On January 13, 2016, the U.S. Securities and Exchange Commission approved Christmas Corporation as a Registered Investment Adviser (RIA), pursuant to Section 203 of Investment Advisers Act of 1940. With this registration, we are now managing clients assets using Separately Managed Accounts (SMA) structure and a private investment partnership. This registration also made us possible to manage mutual funds, Exchange-Traded Funds (ETF), and other types of investment company in the future.
Since the beginning of January 2016 to December 31, 2020 (60 months) we recorded a 250% cumulative return, gross of management fees, compared with 103% of S&P500. This significant outperformance has strengthened our company’s mission to deliver results to clients and beat the market.
What Christmas Corp is All About?
Eduardus Christmas as our Chairman has pledged his name to the company, but the company means way bigger than Eduardus himself.
Christmas Corp is about fresh ideas of stock-picking, that we shall never surrender neither to the status quo of investing nor to the market crowds. It’s about a strong teamwork from finance, operating, to IT division. Above all, it’s about A CULTURE TO SERVE our clients, to the best of our knowledge and ability. We are happy when our clients are happy and put their trust on us.
We believe upon death or mental disability of our Chairman, this company shall prevail over the next hundreds of years, bearing the same name and spirit as of today.
Lessons from Our Favorite Stocks
Some of our clients were expecting well-known or giant companies such as Apple, Amazon, Tesla, Netflix or Facebook as our top holdings. We choose a different path instead and always hunt for better alternatives (Yes we also own Apple stock, but not as a major holding).
One of the most philosophical thing in our investment strategy is: we only buy company that we are proud of owning it. This manner shows that we are long-term investors with strong due diligence process prior to buying a stock. The word “proud” seems to be a non-scientific and feeling-driven term in a fund management world, where meticulous numbers and matrices are regularly used to make a decision. But in our team, proud to own a company only comes from knowing the business that what we are buying based on our in-depth research on its financial performance. Investing is NOT a business of “feeling”. It requires intuition and certain degree of mathematical approach.
Ferrari NV (RACE). Our first buy call for this stock was in February 2016 at $32 per share. At that moment, the P/E ratio for RACE was 20x, way above the automotive industry multiple at 5-8x. What we learned is that Ferrari is NOT an automotive company but an ultra-luxury goods producer instead. Hence, it should be valued in comparison with Hermes International. By the end of 2020, the prancing horse was valued at $229 per share and still held in clients portfolio as top holding.
The Trade Desk Inc (TTD). The advertisement technology company went public in September 2016. As an experiment, we bought this at $30 per share by end of 2016. It was only since 2018 that we were really interested to buy and then loaded our portfolio with this stock at $80-200 price range, becoming a top holding side-by-side with RACE.
TTD is a rare software company with high growth in revenues but very profitable on its stage of growth. TTD goes beyond demand-side platform for advertisers by utilizing artificial intelligence and targeting new growing markets such as connected TV and mobile. By the end of 2020, TTD was closed at $801 per share, recording almost 27-fold (2600% return) on our first buy call price. We have reduced position in TTD several times, but the gigantic return made it still in our top holdings.
Hermes International SA (RMS.PA). Famous for its Birkin and Kelly bag, we were interested to start collecting the stocks by 2017. This is a type of stock that may survive in macroeconomic downturn, because of its high net worth consumer segment.
Often times, it is a simple way to tell our prospective clients about what investing is all about: Investing is to hold back your desire of buying a Louis Vuitton bag and investing your money in stocks instead, so that you can buy a Birkin bag in the future.
Edwards Lifesciences (EW) and Intuitive Surgical Inc (ISRG). The two medical technology companies have one similar characteristics: market leader.
EW is specializing in artificial heart valves and hemodynamic monitoring with more than 50% market share in transcatheter heart valve producer. Meanwhile ISRG is the pioneer of robotic surgical. We love innovative companies!
Once a Fraud, Always a Clown
A case from Wirecard AG (WDI.DE), a German fintech company. We bought the stock in 2017 at EUR 45 and enjoyed big gain by 2018 when it reached almost EUR 200.
At the beginning of 2019, we read about “small” fraud (
read here) of the company and we let it go entirely from portfolio at EUR 100 per share. A decision we shall never regret, because a year later it turned out that the company had a much bigger fraud (
read here). As revealed by KPMG, Wirecard's long time auditor EY failed to verify the existence of cash reserves in what appeared to be fraudulent bank statements. Stock price plummeted rapidly. Now? It is traded below 1 Euro!
We shall never tolerate frauds. And it holds true in investment, because investing involves a certain degree of trust. Whenever that trust is broken, we never hesitate to sell entirely as soon as possible.
Lessons from 2018 and Covid-19: The Alpha
In 2018, S&P 500 experienced a negative return of about 5%, but our portfolio gained 1.4%. By March 2020 when panic on Covid-19 happened across the global financial market, we experienced a smaller loss than market.
A fund manager that beat the market only in times of bullish period proves nothing. We have proven that we can produce a better result when the market drop. It is called “alpha”. Often mislead as “outperformance”, alpha shows manager’s skill in picking securities. (We will release an article about this later).
We ended 2020 with more than 50% of investment return, leaving S&P 500 in the dust at 18% return. Our stock picking strategy does matter!
It wasn’t luck either that stock market rebounded fast in 2020, as our Chairman wrote an article (
read here) during the midst of Covid crash in March. It is written in the article that the U.S. market was (at that time) at its cheapest valuation in history since World War 2. We present one of the charts here:
Covid crash in March showed us that old lesson from Warren Buffett still holds true: “be greed when the others are fear”.
Market Review and Outlook
It was a blitzkrieg. We have seen the fastest market recovery from bear market territory in history. The S&P 500 and Nasdaq were at new highs with 10% unemployment. Economic data is backward-looking, and we really don’t understand why many money managers focus too much on navigating economic data. Don’t lose the forest for the trees.
The big theme in 2021 will be mobility normalization driven by fiscal stimulus and vaccine advancements. We will also face the discussion about inflation (or disinflation) later in late 2021. For now, we shall enjoy the high cash position based on money market fund assets, which are still $700 billion above pre-pandemic levels. In contrast, individual investors are more aggressive. AAII Sentiment Survey shows 46% bullishness versus 38% average. It is conflicting. The sure thing is the market will be less straight forward compared to the last six months.
Another big discussion in 2021 is about value vs. growth. We see it as remarkable as we closed 2020 with value stocks momentum subsiding. There will be value rally ahead, but they won’t be a long-term trend. We believe monetary policy will be a dominant force vs. fiscal policy because it is the easier way to do it. Let’s face it, in a polarization world, expecting a coherent fiscal policy is unavailing. When monetary policy is dominant, growth stocks have the upper hand. But we don’t care. After all, value and growth are inseparable and investing means acquiring more than you are paying for.
One more thing to say about 2021 is the Environmental, Social, and Governance theme. This is a big trend in the past few years, and it is getting bigger. Investment in ESG-oriented funds topped $1 trillion in 2020 for the first time. It is a good thing to hear, and we love the willingness to take real action towards a better world. For us, ESG is more than just scoring, metrics, or a set of criteria. It is about finding companies that have a positive impact on humanity.
What's Next at Christmas Corp?
We are improving procedures of our idea generation and analytical system (hint: a machine learning probably?).
Business as usual: stock picking and portfolio management. We are always hunting for the next big stories. Most investors may find interest in theme such as electric vehicle (EV), but again we are not bound to the crowd. If the crowd picks EV, we may pick genetic diagnostics (Genomics) as our theme. We always find it challenging to find our own ideas and prove it right!
We are allocating resources to develop technology in order to manage our clients better. In 2020, we just revamped our website with much better design and functionality. We are now finishing client portal so that it will become easy for everybody to onboard and register as our client and to monitor their investment progress at anytime, just by utilizing our website (and maybe mobile apps in the future).
A 5-year old company in investment world is just like a newborn baby. We shall nurture this company, grow it fast and keep the quality of our analysis intact, so that our company can be a blessing to all clients that we serve.
*Should you want to learn more about how to become our client, please explore our
website or read the
FAQ here.
