I intend to continue posting detailed portfolio updates on a quarterly basis. For more frequent updates on the portfolio composition, I post regularly on X (formerly Twitter). The posts there can be seen by following @gauchorico.
PRIOR PORTFOLIO UPDATES
PORTFOLIO PERFORMANCE
Since the last portfolio update on 8Mar 2024, the portfolio has risen significantly (through the end of May 2024). During that time the S&P 500 total return (including dividends) index lagged further behind the portfolio as shown in the table below.
| DATE | GauchoRico Portfolio (YTD) | S&P500 Total Return (YTD) |
|---|---|---|
| Jan24 | 0.7% | 1.7% |
| Feb24 | 20.7% | 7.1% |
| Mar24 | 21.5% | 10.6% |
| Apr24 | 18.0% | 6.0% |
| May24 | 39.4% | 11.3% |
| 7Jun24 | 39.4% | 12.8% |
The GauchoRico portfolio’s cumulative return in the 7.41 years (through the end of May 2024) since the start of 2017 is now +740.4% compared to the S&P 500 (TR)’s return of +168.7%. In those 7 years and 5 months, the portfolio’s CAGR was 33.2%.
| Year | GauchoRico Return | GauchoRico Cumulative Return | S&P 500 (TR) Return | S&P 500 (TR) Cumulative Return |
|---|---|---|---|---|
| 2017 | +61.6% | +61.6% | +22.8% | +22.8% |
| 2018 | +55.9% | +152.0% | -5.2% | +16.5% |
| 2019 | +41.8% | +257.3% | +31.5% | +53.2% |
| 2020 | +245.6% | +1134.7% | +18.4% | +81.4% |
| 2021 | +27.7% | +1477.3% | +28.7% | +133.4% |
| 2022 | -71.4% | +350.5% | -18.1% | +91.1% |
| 2023 | +33.9% | +503.0% | +26.3% | +141.4% |
| 2024* | +39.4% | +740.4% | +11.3% | +168.7% |
In my portfolio update from 31Dec 2023, I shared that I would be investing a bit less aggressively than I had been during the 2017 through 2022 period. My use of LEAPS was very aggressive (at times during 2020-2022 I had about 1/3 of my portfolio invested in LEAPS of hyper growth stocks in addition to large short put exposure). This worked very well in 2020 and 2021 but terribly in 2022 as my gains and losses were amplified. I won’t be using aggressive tactics nearly as much as I did previously. However, after further consideration, I decided to continue to invest aggressively in growth stocks with the majority of my portfolio. My allocations (below) reflect this: all of my large positions are growing revenue very rapidly; in fact, the only company in the portfolio that’s growing revenue under 30% is TTD (ok TSLA too). Therefore, the portfolio that I report will continue to focus primarily on maximizing returns although a little more cautiously. I have removed large chunks of cash from the portfolio over the past seven months; this removed cash is no longer part of the portfolio and isn’t reported in my updates. The intended use of the removed cash is for living expenses and to purchase other assets not related to my stock investing; I don’t intend to repatriate such cash back into the portfolio in the future. This approach of segregating funds into two buckets enables me to focus my investing efforts on maximizing growth with a portion of my assets while also utilizing the other portion of assets to enjoy my lifestyle without the stress and uncertainty caused by the wild swings in asset values.
ALLOCATIONS
| 7Jun | 5/31 | 4/30 | 3/31 | 2/29 | 1/31 | 12/31 | |
|---|---|---|---|---|---|---|---|
| NVDA | 17.2% | 15.6% | 11.9%^ | 14.9% | 13.2% | 13.2% | 10.6% |
| AXON | 13.5% | 13.6% | 12.3% | 10.1% | 9.5% | 10.0% | 10.4% |
| MELI | 11.3% | 12.2% | 12.1% | 11.7% | 12.4% | 12.8% | 11.8% |
| TMDX | 10.4% | 10.3% | 7.8% | 6.0% | — | — | — |
| ELF | 9.9% | 10.5% | 12.0% | 8.9% | 10.6% | 11.2% | 10.2% |
| CELH | 6.3% | 6.9% | 7.6% | 4.7% | 10.6% | 11.2%* | 11.9%^* |
| ASPN | 6.2% | 6.1% | 4.0% | 4.3% | 3.4% | 1.2% | — |
| TSLA | 5.5%* | 5.6%* | 3.3%* | 2.9%* | 3.3% | 3.3% | 4.0% |
| CRWD | 5.2% | 4.7% | 5.0% | 7.7% | 8.3% | 8.1% | 7.1% |
| TTD | 5.0% | 5.0% | 4.9% | 8.2% | 8.1% | 6.9% | 7.3% |
| SNOW | 2.7% | 2.8% | 8.7% | 8.8% | 8.6% | 9.6% | 9.8% |
| IOT | — | — | 4.8% | 5.0% | — | — | — |
| META | — | — | 0.2%** | — | — | — | — |
| ZS | — | — | — | 0.1%** | — | — | — |
| WW | — | — | — | — | 0.1%^ | 0.2%^ | 0.5%^ |
| AEHR | — | — | — | — | — | — | 3.2% |
| Cash | 6.7% | 6.8% | 5.6% | 6.6% | 11.3% | 13.1% | 13.4% |
The allocation details described below are as of May 31, 2024. One of the 11 positions in the portfolio is leveraged with long-term call options. TSLA: of the 5.6% position 2.8% is in shares and 2.7% is in Jun2026 $180 call options and Dec2026 $175 and $185 call options. The portfolio is comprised of 90.5% in shares, 6.8% cash, 2.7% long-term call options, and a negligible amount of short puts.
PORTFOLIO CHANGES
Changes since 8Mar 2024
- ASPN: added 21Mar; trimmed 6May.
- AXON: added 15Apr, 16Apr, 17Apr, 9May, 10May, 14May, 15May, 16May, 21May.
- CELH: added 11Apr, 15Apr, 16Apr, 17Apr; cut 9May, 10May, 15May; added 28May.
- CRWD: reduced 10Apr, 11Apr; trimmed 16May.
- ELF: added 2Apr, 3Apr, 4Apr, 10Apr, 11Apr; cut 1May; shares to LEAPS on 9May, 14May; LEAPS to shares on 15May; shares to LEAPS on 17May; LEAPS to shares on 23May; trimmed 23May, 24May.
- IOT: added 11; trimmed 22Mar, 13May; sold all 21May; bought 3Jun; sold all 6Jun.
- MELI: added 16Apr; reduced 6May.
- NVDA: 1/2 of position shares to LEAPS on 19Apr; 23Apr sold 1/3 LEAPS; LEAPS to shares on 23May.
- SNOW: trimmed 21Mar, 15May; reduced 2May, 17May, 28May.
- TMDX: added 21Mar, 22Mar, 25Mar, 26Mar.
- TSLA: 1/3 shares to LEAPS on 25Mar; 1/3 shares to LEAPS on 26Mar; added 2May, 10May, 15May.
- TTD: reduced 1Apr, 5Apr, 11Apr; trimmed 16May.
EARNINGS RESULTS
Since the last portfolio update, all portfolio companies reported their latest quarterly results. I’ll go through them in the order that they reported results.
TSLA (reported results on 23Apr)
TSLA was the first portfolio company to report results this cycle. I previously shared my thoughts on the quarter here. Since then, I’ve added shares to my position several times. My thesis for owning shares is that Tesla will solve autonomy for its automobiles leading to a large step up in valuation, revenue, and profitability. As I watch the rapid progression and improvement to Telsa’s FSD (full self driving) software, my confidence that the Company will succeed in delivering autonomy increases. The cadence of improvements to FSD increased starting in March 2024.
TMDX (reported results on 30Apr)
TMDX reported its Q1 results on 30Apr. The Company reported another amazing quarter with 133% YoY revenue growth. I had briefly held a very small position in mid-2023, but exited when the Company announced plans to purchase a fleet of planes. Other reasons I had for exiting were a lack of international expansion opportunity and a very slow-growing market (after all, the number of people needing transplants isn’t going to increase when the population isn’t growing fast). While the above are true, both the demand for transplants as well as the supply of organs remain much higher than the number of transplants that are actually performed. This gap can only be filled if the organs can be quickly and safely moved to where the transplant recipients are located. TMDX is filling that gap with the purchase of additional planes that enable the movement of organs from donor location to recipient location. Once the gap is filled, I posit that TMDX will no longer be a good investment because then growth will fall off a cliff. However, I do want to stay invested while the getting is good. TMDX currently owns 14 planes and has plans to exit 2024 with 15-20. Furthermore, the CEO thinks that TMDX will have 25-30 planes by the end of 2025. I believe that this means TMDX will continue to fill the gap between the true demand for transplants and the number that can be performed through the end of 2025, at least; both transplant growth and revenue growth should remain very high during this period. TMDX did raise its 2025 guidance to 66% growth for 2024. TMDX will have two more opportunities to raise guidance again before the 2024 results are in the books. In summary, I believe that TMDX will continue to grow very rapidly (probably triple digits) for at least another year, and I want to maintain a large allocation even after the recent share price rise.
ASPN (reported results on 1May)
ASPN reported results on 1May. The results were outstanding with revenue up 107% YoY, but more than all of this growth came from its fast-growing Thermal Barriers segment which provides a thermal barrier solution for EVs; the segment grew revenue 459% YoY! After only its first quarter of fiscal 2024, the Company increased revenue guidance by $30M (projecting 59% growth, after guiding for 47% revenue growth just 10 weeks prior). The Company also increased its adjusted EBITDA and earnings per share guidance for FY25 by 83% and 109%, respectively. Clearly, the market liked the earnings report so much that the stock price gapped up 58% on the first trading day after the results were announced. I don’t think I’ve ever seen a stock rise that much on just an earnings report. ASPN’s agreements with GM and Toyota should keep the Thermal Barriers segment growing for more than a couple years. ASPN has enough capacity to supply orders and meet its revenue targets through the end of 2024. Expansion plans for a second plant have been resurrected, and the Company is on track to completely outsource production for its Energy Industrial products. Despite the share run up, I still like the risk-reward for owning shares, but dependance on the continued near-term adoption of EVs has me a bit cautious so I don’t want the allocation to get too large.
MELI (reported results on 2May)
MELI reported Q1 FY2024 results on 2May. MELI is now a 25-year-old company, and it’s still growing revenue at 36% YoY. Total payment volume was up 35% YoY, and gross merchandise volume was up 20% YoY. MELI operates in a part of the world where there’s often political uncertainty and occasional currency devaluations, yet the Company has managed to thrive for going on three decades. MELI has also resisted attempts by tech behemoths such as Amazon to bully their way into the Latin American market; each such attempt has ended in failure for the challenger leaving MELI totally dominant in Latin America. For these reasons, I find it unnecessary to pour over the details of each quarterly report, but, rather, I just focus on the highlights to ensure that MELI is still on track. MELI management has earned my trust. In Q1, MELI delivered another great result. Yes, there are currently some troubles with its Argentina operations (through no fault of MELI but due to events occurring in Argentina). I am confident that MELI will continue to thrive despite the issues in Argentina; meanwhile, the excellent results in Brazil and Mexico provide a ballast to buffer MELI against the Argentina challenges.
AXON (reported results on 6May)
AXON reported Q1 FY24 results on 6May. Revenue grew 34.3% YoY, and growth of AXON’s recurring revenue and higher margin cloud segment continued to outpace overall growth with 51.5% growth YoY. AXON’s Cloud revenue comprised 38.3% of total revenue, up from 33.9% of the total a year ago. The higher growth of AXON Cloud is a tailwind for both growth and profitability. AXON raised its full year revenue growth guidance from 24% to 28% with two quarters left to raise guidance further.
AXON has multiple avenues for continued growth moving forward. First, AXON has plenty of room to expand into its TAM as shown in slide 15 of the Q1 investor slide deck (below). It’s also notable that the international markets have low penetration and much opportunity for expansion.
Second, AXON continues to develop innovative new products that allow AXON to realize new sources of revenue from existing and new customers. Draft One produces draft police reports for officers using body camera, audio, and video. Officers really don’t like going back to the station to write police reports, and it takes them about 40% of their time to complete data entry and write reports; according to AXON, reports produced using Draft One are more accurate and easier to comprehend than reports written by officers. It seems like this new product is on its way to become a big success.
Third, AXON’s leading market position and strong balance sheet enable it to acquire smaller companies with innovative new technologies that complement its existing products and services. On 31Jan, AXON acquired, for $241.3M, the remaining 79.7% of Fusis, an aggregator of live video, data, and sensor feeds, that it didn’t already own. On 6May, AXON announced that it intends to acquire DeDrone, a market leader in air space security combining hardware sensors with software to detect, identify, track, and mitigate drones. The offer price for DeDrone was $400M for the 80% of DeDrone that AXON didn’t already own. AXON’s market capitalization is approximately $21.6B with more than $1B in cash, short-term investments, and marketable securities on its balance sheet; thus, AXON shareholders will not be significantly diluted by these acquisitions as together they comprise less than 5% of AXON’s market cap. In addition, the acquisitions should both enhance AXON’s strategic position and dominance in its markets as well as provide future sources of revenue and growth. The acquired companies also benefit as they can leverage AXON’s sale force, distribution channels, and marketing and R&D resources all of which can serve to accelerate go to market and market penetration efforts.
Fourth, AXON can grow into new markets. The Company has historically sold into its 17,000 public safety agencies. There are opportunities to sell into other markets such as military and enterprise accounts. AXON also lists justice, fire & EMS, and corrections (prisons) as emerging market verticals. One example in enterprise is the recent decision by TJX, the parent company of TJ Maxx and Marshalls, to equip its employees with body cameras to thwart theft from its retail stores.
In summary, AXON is dominant, growing fast, and has plenty of growth vectors going forward. I believe the company can grow for many years to come, and I would be very hesitant to sell this position. After a great earnings report, the stock has sold off. I don’t understand why the stock has fallen, and I have added to my position multiple times since the 6May earnings report was released.
CELH (reported results on 7May)
CELH reported Q1 FY2024 results on 7May. Revenue only grew 37% YoY in Q1, but the growth rate was negatively impacted by Pepsi’s inventory management in 2023 when the Pepsi had to stock product for the Spring season last year. It’s clear that the growth has not really slowed to 37%, and the inventory fluctuation should work itself out in the coming months. Yes, CELH grew sales triple digits in 2023 and in prior years. Growth is slowing, but there is still growth to be had in the U.S. let alone the growth opportunities internationally. Perhaps growth in 2024 will slow to 50%. I think an important factor in determining how quickly growth decelerates will be how quickly CELH can launch in new countries. CELH will enter the U.K., Australia, New Zealand, and France soon. I suspect international expansion might happen more slowly than investor might want, and I had cut my allocation down to around 5% (it was a double-digit allocation a few months ago), but I recently added some shares back when the shares sold off to $80 and below. I intend to reduce the portfolio’s CELH allocation once again again when the shares rebound or when next quarter’s revenue growth rebounds (I think it likely will). I also believe that CELH’s high growth days are numbered so it’s likely that I’ll keep reducing the allocation and eventually sell out completely.
TTD (reported results on 8May)
TTD reported Q1 FY2024 results on 8May. TTD is another one of my portfolio companies that requires little work and analysis. Every quarter seems the same: revenue is growing in the mid-20%s (TTD actually showed acceleration to 28.3% this past quarter), TTD remains dominant, TTD is taking market share, the world continues to move away from linear TV and to connected TV, Unified ID 2.0 continues to gain traction, and the walled gardens are breaking down. Since 2024 is an election year in the United States, TTD is getting a tailwind from this additional advertising spending. But TTD remains a sub-30% grower, and it’s an expensive stock trading at 86x FCF (TTM); for these reasons, TTD will remain a small allocation position in the portfolio.
ELF (reported results on 22May)
ELF reported Q4 FY24 results on 22May, and revenue grew 71.4% YoY; the growth rate was not all organic due to the Naturium acquisition. Like CELH, ELF is taking share and has a lot of opportunity to expand into international markets; however, I believe that ELF’s high growth runway is a lot longer than CELH’s, and I have allocated more of the portfolio to ELF than to CELH. ELF has opportunities to grow internationally and in the skincare segment with new products. U.S. revenues are 85% of the total (for Q4 2024), and the remaining 15% is predominantly from the U.K. and Canada. This leaves a lot of potential growth from expansion into the rest of the world. Below is an estimate of 2023 cosmetics sales (in $M) by country.
The above graph shows that ELF still has opportunities to grow in European markets where success has been demonstrated in the U.K., Italy, and most recently in the Netherlands. However, the untapped European markets are small relative to the Asian markets (notably China, Japan, and India). While European consumers’ purchasing behavior may mirror those in American markets, Asian consumers may lean more heavily toward higher end luxury brands. I’m by no means an expert on cosmetic consumers’ purchasing habits, but I’m aware that strong brands (e.g. iPhone, luxury automobiles, etc.) have done particularly well in China and Japan. So, for me, it’s still an open question whether low priced brands from ELF will do as well in China and Japan as they have done in Western countries. The Chinese and Japanese markets are so large that if adoption patterns in these countries differs materially from those in Western countries, then the international opportunity for ELF may be a lot smaller than assumed by investors. On the other hand, the brand associated with the color on the face and moisturizer on the skin is not as noticeable as an iPhone in the hand or the vehicle that’s driven (such products are highly visible to others). In Q4, ELF grew its international business by 115% so such potential concerns (about China and Japan) aren’t relevant to the numbers, now or in the foreseeable future.
For now, ELF continues to expand by launching new products and taking share from competitors. In Q4 (the 3/31/24 quarter), ELF grew its cosmetics line by 30% while the overall category was down 3%. Similarly, ELF’s skincare brands were up 38% while the market grew only 2%. There’s still room to grow by taking share, especially in skincare where ELF has less than 2% market share (it has 10.5% share in cosmetics so there’s also room to grow there).
NVDA (reported results on 22May)
NVDA reported Q1 FY25 results on 22May. Once again, NVDA reported a blowout quarter with revenue growing 262% YoY and adjusted earnings per share growing 461%! Data center revenue which is fueling the artificial intelligence boom grew 427% YoY. In Q2, NVDA will lap the first quarter of its AI fueled boom, and the guidance for Q2 revenue is for $28B which would represent 107% YoY growth. NVDA has been beating its guidance by about $2B for the past few quarters, and a similar beat in Q2 would provide 122% YoY growth for the quarter.
Those who aren’t holders of NVDA usually state that the semiconductor industry is cyclical and NVDA shares will fall once the boom phase of this cycle ends. Another knock against NVDA is the law of large numbers which states that once a company’s revenue gets really big it becomes harder and harder to maintain high growth. I think that both of these points are valid, but the key question, I think, is when will the thirst for AI infrastructure end. Holders of NVDA shares would say that growth will remain higher for longer. I’m in this camp. The reason that growth will remain higher for longer is that AI is so important to technology companies, enterprises, and governments that they must invest in AI or else they will miss out to competitors. That is, they will miss out on the massive market opportunity that the products and services of AI will provide (technology companies), they will get disrupted (enterprises), and their country will be left behind or left vulnerable to threats from countries that develop the AI technologies faster. The stakes are higher than ever so the arms race continues in full swing. There is ample evidence that things are playing out exactly in this way. The big tech companies (AMZN, MSFT, META, and GOOG) have announced huge AI capital expenditures and gigantic increases in AI infrastructure CapEx spending plans. These plans were revealed in latest earnings calls and guess from whom they’re all buying GPUs? Yes, NVDA across the board! And AI specific companies are also scrambling to procure GPUs from NVDA; these include OpenAI, Anthropic, Tesla, and Elon Musk’s x.ai. And the investments are enormous. For example, x.ai just raised a $6B investment round, and it intends to invest about $3B in 100,000 NVDA H100s in 2024. Elon also revealed that in 2025, x.ai plans to buy 300,000 B200s which would cost $10B plus or minus a couple of billion. So the demand is there, but what about the supply?
NVDA is now on a one-year cadence of new GPU product releases. NVDA has the top performing GPU on the market with the H100. The H200 and the next generation Blackwell B100 are in full production and both will launch this year. The Blackwell Ultra (B200) is in full development and will launch in 2025. During his keynote address at Computex 2024, Jensen announced the next generation Rubin (R100) and its accompanying CPU, Vera; this GPU will launch in 2026, and the Rubin Ultra (R200) will launch in 2027. The Rubin line of GPUs are also already in development. Below is a screenshot of NVDA’s product roadmap presented by Jensen on 2Jun.
Earlier today, I wrote some additional thoughts about NVDA and its future. I think that NVDA’s business has at least a couple of years of great growth ahead. More important, I think that growth will turn out to be better than the “market” currently expects, and, as a result, I believe that the share price can still rise once the higher growth for longer prediction actually becomes a reality.
SNOW (reported results on 22May)
SNOW reported Q1 FY25 results on 22May. I’ve held SNOW shares for a long time, and, going into 2024, I had almost a double-digit allocation. I still believe that data is needed for AI and that companies like SNOW will be indispensable to help enterprises realize meaningful benefit from AI. There’s a lag between the time NVDA realizes huge growth due to AI infrastructure investment and the time that applications for AI begin see that huge growth. I believe these derivative beneficiaries of the infrastructure investment will happen eventually, maybe even soon. However, I’ve become increasingly concerned that SNOW isn’t a one-of-a-kind dominant company like NVDA, AXON, and MELI. Databricks, SNOW’s most formidable competitor, has been increasingly making waves and showing success. Maybe the market will be big enough for multiple winners, but will competiton affect gross margins and growth rates? Will one competitor become more dominant? I don’t have such questions when I look at AXON, MELI, or NVDA. Even though, TSLA is somewhat speculative for me, TSLA appears to have a huge lead in autonomy for autos. SNOW and Databricks seem more like peers than like one big brother and one little brother. For this reason, I have reduced my SNOW allocation by about 70% since the beginning of 2024. For now, I’m still holding on to a 2.7% allocation because I want some exposure to the second/third derivative AI beneficiaries. I do realize that SNOW’s stock price isn’t much higher than the $120 price that Warren Buffett paid about four years ago, but the current price isn’t my primary motivation for holding any stock position. My confidence about the prospects of the business is always my primary consideration.
CRWD (reported results on 4Jun)
CRWD reported very solid results on 4May. Subscription revenue growth was 34% YoY, a sequential increase from 33%. ARR grew 33% YoY. FCF margin, adjusted EPS growth (YoY), and FCF growth (YoY) were all outstanding at 35%, 62%, and 42%, respectively. The percentage of customers using seven, six, and five modules all ticked up 1% sequentially, and the number of customers using eight or more modules increased by 95% YoY. CEO Kurtz explanation for the great results included both customers’ desire for vendor consolidation and Crowdstrike’s simple, easy-to-use single agent approach. Operating margin improved from 17% in Q1 of last year to 22% showing that CRWD continues to squeeze out operating leverage on its march to attaining its new operating target model (that was updated significantly in September). To top it all off, on 7Jun, it was announced that CRWD will be joining the S&P 500 index.
Overall, CRWD continues to execute in the cybersecurity market while some competitors stumble or show mixed results. The only negative things I can say is that the valuation (as of 5Jun) is high at 75x EV/FCF (TTM). For this reason, my allocation isn’t higher.
More on the Portfolio’s Allocations
I continue to be satisfied with how I’ve allocated the portfolio. In my last portfolio update, I classified my investments into several buckets:
1. High Growth Today but Eventual Slowdown,
2. AI Investments,
3. High Growth SaaS, and
4. Very Dominant Businesses.
Note that some companies fit into more than one bucket.
High Growth Today but Eventual Slowdown: This is the “great for now” bucket. Get the returns while the getting is good, but there will be a slowdown, and these positions will eventually be sold from the portfolio. Companies in this bucket are NVDA, TMDX, ASPN, ELF, and CELH. I’ve reduced CELH, and I expect it will be the first of the group to fall out of the bucket and get sold from the portfolio. All the others still have very good risk-reward and a long runway for high growth, in my opinion.
AI Investments: I still hold three companies in what I consider my AI basket: NVDA, SNOW, and TSLA. The NVDA allocation has grown larger and larger despite my trimming of shares. I’ve cut SNOW way down for reasons I’ve described above. I’d probably consider selling SNOW completely if I were to find another AI related investment that I like better. I’ve added to the TSLA allocation as my confidence in the Company solving full self-driving has increased; after converting all my shares to LEAPS, I added more TSLA shares.
High Growth SaaS: I have three positions in a high growth SaaS basket: AXON, SNOW, and CRWD. I sold IOT because I feel that it should be growing faster than in the 30%s given where it is on its journey toward realizing operating leverage. These days high growth is greater than 30% revenue growth; it used to be much, much higher; but it’s become harder to find hyper growth SaaS companies. Each company is dominant in its market, except I feel that SNOW is now less dominant than I thought previously.
Very Dominant Businesses: They are AXON, MELI, TTD, and CRWD, and I’d be hard-pressed to sell them because they are so dominant in their markets. When these companies report results, I don’t need to spend too much time analyzing them because I’ve found their results to be so consistently good. The other advantage of owning shares in these businesses is that as they grow and continue to become more dominant in their markets the likelihood of them getting disrupted drops; this can provide additional reliability and stability to the portfolio.
Assets Outside the Portfolio: I don’t report assets that I own outside the portfolio, and these assets don’t factor into the return results that I post. I consider them completely separate. Such assets include predominantly cash and real estate plus some other investments. Owning these assets gives me peace of mind, specifically a sense of security that no matter what happens to my stock portfolio I will be able to pay for all my expenses and maintain my lifestyle. Since November of last year, I have been moving funds out of the portfolio and into this bucket. I intend to continue to remove additional funds as the portfolio increases in value. In addition to serving my own needs, the removal of these funds provides those who follow my portfolio’s progress a clearer view of the returns generated from the portion of my assets that I’m devoting to the maximization of returns through stock picking/investing.
FINAL THOUGHTS
The rally is on its eighth month, yet I still feel optimistic. Almost all of the portfolio companies (I mean their businesses) performed wonderfully in the past earnings cycle. The stock prices in many cases shot further up as well. COVID was an interesting time during which many companies benefitted. Some of those benefits were projected forward, and, when these projections didn’t happen, many high-fliers crashed hard. Higher inflation and interest rates didn’t help either. Now, it seems, some of the distortions caused by COVID and the responses to COVID are finally normalizing. Some companies have already reached new all-time highs, but others never will. I no longer hold many of the companies that were in the portfolio in late 2021, and I’ve added new ones. We must always consider making changes as we get new information. As always, no one can be sure what the future holds, but perhaps the misery of 2022 (for this portfolio) is finally becoming a distant memory.
The opinions, thoughts, analyses, stock selections, portfolio allocations, and other content is freely shared by GauchoRico. This information should not be taken as recommendations or advice. GauchoRico does not make recommendations and does not offer financial advice. Each person/investor is responsible for making and owning their own decisions, financial and otherwise.