2024 Q2 Portfolio Update
To start the year I reflected on the reality of how investing fits into my life:
This is not a family office, and at the end of the day, I mainly dollar cost average into index funds via a 401k retirement vehicle, IRAs, and an individual brokerage account. Overall, my actions reflect this reality. But that doesn’t mean I can’t enjoy sometimes acting like I am running my own family office.
From Matt Levine earlier this month:
The most and least prestigious job in finance is “I manage my family’s investments.” One thing that it can mean is that you had a long (or, better, short) and lucrative career as a professional investor, in which you learned all the skills you need to pick investments that go up, and also made so much money that you don’t need to work at a job anymore. Instead, you took the money you earned at your job, used it to buy more investments that went up, got even wealthier, and now fund your lifestyle by picking investments for an hour a week and otherwise play golf and sail boats.
Another thing it can mean is that you are just regular unemployed, but you’ve got $200 in a Robinhood account, and you use that to YOLO GameStop options.
If you are in the latter category, though, and when people ask you what you do you say “I manage my family’s investment portfolio,” you will probably get into a few more parties than if you said “I’m unemployed so I mess around on Robinhood all day.”
A long, hard look in the mirror tells me I am somewhere in between these two extremes.1
At the end of March, I started trimming some individual stock holdings for the first time in multiple years. As of the Q1 update, I trimmed or closed out 8 positions. Since then I have continued to sell at the same pace, with 8 additional instances during Q2. The full list is in the table below.
As I mentioned in the the Q1 installment, all of these investments were initiated in the last ~3-4 years. For a point of reference, the S&P 500 appreciated around 60% since the start of 2020 through Q1 2024. That’s the simple hurdle of whether or not these were productive positions — 11 of the 16 returned more than that 60%.
Of course, over a 16 investment sample, there are going to be times you nail the short-term top (e.g., Workday, CVS) and times where you don’t (e.g., Walmart, Spotify).
Beyond the 11 investments that beat the S&P 500 over this period; many have beat it handily, with 9 of these investments beating the index by ~100%+.
Several of the sales have been of top holdings (defined as the top 15 individual companies by current market value). When I have trimmed top holdings (i.e., Coinbase, Spotify, Microsoft, JP Morgan, and Goldman Sachs), it has been small. So much so that all of these companies are still in the top holdings.2
Overall, the market has marched upward in Q2 after initially selling off ~5% to start the quarter, ultimately ending the quarter up 4%.
Looking ahead, once again it’s inflation and interest rates that are on my mind. I continue to be more hawkish than the average pundit; more inline with some of the pundits I tend to listen to more closely.
It does seem some negativity is starting to ripple through the market. For example, this is evident in the average expected inflation popping to over 5%, while the median holds steady at 3%.
If you believe inflation is not yet dead and buried, then interest rates are not going to meaningfully decrease, so it does not feel like the market, overall, is inexpensive.
Morningstar’s price to fair value research is a great representation of my short-term sentiment on the price of the market. In particular, the chart below starts nearly exactly when I started investing around 2010.
Sticking to recent history — I recall it was extremely exciting buying individual companies in 2020. It was a fool’s errand for much of 2021, while 2022 brought new exciting opportunities if you still had cash to deploy. Most recently, 2023 into 2024 have been a march straight up back to a point in which it feels like there are less exciting opportunities.
This has lead me to increase my hedge (i.e., short position, long volatility) in Q2 based on valuation and macro economic outlook.
On that happy note, wishing you a great Independence Day and exciting opportunities in Q3.
I mean I don’t even have a Robinhood account. But, conversely I don’t sail.
The top holdings are the same 15 companies as last quarter.