisant of the fact that starting and end points of our calculations are arbitrary and a lot of bias can creep in, also depending on how and when we measure returns.

Notes From A Ten-Year Journey

Back in May I simply went back in time by ten years, April to April, because the Portfolio has now completed its first decade of active existence. It soon dawned upon me, adding context and interpretation remains vital.

For example: I have repeated the exercise over the past weekend --June to June-- and this time the decade's all-round winner is ERP-SaaS services provider TechnologyOne ((TNE)), thanks to yet another strong rally over the past two months, whereas shares in Aristocrat Leisure lack clear momentum due to too many question marks about tariffs, the US dollar and the US economy.

The message to all of us remains the same: don't be too easily bamboozled by backward-looking calculations, also pay attention to context and details. As the starting point was ten years ago, changes at this stage of the period can have an outsized impact on the return calculations overall.

Having said so, I have absolutely no reason to complain and can also now report TechOne has become the first company in the All-Weather Portfolio that has generated a return of 1000%. Yes, that's not a typo.

One thousand per cent over the past ten years. (Dividends not included).

Second observation: This still doesn't make TechOne the best performer on the ASX overall. Shares in accountancy software platform Xero ((XRO)), which is equally in the Portfolio, have appreciated by nearly 1100% over the same period. Alas, the Portfolio added these shares a few years later, and also sold out and bought back in over time.

Not grabbing the full potential from Xero shares, even though they have been on my curated lists from the get-go, is shaping up as one of the key lessons I had to learn.

It's one of the reasons as to why I have become extremely reluctant to wave goodbye to great companies. Pro Medicus ((PME)) is no longer in the Portfolio and has equally contributed to that lesson learned.

Lucky me, all of REA Group ((REA)), WiseTech Global ((WTC)), Hub24 ((HUB)) and Xero have offered multiple opportunities to get back on board or accumulate more shares.

But the key lesson remains: be extra-extra careful when selling out. The market might not be as accommodating as you expect, and lest our very own doubts, discomfort and biases get in the way and form an invisible barrier that prevents us from buying back in.

Equally important: my research into High Quality All-Weathers and Growth companies on the ASX also serves to educate and to inform those investors and subscribers that are not afraid to steer away from simply buying banks and resources companies, and from beaten-down, lower quality options.

A Thing Of Beauty, A Joy Forever

Within this context, let's note the returns ex-dividends from the core holdings that have been held in the Portfolio throughout most of the 10-year period:

-TechOne                  1000%
-Aristocrat Leisure      760%
-REA Group               491%
-NextDC ((NXT))        479%
-ResMed ((RMD))      432%

One look at that overview should convince every investor a Buy-and-Hold strategy remains as valuable and as valid as ever, despite many calls and predictions to the contrary (the Finance industry needs to make a return too, of course).