This will be a quick post.
When I started this blog in August 2020, stock prices were breaking new all time highs for what seemed like every other day. IRRs looked low then, particularly for the higher growth companies within my family’s portfolio. Despite the environment, I kept investing, buying both high growth, expensive companies (Peloton, Crowdstrike, Netflix, Tesla etc) and value companies (Alibaba, Facebook).
I was mindful of valuations and kept position sizes small for the higher growth, expensive firms and loaded up more heavily on cheaper companies growing at a reasonable pace.
The macro was something I never considered much because I lacked the knowledge and skill to position a portfolio to handle it well. I was also less concerned since I have a 20 year investment horizon. Market downturns and valuations hits of more than 50% are par for the course in pursuit of the risk premium.
When I started in 2015, I enjoyed a tremendous bull market (with small hiccups) until 2018 when I sold all my positions to fund my home purchase. I have no regrets selling since I needed the cash for a downpayment, renovation and furnishing. When I got back in after March 2020 with funds from myself and my family (I invest on their behalf), valuations were already juiced, but purchase I did anyway.
I frankly and happy that a stock market decline is happening less than 2 years into my family’s investing journey. We intend to keep investing our income for the next 15 years. This means we have only deployed about 15% of our total portfolio cost basis. If this bear market lasts for at least 2 years, we’d be able to dramatically reduce our cost basis and juice IRRs over the next 10 years by steadily investing through this bear market.
What I am buying
I am actively acquiring shares in :
Google
Palantir
Tesla
Amazon
Facebook
I will not be adding to my position in Peloton despite the massive depreciation because of significant execution risk and a shakier balance sheet. A CEO change is enough to convince me to hold for a turnaround. I also managed risk by keeping it to a small position size.
I have trimmed some stocks from the portfolio such as Crowdstrike. Reason for doing this is simple - valuation. It’s a small position that appreciated over 100% before devaluing. Since the profits exceeded 20% IRR over the 1.5 years I held it, I decided to sell it and allocate the funds to Google (trading at sub 15x earnings), prefering to take on less valuation risk there.
I remain convinced about Palantir & Tesla’s long term growth trajectories. One only needs to look at the Palantir’s commercial business growth (over 50%) and Tesla’s (over 50% as well) to be convinced that these firms will be around for sometime.
Palantir is a challenging company to understand. I recommend watching CodeStrap’s youtube channel for information.
Tesla’s valuation is a tough pill to swallow, but if you can believe in the 10m cars / year vision in 2030, the valuation is easily supported. Watch Dave Lee’s channel for reasons why.
Future allocation to the S&P 500 Index
Following individual companies is hard. So far, I have had more misses on valuations and growth projections (Peloton is an example of a story that changed quickly). While I remain bullish on my large picks (Tesla, Alibaba, Facebook, Google, Amazon, Palantir), I intend to round off the portfolio by adding the S&P 500 index as well instead of a basket of smaller positions.
I will be doing this once I complete allocation to the 6 firms above (10% positions each) and will allocate the remaining 40% to the index.
While I remain biased towards inaction, I will seize opportunities to sell out of overvalued positions and allocating to undervalued positions (selling Crowdstrike to buy Google is an example).
As always, note that I am not a licensed financial advisor and everything on this blog post and on this blog is opinion and not advice.
Note : I am not a financial advisor and this is my personal portfolio. Do not blindly follow and do your due diligence. You can lose money by investing in the stock market. All my writing is opinion and NOT advice.