Portfolio Breakdown by Geography

I’m always intrigued by how investors position themselves in providing a measure of protection against market downturns.  Most common is sector diversification where the theory is a downturn in one area of the economy is offset by outperformance – or at least stability – in other areas.  DivHut recently posted his quarterly sector review which – as he indicated – is reasonably aligned with his risk tolerance and goals.  The weakness in this approach is his low exposure to Technology or in my case an overexposure to Financials.  So long as potential weaknesses are identified, this approach does allow a portfolio to be tilted towards sectors which the investor believes will outperform the broader market.

Another approach was presented by Roadmap2Retire last March where the attempt was made to isolate the geographic revenue diversification of the companies he owned.  A daunting effort to be sure, but I’m not sure the data he obtained was complete.  As an example, he reports BCE’s revenue as 100% Canadian.  That is likely as reported in filings.  Not reported is their 37.5% stake in Maple Leaf Sports which owns the Maple Leafs (NHL) and Raptors (NBA).  The NBA pays revenue sharing in US dollars (not Canadian).  Basically any minority stake, investments or joint ventures with other companies are likely to be excluded from any of the companies he owns.  The question becomes – is this revenue identifiable and negligible?

The approach I take is – first sector and secondly the country where the company is headquartered.  Dividends paid are recorded post exchange to US currency which does result in some fluctuation based on the relative strength (or weakness) of the dollar.  The following table illustrates the non-US source for roughly 15% of my dividends.

8.98% Canada
0.53% United Kingdom
0.04% Bahamas
2.44% Australia
0.13% Ireland
0.32% Mexico
0.00% China*
1.29% Hong Kong
0.20% Chile
0.26% Luxembourg
1.47% Singapore

* no dividend paid at this time

The UK dividends are set to increase once a merger involving one of my US companies is complete.  I may be forced to slow foreign purchases as recent political events have resulted in the US dollar weakening and the Yen and Swiss Franc strengthening.  If so, I’m sure I can find a few US companies to put my money into!



2 thoughts on “Portfolio Breakdown by Geography

  1. Thank you very much for the DivHut mention. The bottom line when it comes to sector diversification is ones acceptance of risk with the current portfolio. Sure, I do not hold any tech nor energy in my long term portfolio but that was by design. Those sectors are extremely volatile and I wanted to load up on stocks and sectors that are more stable. That being said, I’m not against tech nor energy as I have owned many companies in those spaces in the past and QCOM was a May consideration for me, a first in the tech space since I went down the DGI route.

    Liked by 1 person

  2. I agree with your approach but differ only where we choose to overweight ourselves. I chose regional banks until the election when they came back in favor. Now I’m leaning more towards foreign issues while improving my sector allocation like my recent Singapore Telecom purchase to beef up my telecom holdings.

    The point I was attempting to make was there are multiple ways to analyze portfolio diversification, from the common (sector) to the more benign (geographic) though I’m not sure (as R2R’s data indicated) that geography is a good one either with multi-nationals in the mix.

    Thanks for the comment!


Comments are closed.