Stock Investing Portfolio - Monthly Update (Feb 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 lost 2.8% last month, bringing the cumulative return to 30% since its inception in November 2023.

• Top Performers: The portfolio's best-performing stocks are Netflix ($NFLX), up 135%, and $BKNG (Booking Holdings), up 79%.

• Recent Transactions: I closed 3 positions in the past month.

• Current Allocation: The portfolio is 89% allocated across 22 positions, including 26% in Technology sector, 20% in Consumer Cyclicals, 14% in Healthcare, and 10% in Communication Services. Last month, I reduced my exposure in Technology.

My Take:

Last month was a challenging one for the portfolio as the market continued to chop around without a clear direction. I remained inactive until this week when I reduced my exposure by selling underperforming positions that failed to bounce following the earnings season.

I've been patient with some underperforming positions, but I am ready to make more adjustments to the portfolio. Either the market finally resolves to the upside after this three-month range, in which case I want to invest in the leaders of the next phase of the bull market. Or this consolidation morphs into a deeper pullback, and I don't want to be stuck into losing positions. Both cases suggest it is not a bad idea to raise cash in the coming month.

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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 +30%. Over the past month, the portfolio decreased by 2.8%.

3. Portfolio Composition

The Stock Investing Portfolio is currently 89% actively invested across 22 positions, with the top performers being $NFLX (+135%) and $BKNG (+79%).