WSGY – Jan 2021

Building a portfolio is exciting stuff.

So many questions to answer. What is my investment style? How big should the portfolio be? Do I buy & hold or do I churn and earn? What is GARP anyway?

I think I will start off with a couple of core holdings. I want those core holdings to be well-established, stable, expertly managed companies. I want them to be profitable businesses that are operating in a long-term growth sector. I want them to be companies that are mature in the way they handle political and social pressures. In short, I want them to be the companies that I would love to work in. Once I have these core holdings in place I will look to build the portfolio around it.

There aren’t too many stalwarts in that league. There are some obviously exciting ones – such as TSLA and GOOG, but they are already too richly valued, in my opinion. And then there are some 800-pound gorillas like AAPL and AMZN that could very well fit the bill, but seems too obvious as a choice. Need to be a ‘left-of-field’ play that would be ‘oh-so-obvious’ as the years roll along. What could it be?

There were 6 that made my list of probables. The first 4 include Costco (COST), Comcast (CMCSA), Disney (DIS), and gasp..AAPL! Whats my logic? They seem to be companies that all seem to be doing pretty well, based on what I see happening around me. And the next 2 are companies that appear to be well positioned to not just ride-out, but cash-in on the Covid-19 health crisis – Pfizer (PFE) and Paypal (PYPL).

An examination of the fundamental metrics reveals PYPL to be the dearest with a forward P/E of 51, while PFE and CMCSA being the the other end of the spectrum at a forward P/E of 11 and 13 respectively, and sport a tidy dividend yield as well. This helps me narrow it down to a two-horse race – CMCSA and PFE.

Now let’s see how they compare with each other on fundamentals.

Financial StrengthPFECMCSA
P/E (TTM)2223
Debt/Equity Ratio0.61.21
Quick Ratio1.00.9
Management EffectivenessPFECMCSA
Gross Profit Margin71%55%
Operating Margin21%17%
Net Profit Margin16%10%
Data as on Jan 23, 2021

PFE clearly beats CMCSA in the first matchup – on Financial Strength. Ideally I would prefer a Debt/Equity ratio of below 0.5, but 0.6 is not too shabby.

They are pretty much evenly matched in round 2 – Management Effectiveness.

Round 3 – Profitability is again better with PFE than CMCSA.

Result: PFE beats CMCSA 2-0.

Action: Make the first investment of this portfolio by placing a BUY order for PFE.

Ticker# of SharesValue at Purchase
Portfolio as of Jan 31 2021

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