Composite Symbols & Diversified Portfolio with Just Two Stocks?

2021년 8월 16일

Here I use one of the more simple TV tools to show a powerful combination of two stocks. The tool is adding symbols together to make a composite symbol. As a bonus, it also shows what I think is a great combo of two companies that, together, make for one heck of a portfolio.

In this chart I combine CSU in Canada with BRK.B in the USA. But first CSU needs to be multiplied by the CADUSD cross rate to compare apples to apples. You can add up to 10 symbols this way to chart a portfolio. One can also multiply a position size to each symbol to more accurately show your portfolio as many other have previously shown. Again, I am not inventing anything new here.

The resulting chart show two of my favorites: Constellation Software - a company that is essentially a VC with over 500 well chosen tech companies folded into it and Berkshire Hathaway - the ultimate "bricks and mortar" conglomerate.

Both of these companies boast a great history of carefully choosing long term business acquisitions along with a relatively hands off approach and steady growth. Unlike ETF's or mutual funds, there is no extra MER dragging down performance and almost no tax surprises from any built in capital gain, interest or dividend distributions. BRK.B never pays a divided and CSU has recently stated that it will attempt start to make some larger acquisitions - using it's cash to do the same. It currently pays only a small dividend and instead reinvests most of it's earnings as does BRK.B with all of it's earnings. The result is very tax efficient investments that let experienced managers like Warren Buffet, re-employ your earnings to further compound your potential gains. The resulting chart shows incredible performance at an average of 21.14% per year over the 16.21 years we have data on - all in a two company portfolio that boasts hundreds of companies under their umbrella in a diversified portfolio spread among huge industrial, finance, insurance and software industries - All in a relatively low volatility portfolio.

Two Important Notes:

A note about dividends: I love that these companies pay little or no dividends! Understand that the most important measure in my mind - outside of risk - is TOTAL RETURN. If your investment increases by 10% or you get a 2% dividend and 8% gain - you get the same 10% return. However, dividends are typically taxed at a less favorable rate to capital gains unless they are in a retirement plan so that dividends actually can eat into your after tax net profits. You want income? Sell a little bit off on a regular basis and only pay capital gains taxes that are typically taxed at a lower rate outside of registered plans like IRA's or RRSP's. Even cross boarder tax issues are better with this arrangement as dividends between Canada and the US are often treated as income in non-registered plans when they come from outside the country. Citizens of either country living in the other country also escape potential double taxation this way. (Tax laws do change so have your advisor or accountant verify this for your particular situation).

A note about the high price of both of these stocks: Don't worry about it! $10,000 invested is $10,000 invested. It does not matter if it is in 5 shares @ $2000 per share or 10,000 shares @ $1 per share. More and more brokers are now allowing the purchase of "Fractional Shares" which enables the investor to put only say $200 into buying a $2000 stock and low to zero commission rates now offered at many of those same firms make purchasing small numbers of shares or fractions of those shares no different that if you were to trade thousands of shares. Don't let a high price per share scare you away from a good stock.