Portfolio Update 9/19/18

Return Since Inception, 12/31/14: 59.21%

Vanguard S&P 500 ETF Div Adj Return Since 12/31/14: 52.38%

Return YTD: 6.12%

Vanguard S&P 500 ETF Div Adj Return YTD: 10.11%

It was been a wonderful couple of years balancing my love for value investing with world changing technology. The style split works out to be about 50/50 of my portfolio. 50% companies that are undervalued based on current prices, and 50% companies with disruptive technologies in industries I understand. The strategy matches my personality; I’m an aggressively optimistic contrarian.

This year has been tough, however, as I’ve become more concentrated in one position, Tesla. Recently, I decided to add to my original position at prices ranging from 254.2-290.1. Yesterday news broke that Tesla is under criminal investigation for the tweets Elon Musk sent last month regarding taking Tesla private. I’m highly confident nothing will come from it, as the Saudi Fund for Development had interest in buying Tesla throughout the years. Given the Saudi’s partial ownership of Tesla, they have too much skin in the game to leave the company high and dry.

Tesla is going to be a trillion dollar company, as long as Elon Musk keeps quiet. In fact, it will probably be one of the first six companies to a trillion dollar valuation. Besides creating compelling products that attract fans akin to Apple fanboys in the early days of the iPhone, they are doing two things that will cement their position as the largest transportation company in the world: Autonomous manufacturing and driverless technology.

Tesla’s focus on becoming the greatest manufacturing company will generate margins that will propel them as they enter new product categories. Their manufacturing line requires fewer steps than a traditional car lines, with far more robots on assembly.

Tesla’s driverless technology is years ahead of their competition’s, namely Waymo’s. Tesla’s enormous trove of data it collects from each car, every mile driven, in accordance with their neural networks gives them a multiyear head start in this consequential technology. They are going to drastically disrupt public transportation, i.e. Uber/Lyft, as well as private transportation and freight. These are major industries globally.

In addition to building a large position in Tesla, I’ve also built a larger position in international equities, especially emerging markets. Emerging market equities have never been this inexpensive relative to US equities. That’s the extent of the thesis; the anticipated return based on valuation is far greater than what can be expected in the US in the coming decade.

Here are the gainers I’ve realized so far in 2018:

I sold Salesforce at 122.93 after a 47.11% gain

I sold Under Armour at 20.80 after a 58.78% gain.

I sold Zendesk at 61.45 after a 96.4% gain.

I sold Twitter at 35.10 after a 113.37% gain.

I sold 50% of my Amazon position at 2014.77 after a 114.32% gain.

Here are the major losses I’ve realized so far in 2018:

I sold BBVA at 6.21 after a 20.4% loss

I sold Colony NorthStar CLNS (now CLNY) at 8.35 after a 40.0% loss.

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