2024 Q1 Portfolio Update
The S&P 500 Index was up 10% during the first quarter. A fantastic start to the year, on the heels of a great end to last year.
The 15 largest positions in the portfolio are as follows.
Exits — Vail, Berkshire
Vail and Berkshire drop out of the top 15 largest positions. Vail is up a small 4% thus far year-to-date. On the other hand, Berkshire is up a more than respectable 17% this year. Yet, it’s the relatively underperformance that bumps even Berkshire, let alone Vail, out of the top 15 holdings by current market value.
This speaks to the moment we are in when a greater than 15% gain in 3-months is significant underperformance.
New entrants — Airbnb, Disney
Disney is a re-entrant, while Airbnb is completely new to the top holdings list. Both enter on the back on great price action over the past few quarters, not due to new buys this quarter.
Back to '“the moment” we are in. In the 2023 year end wrap post, I mention that the recent market bottom was October 27, 2023. Since then broader indices are up big.
Really big. Around 30% in 5 months is nothing short of a furious rally. That’s the moment.
This has lead to, for the first time in more than two years, the trimming of some positions this quarter.
Here is the full list of companies which I’ve sold any portion of my position this quarter:
All of these positions were initiated 2020 and into 2021. For context, the S&P 500 is up ~60% since the start of 2020.
The list of sales includes several companies (Coinbase, Spotify, Goldman, and JP Morgan) on the top holdings list. I will focus on these as I contemplate the why behind trimming.
Coinbase has gone from being priced at as low as 4x sales to over 13x sales. Currently, it’s priced at over 100% above it’s 200-day moving average. And there are potential regulatory issues still to be resolved.
Similarly, Spotify is trading at more than 40% above it’s 200-day moving average. The company is at an inflection point as they work towards consistent profitability, but is likely to be very richly valued at this price level 12, or maybe even 24+ months out.
I have so much respect for both of these companies. But a great company does not always equate to a great stock. As the valuation changes as does my analysis. At $71/share for Spotify and $55/share for Coinbase, there is a much higher margin of safety than at $250/share and $275/share.
JP Morgan was trading at under 9x earnings and has moved to nearly 13x and nearing it’s historical highs, on average.
Similarly, Goldman Sachs is trading at more than 12x earnings, also above it’s historical average.
JP Morgan and Goldman were very much opportunistic buys when macro economic events created buying opportunities. They were also a way to diversify away from both high growth, “momentum” driven high tech.
In all cases, the current valuations provide a risk-reward scenario, in the medium term (say over the next 1-2 years), that is no longer as attractive as it was. Since October 27th alone, while Coinbase is up 275%, and Spotify 66%, even JP Morgan and Goldman are up 49% and 46%, respectively.
Important to also note; even after the sales, these companies have remained in the top 15 holdings. This is, as of now, trimming winners.