Stock Investing Portfolio - Monthly Update (Jan 2025 Edition)

Dear readers,

Welcome back to My Weekly Stock, where in-depth market analysis meets proven momentum-based trading strategies. My mission? To help you win in the markets with unbiased, data-driven insights you can act on.

Over the years, I've developed a proprietary momentum-based approach, enabling me to ride strong trends confidently. Every week, I dedicate hours to researching, analyzing, and curating data—I do all the hard work so you don't have to.

This mid-week update is about my Stock Investing Portfolio! In this post, I’ll cover my long-term investing strategies, including portfolio performance, recent adjustments, and my outlook for the months ahead. Stay tuned to learn how I connect strategy to insights, and ultimately portfolio decisions.

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SUMMARY

This month's update at a glance:

• Performance: The Stock Investing portfolio returned +1% last month, bringing the cumulative return to 33% since its inception in November 2023.

• Top Performers: The portfolio's best-performing stocks are Netflix ($NFLX), up 134%, and $ISRG (Intuitive Surgical), up 75%.

• Recent Transactions: Initiated 1 new position, and closed 2 positions in the past month.

• Current Allocation: The portfolio is 99% allocated across 25 positions, including 33% in Technology sector, 20% in Consumer Cyclicals, 14% in Healthcare, and 10% in Communication Services. Last month, I reduced my exposure in healthcare.

My Take:

In Q4, I deployed a lot more cash and made several new additions to the portfolio. Unfortunately, the timing wasn’t ideal, as the market slowed down in December. However, I remained patient since my macro view remains bullish, and I continue to see us in a strong long-term uptrend.

As a result, the past month has been quieter, and I expect this to continue as I navigate earnings season. My focus is on seeing whether some of the underperforming names in the portfolio can finally gain traction. The start of the year has been encouraging in that regard. Long-term portfolios can unlock significant value but require patience and discipline to manage through inevitable pullbacks.

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1. APPROACH

This Stock Investing Portfolio is a mid-to-long-term strategy, but it's not a "buy and hold forever" approach. On average, holdings will last 12 months, but positions may be shorter or longer depending on market conditions. I actively manage the portfolio and am willing to sit in cash during periods of weak momentum.

Every successful investing approach has three key ingredients:

1. A process to screen stocks and build a watchlist.

2. A set of rules for entering and exiting positions.

3. A system to manage risk.

Watchlist

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 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.

Entry and Exit Rules

My approach is to buy on strength. Signals are derived from weekly charts, focusing on a crossover between the 9-week and 30-week Exponential Moving Averages (EMAs) to identify trend reversals. Rather than chasing exact highs or lows—often more luck than skill—I wait for confirmed signals of a trend reversal to capture significant portions of the move.

Risk Management

Risk is managed primarily through active position management. I never add to losing positions. I actively manage positions during uptrends, trimming after substantial gains to lock in profits. Remaining positions are allowed to run until the trend shows signs of exhaustion.

These principles serve as guidelines, but I adapt my approach based on the unique characteristics of each stock, chart setup, and prevailing market conditions.

2. Performance

While my back-testing and research have shown promising results, I prioritize full transparency by reporting performance only from the portfolio’s initiation on Savvy Trader in November 2023. Since then, the Stock Investing Portfolio has achieved a cumulative return of +33%. Over the past month, the portfolio decreased by 1.2%.

3. Portfolio Composition

The Stock Investing Portfolio is currently 99% actively invested across 25 positions, with the top performers being $NFLX (+134%) and $ISRG (+75%).