AndreaRavalli Portfolio July 2022

After a small break for June due to various commitments, the regular reporting on the activities and performance of the AndreaRavalli portfolio popular investor on Etoro returns.

Numbers don’t lie

July was the best month of a “lackluster” 2022 for the US stock market.
With gains around 10%, the loss on the year was reduced, which remains 21% for the Nasdaq 100 and 14% for the SPX500. The portfolio also had a good month recovering 5% and maintaining a smaller loss than the major U.S. indices, a loss that is around 10% again on a year-to-date basis

Cina’s situation

Chinese stocks have been the portfolio ballast this month.

This is the performance that the main Chinese stocks held in the portfolio had in July:
-Country garden -37% (real estate)
-BABA -21% (ecommerce and cloud service provider)
-Ping An Insurance -13% (insurance institution)
-NIO -9% (EV developer and manufacturer)
China has been suffering from a major real estate problem for some time, which has brought large real estate groups (such as Evergrande) into distress while at the same time holding back the dragon’s economy. This month there were protests calling for a freeze on mortgage payments until the house is delivered, and protests are not something that happens often in China.. You may wonder why there should be a protest over mortgages if there are no houses but the reason is that in China it is normal to take out the mortgage before receiving the house, even years before.

USA’s situation

The U.S. is in a “technical” recession after 2 quarters with negative growth but the word “recession” is never made official by Powell and the Federal Reserve as they believe that a strong labor world as now can prevent “real” recession even with inflation apparently no longer transient as Powell said.
The earnings of the largest companies in the U.S. market (Google, Amazon, Facebook, Apple, Netflix above all) showed “less positive” numbers than usual but the market reaction was still positive with a few exceptions like Facebook and Intel.
Will these earnings and this month that showed relative “optimism” in the markets be enough to allow the U.S. market to recover the losses accumulated in this first half of 2022?

UE’s (and Italy’s) situation

In Europe, inflation continues to be very high, at U.S. levels, however, the latest production and GDP output numbers are better, albeit slightly, than expected. This might suggest that the situation is stabilizing and that Europe is equipping itself to solve the overbearing energy crisis it has suffered since the Russian invasion of Ukraine.
Italy plunges back into political instability with yet another fall of government resulting in early elections in September for the first time in the history of the republic. The management of PNRR funds is crucial for several companies we hold in our portfolio like ENEL and A2A, so the hope is that the new government, which will be the 21st since 2000 (sigh), will be able to make the most of the European PNRR. In the meantime, however, I would and will personally avoid new purchases on Italian stocks.

Portfolio’s risk

With the large purchase of SWDA in the portfolio there was an attempt to mitigate risk and improve portfolio stability. The fund is accumulation so there has been a slight reduction in dividends while still going to optimize performance because Etoro retains a portion of dividends on which a 26 percent tax is still paid for Italian, English and Brazilian dividends. The portfolio risk remains between 5 and 6 because of the rather volatile period on global stock markets.

What to expect in August

Unfortunately, I don’t have a crystal ball, but with inflation, the Chinese real estate problem, the Russian-Ukrainian war, and the low volumes typical of August I’m pretty sure there will be a lot of volatility. Which could also mean “bargains,” we will find out.

Sectoral portfolio diversification

The purchase of SWDA helped portfolio diversification from previous months. We have a slight decline for Utilities, Healtcare and Energy and an increase for Consumer Cyclical and Consumer Defensive which could help in a possible recession/stagnation.

Portfolio’s dividend

Despite the inclusion of SWDA (which is zero dividend being accumulation) the dividend rate has remained stable. This is also due to the increase in dividends of some companies and the depreciation of some large dividend stocks.