Portfolio Mini-Thesis

I’ve taken a break from blogging throughout this bear market and subsequent bull. Not on purpose, I’m just very busy dealing with clients and my girlfriend moving in. I haven’t taken a break from managing my portfolio; in fact I’ve made a lot of changes I want to reflect on. 

The coronavirus pandemic took everyone by surprise. Well, kind of. In late January I had seen disturbing videos on Twitter of deserted streets in Wuhan being sprayed with white foam, and drones flying around telling people to remain inside. I didn’t act on it; I didn’t think that could happen in the US. It was so surreal. 

I chose to hold on to what I had in the portfolio and put cash from my TSLA divestment back to work in other stocks on the way down. Eventually buying back some TSLA too. While I didn’t explicitly predict the unprecedented stimulus as a result of the frozen economy, I have invested assuming there’s a Trump put on this market. He had exactly one accomplishment to hang his hat on, the stock market’s performance.

“How’s your 401k?”

The Government’s coordinated effort to buoy the stock market is not a surprise. Will it prove to be futile? Perhaps it will and I am positioning myself for a rocky road ahead. There are too many people thinking we are heading back to normalcy in nothing flat. That’s not the case, social distancing and shelter in place is our only chance to beat the virus. 

Unemployment is likely to remain high for the remainder of the year. Reflexivity is going to cause severe economic damage. 

I’ve put on a $SPY short to hedge out ~18% of my long exposure. On March 23rd I was ~120% leveraged long. The hedges were put on at SPY 2550, 2600, 2700 & 2800. 

The larger new positions in my portfolio from March are Microsoft & T-Mobile US. Some smaller new positions include Boeing, Starbucks, Twilio & Zendesk. The way I see it, this was an opportunity to buy the ones that got away, the companies I’ve wanted to own but wasn’t willing to pay up for. Apparently I’ve longed for Seattle based companies.

Here are my top 15 positions along with the mini-thesis of why I own them:

  1. Berkshire Hathaway – BRK.B – Exposure to high quality businesses Warren chooses. Heaps of cash on the balance sheet and exposure to industries I don’t understand i.e. insurance and junk foods. 
  2. American Express – AXP – Trades at 7x FCF and 11x Earnings. Amazing global brand. Also provides an inflation hedge. 
  3. Tesla – TSLA – Changing the world with compelling EVs, sleek solar energy and superior battery technology. Will morph into a transportation-as-a-service company over the next 10 years. 
  4. Spotify – SPOT – Cult company and sticky software-as-a-service platform. Huge consumer surplus and structural cost advantage from network effects on artists and consumers. Effectively a record label for many smaller artists. 
  5. Volkswagen – VWAGY – Hated and trading that way. One of the few forward thinking auto incumbents. Will likely make compelling EVs and be in the first 5 to full autonomy.  
  6. Amazon – AMZN – AWS is the internet. And people want things delivered. 
  7. Microsoft – MSFT – More of the internet.
  8. Shell – RDS.A – IF this isn’t out of business in the next decade, they should be able to return a ton of money to shareholders. March 2020 was a point of very significant pessimism. 
  9. Wells Fargo – WFC – Stupid cheap and hated. Can return gobs to shareholders. 
  10. Amgen – AMGN – Proven team of executives with mad capital allocation skills. Long term compounder. 
  11. Teradyne – TER – Robotics changing the world. Practical application of machine learning and automation. 
  12. Alphabet – GOOG – The remainder of the internet. Reasonably valued given the suite of high quality, high margin, and defensible businesses. 
  13. BMW – BMWYY – Compelling everlasting auto brand trading as if it were about to go out of business. 
  14. BASF – BASFY – Dirt cheap. Leveraged exposure to commodities globally. 
  15. T-Mobile US – TMUS – Another team of proven executives with a superior approach to telecom in the US. Burgeoning enterprise business and successful takeover of Sprint.  

I see more short term upside as an opportunity to sell. I would sell hard at S&P 2850 to about 25% hedged.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s