Monthly Portfolio Update #12 (Dec 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.
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 36% and 34% respectively.
Portfolio composition: the stock portfolio is entirely invested (99%), while the ETF portfolio has sizeable cash available (23%). I currently own 26 stocks and 11 ETFs.
Activity: it was an active month for the stock portfolio as I made 6 new buys and 5 sales, while I made no new transactions on the ETF portfolio.
This Month’s Takeaways:
The Macro Portfolio remained unchanged this month as I rode the post-election rally, with performance lifted by the crypto rally. I’m contemplating taking profits in both crypto and equities, but I’ve decided to hold off until January when I will make changes to the portfolio structure. Notably, it will allow me to use the cash to expand the portfolio into sector-themed ETFs—more details to come next month!
In the stock portfolio, I took the opportunity to rebalance and initiated six new positions, adding to the five additions from the previous month. The activity level has weighed on performance, as early breakouts often experience some softness and retests of the breakout zone. For example, I added $SNPS last week, which is now down 10%. These positions can take time to play out, and proper risk management—like appropriate position sizing in my case—is critical and will allow you to stay patient while it works out.
A clear framework, discipline, and sound risk management will pay off eventually, and sometimes, results come faster than expected. Take $LULU, which surged 22% just a week after being added.
Note: it is the final article in the current format. Starting next month, each portfolio will have its own dedicated post, which will still be published monthly. The change will allow me to include my momentum analysis, similar to what I share in the weekly trading updates on Mondays, but with a more long-term perspective.
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:
Growth: I target companies exhibiting over 10% Earnings Per Share (EPS) growth and more than 5% revenue growth
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.
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 +36%. In the last month, the portfolio has returned 0%.
My Current Holdings
Here's an overview of my current stock portfolio: 99% is actively invested, with the remaining 1% kept in cash. The portfolio has 26 positions, and the best performers are BKNG (+84%), NFLX (+120%), and GOOG (+49%).
Keep reading with a 7-day free trial
Subscribe to My Weekly Stock to keep reading this post and get 7 days of free access to the full post archives.