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The Satellites Of My Core-satellite Investment Strategy

The satellites of my core-satellite investment strategy

John C. Bogle in 2016
Founder of Vanguard and the father of index investing.

John C. Bogle barely if ever bought any individual stocks. I’m going against this a bit by using a core-satellite strategy for my portfolio. I’m not as smart or good as him but the reason to leave some room for individual investments is that I like to look into these individual companies. I also like owning a part of a company I believe in. The third reason is to give me some room to see if I can pick some winners. The chances are slim I will do better in the long-run but I’d like to try: it’s fun.

It’s why the following 8 stocks are part of my personal portfolio. These are the only individual stocks I own; Other stocks are trackers or funds (i.e., in my Beobank actively managed fund).

Aedifica

The first “satellite” or individual stock I want to talk about is Aedifica. It’s a Belgian company that specializes in European healthcare real estate, and in particular, housing for seniors with care needs.

Aedifica has established itself in recent years as a leader in the European listed real estate sector. By investing in buildings that generate recurring and indexed rental income and offer the potential for capital gains. they offer a reliable, sustainable, and attractive yield. It’s why it’s my first and major REIT. A second reason is for their large weight in health care.

The third reason for my interest in AED is the ever-growing elderly population. We are continuously bombarded with research stating this dramatic growth, so I want to play into this by investing in AED. It also gives the extra benefit of a reduced withholding tax of 15%.

Because they are a Belgian REIT, they are required to adhere to certain requirements. Aedifica has a clear explanation about this so I’ll refrain from just copy-pasting it. It boils down to the following:

  • Listed on the market where at least 30% of the shares must be offered on the market;
  • a company whose main purpose is solely real estate;
  • Return 80% of their profits in the form of dividends;
  • If it has over 60% in health care, the withholding tax drops to 15%;

It always easy to talk about performance in hindsight, but I’m happy to have this in my portfolio because at the time of writing (23/01/2020) It’s the best performing stock in my personal portfolio at 51%. Together with a solid dividend yield, this is really a great stock to have.

Source: https://www.aedifica.be/en/profile

Kinepolis

This is my second largest position and it is something I own because I’m an avid moviegoer, mostly in Kinepolis theaters.

Kinepolis was formed in 1997 as a result of the merger of two family-run cinema groups and was first listed on the Brussels stock exchange in 1998.

Kinepolis tries to offer the ‘ultimate movie experience’ to its visitors. In addition to its cinema business, the Group is also active in film distribution, event organization, screen advertising, and property management.

The group owns most of the buildings and land it has its theaters on. This makes them landowners as well.

Cofinimmo

Cofinimmo is another Belgian REIT and my third largest position. The main reason why I have this stock in my list is because of the dividend payout. Of course, I also looked at the fundamentals which are solid.

Their most important activities consist of health care real estate (56%), followed by offices  (31%) and distribution (13%). With a high occupancy rate (96.8%), solid long-term cash flow thanks to their leases, and a fair portfolio value of 4.3 billion there should still be room to grow.

Ubisoft

As someone who enjoyed playing video games throughout his childhood, a video game stock shouldn’t be left out of my portfolio either. I choose Ubisoft as it’s one of the big video game publishers and is has various big game franchises that almost always deliver. Unlike its American counterparts Ubisoft is priced at a more reasonable P/E ratio while having many top games in its portfolio as well. To be fair I also choose them since they are European.

I say they almost always deliver because 2019 was a very bad year for Ubisoft due to the Tom Clancy shooter, Ghost Recon Breakpoint, being both a critical and commercial flop.
It responded by delaying the release of “Watch Dogs Legion,” “Rainbow Six Quarantine” and “Gods & Monsters.” This made stock drop by as much as 20% at the end of 2019.

This allowed me to get in lower during the following months.

Alibaba

Alibaba is a  giant in China and has gained massive traction around the globe. They not only dibed their toes in retail but also entertainment through movie productions.

With ever expanding activities creating new revenue streams that helps increase revenue by 50% yearly, it has still more room to grow. Baba’s Core Commerce segment covers pretty much every corner of trade. It works at both retail and commercial levels, locally and internationally, and also includes logistical and consumer services.

Of course, one of the biggest concerns might actually be none-business related. As it is a Chinese based company it’s at the mercy of the Chinese government when it comes to rules and regulations. Depending on China’s trade deal with the US they could suffer hard.

Overall, I want to believe that Alibaba can keep growing and at the end of the day, trade deal will probably happen. If not with Trump it’ll be with someone else.

Sofina

Next to Belgian REITs and some specific stocks related to my interests I also invested in some Belgian holding companies. A holding company is the perfect way to indirectly get your hands on companies you normally can’t get access to as a retail investor. Sofina is one such holding company that also invests in private-equity. It also has a stellar track record.

Home Invest

Home invest is another Belgian REIT. For the same reason as I hold AED and COFB shares, I hold HOMI. They specialize in the development and management of residential real estate. On September 30th 2019, they held a property portfolio of more than € 580 million in Belgium and The Netherlands.

It’s my way of diversifying my real estate share without having to manage it or having to take a mortgage. As I recently purchased my first apartment I will have a huge inbalance as the total costs are 420,000 EUR. By being invested in these REITs and keep investing in them, I hope, over time, to correct this inbalance.

Nvidia

As a computer enthousiast (who loves to play games) at least one hardware tech company should be part of my satellites. I choose Nvidia because of their solid track record in the computer chip business.

Even though their earnings took a beating because of the crash of crypto(mining) in 2019 the 2020 outlook looks very bright which can be seen in the recovering stock price.

Nvidia has a strong leadership when it comes to it’s main market segment, GPUs, which should help with their earnings. Their main valuation indicator, P/E, is very high at 58 but given the type of stock I’m willing to take the risk.

source: https://www.fool.com/investing/2019/12/24/why-nvidia-stock-should-be-on-2020-shopping-list.aspx

What's next?

I don’t foresee the purchase of any new individual stocks any time soon. With the stocks that I have now, I have a good personal selection. The only thing that I will keep doing is purchase more shares but at a slower rate than I buy ETF’s. This way I can reach my target balance of 80% passive investment and 20% active.

Do you have any preferred stocks that you bought recently or already have in your portfolio?

Please share it in the comment section below.

Mr. FightToFIRE
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This Post Has 2 Comments
  1. Thx for sharing. I also believe bin the approach to add some fun to an etf portfolio. I do the same via options.

    That being said, aedifica is on my radar for the dividend. When I would stay under the threshold for dividend refund, it can be without tax at all.

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