Monthly Portfolio Update #11 (Nov 2024)

Dear subscribers,

Welcome back to My Weekly Stock, where we blend in-depth market analysis with proven momentum-based trading strategies. My mission? Help you navigate the financial markets with unbiased, data-driven insights you can act on.

This mid-week update is about my long-term portfolios, where I will share more about my investing approach, my holdings, and my performance.

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THIS MONTH’S HIGHLIGHTS

My portfolios for long-term investing are based on 3 common principles: entry/exit based on the weekly chart, diversification, and compounding. Here are the key highlights for this month:

• Performance: Since their inception in Q4 2023, the stock and ETF portfolios have returned 37% and 30% respectively.

• Portfolio composition: the stock portfolio is almost entirely invested (97%), while the ETF portfolio has sizeable cash available (23%). I currently own 22 stocks and 11 ETFs.

• Activity: it was an active month as I made 5 new buys and 7 sales.

This Month’s Takeaways:

Last month was intense, with the market navigating a new earnings season, the Fed meeting, and the U.S. presidential election. Both portfolios benefitted significantly from the solid pre- and post-election momentum, closing the month up 5%.

While the rally was strong, I stayed disciplined in my approach, taking profits where it made sense. In the Macro portfolio, I lightened my positions in metals. In the stock portfolio, I reduced exposure in healthcare names, reallocating capital primarily to technology names which offered attractive entry points. Overall, both portfolios benefited from the supportive momentum conditions, and the recent adjustments set them up nicely for the next phase of this bull market.

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LONG-TERM STOCK PORTFOLIO

My Approach

I start the stock selection process by filtering stocks within the US markets through fundamental criteria. This method usually narrows my focus to approximately 30 stocks. To ensure these stocks continually meet my investment criteria and to adapt to evolving market conditions, I update my watchlist every 3 to 6 months. This disciplined approach helps maintain a relevant portfolio.

My investment approach is anchored in 3 fundamental screening criteria:

1. Growth: I target companies exhibiting over 10% Earnings Per Share (EPS) growth and more than 5% revenue growth

2. Margin: I focus on companies with a Return on Invested Capital (ROIC), Operating Margins, and Free Cash Flow (FCF) margins above 10%. These indicators reflect management's efficiency and attractive company's profitability.

3. Balance Sheet: I look for companies with a Debt-to-Equity ratio below 1 and a Current Ratio above 1, which suggests financial health and stability.

The essence of my portfolio strategy is to invest in growing companies with attractive margins and solid financial foundations. These traits closely align with the potential for long-term stock price appreciation.

Identifying such companies is crucial, but the timing of investments is equally important. To this end, I use the Exponential Moving Average (9 and 30) on weekly charts. The process helps me time my entries and exits and ultimately find setups with attractive risk-reward profiles.

I allocate around 5% of my portfolio to each investment, balancing risk management and potential returns. The holding period for these positions can extend from several months to years, assuming they sustain their positive momentum. This approach ensures that each investment has ample time to achieve its full value.

My Performance

I'm confident that my hybrid approach can produce substantial returns over time, and my back-testing has suggested so. Since its inception in November 2023, my portfolio has achieved a cumulative return of +37%. In the last month, the portfolio has returned +5.1%.

My Current Holdings

Here's an overview of my current stock portfolio: 97% is actively invested, with the remaining 3% kept in cash. The portfolio has 22 positions, and the best performers are BKNG (+78%), NFLX (+101%), and GOOG (+45%).