Today’s menu:

• Investing holiday tips

• ROA Watchlist - ratios and performance

• My favourite holiday drink

Investing holiday tips

In the holidays, we all spend more than we expect to. Here’s a few tips to come out richer than you went in:

1. Keep investing. If you invest monthly, perhaps in mutual funds or pension funds, keep doing it. Don’t reduce the amount because you expect to spend more in December.

2. Year end bonuses. If you get a bonus at this time of year, you might feel like “making it rain” but don’t. Try to invest the majority (or a large part) of your bonus. That way you can use the rest guilt-free. Invest before you spend, not the other way around.

3. New year price increases. If you have important things to pay for in January, keep the money aside for this. For instance, medical insurance, car insurance and subscriptions can have their annual increases in January. Keep some cash aside for these in a separate savings account.

4. Emergencies - hopefully you have an emergency cash stash.

5. Is it too good to be true? If you come across something that seems to good to be true, it often is. In investment terms this usually comes in the form of high returns with no risk or making money quickly. There are no free-lunches in investing. Beware.

6. It's never too late too start. The points above may seem like nice-to-have-problems because you don't have investments. It is never too late to start. Start investing this week. It is like planting a seed, if you keep watering it, before you know, it will grow into a nice sized tree.

ROA Watchlist

Compared to the S&P500, the ROA Watchlist companies:

1. Are more profitable (higher margins)

2. Earn higher returns (higher ROCE)

3. Have higher valuations (lower FCF yield)

4. Use less debt (lower risk)

5. Are capital light (lower capex)

Performance

If you had been a long-term holder of an equally weighted portfolio comprising the ROA Watchlist, your investment would now be 5.95 times larger than it was on 1 January 2019. That is a compound annual growth rate of 35%.

A $100 000 would have become $595 000 in these six years. The same amount invested in the index would have become $231 000. The ROA Watchlist portfolio did 2.57 times better than the benchmark.

ROA Watchlist growth rates over different periods:

• 1-year return: 54.7%

• 3-year return: 23.3% per annum

• 5-year return: 33.1% per annum

• Since inception: 35.1% per annum

Benchmark performance

For comparison, here are the MSCI World growth rates:

• 1-year return: 29.3%

• 3-year return: 9.4% per annum

• 5-year return: 12.9% per annum

• Since inception: 14.9% per annum

Risk measures

The portfolio has an Alpha of 17.47% and a Beta of 1.19.

Alpha is a measure of portfolio outperformance and beta is a measure of risk.

If beta is above 1, the portfolio moves up (or down) more than the index. If beta is below 1, the portfolio moves less than the index. The ROA Watchlist moves up and down more than the index does.

My favourite holiday drink

Hope you have wonderful holidays.

Give my favourite drink a try. It is freshly squeezed carrot juice 🥕🥕, served in a glass with two ice cubes 🧊🧊. Two is enough to keep it cool but not enough to dilute the carroty goodness. And let’s be honest, this is an any-time-of-year drink, not just for the holidays.

Be safe. Don’t check stock prices. But do email me if you find an Extraordinary company.

Catch you in 2025.

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