Monthly Portfolio Update #4 (Apr. 2024)
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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. Notably, 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 March 2024:
Performance: Since their inception in October 2023, the stock and ETF portfolios have returned 20%.
Portfolio composition: my stock portfolio is almost entirely invested (91%), while the Macro ETF has a sizeable amount of cash (21%) available to deploy as opportunities arise. I currently own 18 stocks and 10 ETFs.
Activity: I have been deploying more cash in the Macro ETF portfolio as more asset classes have shown positive momentum. I have initiated 2 new positions and made 3 sales.
This Month’s Takeaways:
The macro portfolio has seen a notable uptick from metals and oil, while cryptocurrencies have mostly been consolidating around their all-time highs. Having already secured some profits from crypto last month, I'm comfortable being patient and seeing how things unfold. The most challenging area remains bonds, especially as yields are rising again. I'm considering an exit in the coming week if the weakness persists.
The stock portfolio has performed broadly in line with the overall market this year. As I am almost fully invested, I focus on fine-tuning the portfolio - phasing out underperformers in favor of better new opportunities. I expect the upcoming earnings season to bring us new prospects (and hurdles) and will undoubtedly impact the portfolio composition.
The remainder of the year promises to be captivating as we navigate many uncertainties from financial conditions (inflation, interest rates, and the economic outlook) and geopolitical factors. The key will be to cut through the noise and focus on long-term trends rather than reacting to every news update.
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 +20%. In the last month, the portfolio has grown by 1%.
My Current Holdings
Here's an overview of my current stock portfolio: 91% is actively invested, with the remaining 10% kept in cash. The portfolio has 18 positions, and the best performers are AMAT (+57%), PHM (+56), and NFLX (+51%).
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