Let me begin by showing the following chart,

Buffet indicator, otherwise the ratio of US total stock market valuation to US GDP, has officially crossed the peak value reached during the dot-com bubble, not withstanding the correction in the stock price of growth oriented stocks in the past week. The rapid rise in the 10 year treasury bond since the beginning of the year may very be an indicator for more turmoil in the high growth stocks. And when markets turn around in rapid succession, all correlations tend to go to 1 and no asset type will be spared.  As far as AVI portfolio is concerned, I am pivoting towards a more defensive stance and gradually moving assets out of markets and/or into hard assets.

The chart below provides a break down of various asset class in AVI portfolio.

Here are some observations:

• US stocks is by far the dominant asset class in AVI portfolio. Speak of home bias! Measured in terms of CAPE ratio, US markets today seem dear (at 33.44 as of 12/31/2020). Amongst developed nations, UK seems to be the cheapest (at 13.66 as of 12/31/2020). Amongst the 25 largest economies, the most expensive stock market can be found in the US, Japan and India. The most undervalued are Poland, Russia and Turkey.
• Value represents the largest concentration bucket for investments in the US markets by asset type. Growth stock exposure in AVI portfolio is primarily through passive index investing in the retirement portfolio and a rather large equity position in Facebook. Berkshire forms majority of investments in the Core class of stock investments in the US markets.
• 2/3rds of international equity exposure is concentrated in the developed markets (ex-US), with British American Tobacco (ticker:BTI) forming the bulk of those investments. Exposure to emerging markets is primary through passive index investing (VWO, SCHE and IEMG).
• Gold (through investment in gold trust ETF, IAU) and gold mining stocks (GOLD and KI) forms majority of the exposure in the alternatives asset class. Real estate exposure is primarily through index investing in REITs (XLRE, FREL and VNQ)

The chart below shows the distribution of equity investments (at market price as of 02/27/2021) in AVI portfolio.

• By far, FB leads the pack at 11.75 % of AVI investment portfolio, followed by BRK-B at 6.79 % and WFC at 3.58 %.
• The new entrants in the portfolio since my last update are, Ichan Enterprises LP (ticker: IEP), Enterprise Product Partners (ticker: EPD), Markel Corporation (ticker: MKL) and Merck & Co. Inc (ticker: MRK).
• The annual dividend income from these investments amount to $22,800. My target for year end is to increase this number to atleast $50,000 and hence forth, the total dividend income is one number that I will track regularly. Given the fact that my top two holdings do not pay any dividends, I feel quite confident in my ability to raise the passive dividend income from my equity investments to $50,000 per year.
• Whats not shown above is divestitures from my portfolio. I trimmed my positions in AAPL, PVAC and DISCA. I am almost completely out of EAF and GS. Finally, I have exited my position in TWTR.

The table below is the summary of my realized gains (loss) for these positions

And the chart below shows my unrealized gains (loss) in my current holdings. PVAC holdings have grown upwards of 5X (not shown in the figure)

Unfortunately for me, the biggest unrealized gains for me are now in holdings where I have trimmed my position significantly. The chart below presents unrealized gains in absolute dollar terms

• All I can say is position sizing matters! 5X gains sound impressive but if the position is small, the gains will not have any meaningful impact on portfolio.
• Another point worth noting is how badly in general my portfolio has performed relative to the gains in overall markets. I am sitting on 6 equity positions with unrealized losses, even after witnessing bull of a market hovering in the bubble territory!
• On a positive note though, in absolute dollar terms, my gains are maximum in positions of my highest conviction bet, FB and BRK.B

Video/Book/Article/Audio for last several weeks

Given the fact that my cadence for articles has dropped quite a bit and the fact that I am finding it difficult to keep up with weekly posts, my repository of must watch/listen/read video/audio/articles(books) has grown significantly. Rather than listing all the material, I will highlight a few that are (in my opinion) must for avid market followers..

• Video: Excellent Mohnish Pabrai presentation at Peking University, where he espouses the concept of spawner companies, in particular the apex spawner firms such as Amazon and Google. He shares some insights into how to identify these spawners early enough.
• Video: Charlie Munger Daily Journal Investor Day, yet another event that I look forward to every year. One comment in particular by Charlie Munger in particular echoed particularly well with me, “The first rule of a happy life is low expectations. If you have expectations that are too high you will have a miserable life. When you have reverses you need to just cope and not stew yourself into unnecessary misery“
• Article: Warren Buffet Investor letter -2020: A must read for all investors
• Article: Semper Augustus annual letter 2020. Settle down with a cup of hot coffee, its a 114 page letter and worth a read all way through!
• Article: Investment Master class article on Nicholas Sleep.. Beauty in inaction!
• Video: Netflix documentary on Pele!