Portfolio update: 2024 first half

Disclaimer: The analysis is the expression and assessment of investments right now. They cannot replace individual counseling. Always research and evaluate the investments you are considering based on your investment strategy, risk, and time horizon. Therefore, following the recommendations, you are responsible for any losses you may incur.

The end of the first half-year is past, and it is time to review how the portfolio has performed compared to the required return of 10% annually, and the benchmark. But, before I reveal the performance and portfolio, I will start by showing the transactions that have happened in the first half year. 

Transactions

Bought positions:

New stocks added to the portfolio are shown with a green mark.

Sold positions:

Stocks that are removed from the portfolio completely are shown with a red mark.

Personally, I have gained more capital in the portfolio, due to my main job, which has allowed me to invest in some stocks without selling others. Secondly, most of the stock, that is sold, is mainly due to a decreasing margin of safety or a greater opportunity elsewhere by comparing risk and return. However, the net positions have increased by 5 YTD, and the total number of stocks holding is 14. Personally, I prefer not to hold more than 15, because 15 can still give a large diversification, and because I don’t have to follow up with 30 or 50 stocks, I find 15 a very magical number of holdings.

Portfolio

Its portfolio is updated on 30.06.2024, and 0,3% is held as cash. The low amount of cash held shall indicate a belief that It has been possible to find stock with a large margin of safety. However, as it is right now, some positions are close to fair value, meaning the margin of safety is low, and more stock sales could happen. For example, Taiwan Semiconductor Manufacturing (TSMC) has a lower potential upside while the downside has increased because the price has increased more than the stock's fundamentals. The media focus on AI has an impact on the market's view of TSMC, and the risk of China invading Taiwan appears to be less focused than before. GN is another example of a turnaround case, and the market has rewarded it with higher margins and lower leverage by increasing its stock price. This has again resulted in a lower margin of safety and should be considered more as a stock that should be replaced with another stock. If the quality score is lower, the attempt to replace the stock should be higher. However, when I calculate the portfolio's potential return, I see an 83% upside in the current moment.

Performance

In my opinion, the performance has been very lucrative in the first half-year. Here the return has been 13,54%, which outperforms my requirement of 8%-10% in annual return. Furthermore, compared to benchmarks the portfolio has performed a bit better. The S&P500 had a return of 14,78% and OMX25 had a return of 7,36% in the same period. In that regard, the portfolio has been shown to generate a greater return in some periods, but hopefully, it will perform even better in years to come, when compared to the benchmark. In good times the market tends to chase higher returns by increasing the risk but doing it yourself can result in significant loss due to an extraordinary belief in continuing high performance from these stocks. If a company reports negative and unexpected earnings the stock will plummet. This means the portfolio goal is to make it robust, and the decreased likelihood of buying a stock where most scenarios of the company potential are included in stock price, and the risk if it doesn’t achieve its goals, can result in a significant downturn. This means in some scenarios, it can be very difficult to gain the same return as the stock market, because the market is chasing some specific trends, such as Artificial Intelligence (AI). In that regard, some stocks have achieved high multiple valuations, meaning that everything shall go to perfection before some of these valuations can be justified. Therefore, I'm extra pleased that is have achieved close to the same return as the benchmark, and some of them I outperformed. For instance, the portfolio's expected price-to-earnings ratio is approximately 13, while the SP500 is around 25. This means that the portfolio is roughly half as cheap as the SP500.

Countries P/E

Source: https://worldperatio.com - Date 30.06.2024

Since the start of the documentation of the investment portfolio, the annual return has been 20,3%. If I’m looking and trying to analyze a realistic return, I wouldn’t expect this return. Furthermore, I have already made some mistakes, which could result in a bigger return, if the mistakes were avoided. I constantly try to be better to limit these errors. I’m seeking simple and understandable stocks, making it easy to analyze the company’s future cash flow more predictable and reducing the risk of unknown events. Therefore, I would say the performance is in line with the benchmark, but with space for improvement, I would still have taken this return when I look back.