There were not many changes lately in my portfolio, mostly more of the same:
- I've added to BHC (formerly VRX) and together with the ~15% gains it's now the biggest chunk of my portfolio
- I've added to GM (also via options) despite (or because :)) the significant price drop
- Added a lot of FB, as I appreciated the moat and the buying opportunity reemerged
- I've reduced BRK, mostly because of how much it appreciated
- Same for APPL, but on a smaller scale
- Added slightly to VER, especially after it plunged just a day before ex dividend day
- Reduced KHC and sold remaining WMT & GILD
- Established positions in Tencent and BYD (but sold already half of the latter to realize gains)
- Played TSLA on the way up and down as the "Fun with Musk" continues
- Similarly, bought and sold USDPLN on dips/ups, trying to be around zero PLN cash
I've just read the latest Howard Marks memo, where he reminds that with elevated valuations and lots of money chasing high returns it's time to be cautious. While I mostly agree and the excesses are surely out there, I also think that there are some unique opportunities that warrant being fully invested.
I can see first-hand from my work experience how powerful Google's and Facebook's traffic generation machines are and that virtually everybody else who wants to do business needs to pay them to generate sales since the commerce world constantly shifts to digital and digital means those two giants.
I'm therefore long FB as much as GOOG now, but also sold puts and bought calls that are 1-2 year out, as I think FB is very undervalued when taking into account their growth. I think they will grow more than management guided for, just because it's hard for them to say no to ad money and ad money has no alternative.
As an anecdote (and contradictory evidence), I'm in the process of setting up FB ads for an e-commerce store and FB locked me out twice already, asking to submit a foto. Probably they tightened their (blunt) security measures, but it is telling that I have little choice but come back to them, hoping they will get their act together. With any other vendor it would be a game over.
Amazon is still a wild card, but with Amazon Go potentially having huge growth potential (convenience stores can have high margins...) I'm debating investing even at today's prices. But I need to do the math first.
Elsewhere, I've sold roughly half of BYD during the rally, with no regrets for taking an easy profit quickly.
SEC's allegations for Musk are in my opinion the beginning of the end of TSLA. Even if they will print Q3 profit, I doubt they can print it in both Q3 & Q4. And in Q1, with smaller tax credit and competition arriving the demand will collapse. I doubt even gross-profitable $35k model 3 (which probably won't happen) would save them, given the SG&A, R&D and interest overhead. The demand for costly, small electric car is still not nearly high enough to support this overhead, let alone justify the absurd valuation. I keep my sell & buy orders $50 apart, hoping to gain from volatility and right now I expect to cover completely around $150. I see the intrinsic value of equity as close to $0 at this point, but I prefer some trading profits sooner to riding it all the way down, because a cash injection can easily prolong this by a year or two.
With some more options (sold puts and bought calls) I effectively tripled down on GM, which I think should see triple digit stock price in 2-3 years, given the great management, very low PE, buyback potential for adding shareholder value and GM Cruise potential. But it surely requires patience to see it fall into $33 from $44 where I bought majority of my position. Tariffs, etc. are of course short-term issues, but in the end what matters is their competitive position and I think they're very strong and capital efficient.
Fortunately, at the portfolio level I've compensated GM paper losses with other realized and not realized gains. Really looking forward for the earnings season, should be interesting.
