Portfolio Mini-Thesis 2/13/2021

As of February 13th, 2021 (Representing 60% of my long exposure)

Here are my top 20 stock positions along with the mini-thesis of why I own them:

  1. Facebook (FB) – Facebook is a near indispensable online public utility. It’s the backbone of our online presence, even if we don’t login as often as we used to. It’s the defining platform for online targeted advertising globally. Facebook’s ancillary properties are most exciting and I doubt anyone beats them in VR. Oculus has the potential to provide a huge right tail outcome. Facebook has a lower forward price to earnings ratio than the S&P 500. They still have under-monetized assets and EPS growth well over 15%. 
  1. Spotify (SPOT) – Spotify is a cult product and sticky SaaS. They have an enormous consumer surplus and structural cost advantage from network effects on artists. Spotify is effectively a record label for many artists. They have a gifted management team and aspirations of dominating audio streaming, for which demand will remain strong for a very long time. They’ve had great content acquisitions. At 6 times current revenue, and revenue growth consistently north of 30%, it’s still reasonably valued. 
  1. Berkshire Hathaway (BRK.B) – Berkshire gives me exposure to high quality businesses chosen by the greatest industrialist of all time, Warren Buffett. They have heaps of cash on the balance sheet and exposure to industries that I generally don’t explore i.e. insurance, banking, and processed foods. Todd Wescler and Ted Combs appear to be great capital allocators and they need to be with all that capital. 
  1. Microsoft (MSFT) – Microsoft is a toll booth for productivity. They have an exceptionally competent management team with the right focuses. I don’t know anything the market doesn’t know about Microsoft but I reckon it’s the most reasonably valued and well positioned of the mega-cap technology companies. 
  1. Alphabet (GOOG) – Alphabet is reasonably valued given their suite of high quality, high margin, and defensible businesses. They are the backbone of many of our virtual experiences, whether it be search, maps, email, video streaming, or even this Google Doc. These are under-monetized properties with nothing but runway to grow.  
  1. Volkswagen (VWAGY) – Volkswagen is disliked and valued that way. I think all autos besides Tesla are fairly compelling, and that’s probably because of Tesla. Volkswagen is one of the few forward thinking auto incumbents focused on electrification and autonomy. Volkswagen can unlock loads of value by spinning off businesses. Look at what happened when Fiat spun off Ferrari. Bugatti, Lamborghini and Porsche, a small portion of Volkswagen’s total portfolio, alone, would be worth the entire $100B market cap. 
  1. Electronic Arts (EA) – EA, it’s in the game. EA is a leading content creator in the ever-growing Esports industry. Their portfolio of games include Battlefield, FIFA, The Sims, Apex Legends, Need for Speed, Madden NFL, and Star Wars. Given the recurring nature of their revenues, and consistent revenue growth, it’s silly that it’s trading at 24 times next year’s earnings. 
  1. PNC Financial (PNC) – PNC sold their investment in Blackrock and bought BBVA’s US banking division. They have a smart management with cash to grow the bank while their competition shrinks. I think most large banks are compelling investments right now and PNC has the most potential upside. 
  1. Teradyne (TER) – Teradyne makes semiconductor testing equipment and industrial manufacturing robots. They have tremendous management, enormous growth, and nothing but runway. At 26x forward earnings, it’s the definition of a growth stock at a value price. 
  1. Activision Blizzard (ATVI) – Activision is another top content creator in the lucrative Esports industry. Their portfolio of games includes Call of Duty, World of Warcraft, Diablo, Hearthstone and Overwatch. Like EA, the forward price to earnings ratio is in the low 20s.
  1. Royal Dutch Shell (RDS.A) – This is a point of very significant pessimism in the traditional energy space. Shell is investing aggressively into alternative and renewable energy. I bet Shell transitions to renewable energy most elegantly out of the oil majors. In the meantime, I believe the price of oil will recover as the economy opens up. 
  1. BMW (BMWYY) – BMW is a portfolio of fabled auto brands valued as if they might not survive. At 13 times current earnings and focused on the right things, electrification and autonomy, this is a bet I’ll make all day. 
  1. BASF (BASFY) – BASF is dirt cheap. They provide leveraged exposure to commodities globally, have economies of scale, and significant IP. The commodity cycle is ripe for investment and BASF is a compelling way to play it. 
  1. Amgen (AMGN) – Amgen is a perennial compounder. I don’t see that changing with their focus on oncology and mad capital allocation skills. For whatever reason, the large biotechnology companies are trading at very reasonable valuations these days. 
  1. American Express (AXP) – American Express trades too cheaply for a highly profitable and globally revered brand. They generate consistent cash flows and protect against inflation in my portfolio. I’m afraid their business will eventually face secular headwinds so I’ve been paring back the position size. 
  1. Lockheed Martin – (LMT) – Lockheed Martin is a technological behemoth that compounds at rates far surpassing most companies’ wildest dreams. The market is euphoric on space exploration, but seems to have forgotten Lockheed’s role in advancing space technology. I’m no fan of war, but I’m also realistic so I doubt the U.S. will ever see a reduction in defense spending. At 13 times this year’s earnings and 12 times next year’s earnings, here’s another growth stock at a value price.
  1.  Tencent (TCEHY) – Tencent is the Chinese government’s ordained multimedia giant; talk about a moat. Between Wechat, League of Legends, Fortnite, hosting Call of Duty Online, and Mobile, Valorant, Sharkmob, iTQQ, Tencent Music, and PaiPai.com, Tencent is an extensive and indispensable portfolio of entertainment, e-commerce, and media assets. 
  1. Gilead (GILD) – Once a victim of their own success effectively curing hepatitis C, Gilead may have finally turned the corner. After years of declining revenue, their robust pipeline, thoughtful acquisitions, and wise capital allocation have got them back on track. If this isn’t a trough, then it’s fairly valued, but if this is a trough, look out. 
  1. Helios Fairfax Partners (FFXXF) – Helios Fairfax Partners is a holding company whose investment objective is to achieve long-term capital appreciation investing in Africa. Their holdings were recently written down while their boots-on-the-ground approach will likely lead to tremendous gains for decades to come. One could argue that the African continent somewhat resembles China’s economy 30 years ago. 
  1. Amazon (AMZN) – Amazon and AWS are dominant. People want high quality things delivered to their home quickly, and that’s not going away. Neither is technology that supports online business. It’s not the most attractive value, but it’s growth is unbelievably fast and consistent. 

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