Search

2021 Revamped Portfolio

Updated: Jan 9, 2021

Matthew Chapter 6, verses 2-4 state, "So when you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by others. Truly I tell you, they have received their reward in full. But when you give to the needy, do not let your left hand know what your right hand is doing, so that your giving may be in secret. Then your Father, who sees what is done in secret, will reward you."


As I have written on investments over the past eight years or so, I've often found that one of the tempting drivers of writing is to receive accolades and/or confirmation from others that I am successful. At its worst, I've discovered that this simply feeds my ego leading to pride, and distorting the entire reason why I've written to begin with.


This is a core driver for why I've developed this blog. To simply create a forum for discussion on investments, offering my portfolio and experience as transparent pieces of information for others to consider on their own investment journeys. Hopefully I am successful in honoring this commitment.


Revamped Review

On that note, after updating my annual performance, I thought it would be good to provide a snapshot of the revamped portfolio as 2021 has kicked off.

The portfolio ended 2020 with 54 holdings, this has been scaled back to 43 as of January 7, 2021. Based on this, the portfolio is currently up 3.7% with an approximately 26% cash position. Performance to date is outpacing most peer indices, despite it being very early for the year.


But what I think is most helpful to focus on in this piece is the logic behind streamlining the portfolio and the approach to deploying cash throughout the year.


I am very content with my decisions to reduce the number of holdings in the portfolio. As I reviewed the top performing Exchange-Traded Notes (ETNs), Exchange-Traded Funds (ETFs), and Mutual Funds, it was very clear that the best performers hold from 35 to 55 companies within their portfolios.


At the same time, I looked at companies like Abiomed (ABMD), Align Technology (ALGN), Floor and Decor (FND), among others, and some of the more riskier Special Purpose Acquisition Companies (SPACs) in the portfolio and decided that many of these companies were either not aggressive enough from a growth perspective, or did not have enough visibility to merit the risk.


At the same time, I remain committed to some important investment themes that drive why I select the companies that I do. These include:

  • Ecommerce (literally, and/or value-add services)

  • Streaming (content distribution and/or advertising)

  • Communications (infrastructure and/or platforms)

  • Fintech (crypto currencies, insurance, traditional banking, etc.)

  • Healthcare (gene/protein identification, telemedicine)

  • Technology (security, applications, infrastructure)

I have scrutinized my portfolio against the top performing 1.5%, and there are a lot of similarities with the holdings. The biggest gap that has led to my underperformance is mostly related to Tesla, Inc. (TSLA), and stronger emphasis on cutting edge healthcare plays such as genomics. Regardless, I feel that the revamped portfolio is in a much better position to compete moving forward.


The focus on how to deploy cash in 2021 will be based on existing holding valuations, and the opportunities for new additions.


I will be looking out for substantial Initial Public Offering (IPO) opportunities and scouring how top performing ETNs, ETFs and Mutual Funds have focused on industries within healthcare and energy sectors.


One near-term IPOs on the radar is Roblox. Roblox will now be going public via a Direct Listing, which may afford investors a better opportunity (although the last funding round has valued Roblox at nearly $30 billion, much higher than the most recent $4 billion). Others to pay close attention to include UiPath and Coinbase. Roblox is anticipated to IPO in February, so sooner than later, the others have yet to file initial public documents, or methods of going public.


I have already been reviewing the genomic based companies that Cathie Wood has incorporated into her Ark Trust ETFs. These include Pacific Biosciences of California, Inc. (PACB), CRISPR Therapeutics (CRSP), Invitae Corporation (NVTA), Exact Sciences Corporation (EXAS), among others. Many of these companies are still in early stages of development, and also have seen huge stock gains, so I will continue to be selective.


Volatility

2021 is off to a volatile start. Day one was down for all, which quickly turned to a broad upswing, excluding growth, that is culminating into a resurgence for growth - and we haven't even finished the week.


There are going to opportunities throughout 2021, but the market is betting on another $1,400 per person once Mr. Biden is sworn in as president, as well as the return to more normalcy to continue with COVID cases decreasing. If these two major items play out by the spring, the market my see a further surge.


Already in four trading days, I am looking back on lost opportunities. I was hesitant as the early part of the week witnessed broad selling, and pressure against growth. This lack of action in a couple days resulted in missing significant gains. However, I will remain judicious as to not chase missed opportunities. The primary pressure for me is that my portfolio now has ample cash, and if the market does indeed continue moving up, this will dilute any robust performance and make it much harder to outperform top growth peers.


Conclusion

The portfolio has been streamlined and revamped to be more lean and focused on the core investment ideas that are poised to lead future trends for consumers and a variety of preferences and habits. Based on my adjustments, I am well positioned for 2021 and beyond.


A key challenge will be deploying cash timely throughout the year, as many holdings have witnessed robust performance. Deploying cash can be tricky, one minute you have plenty, the next you are running towards a zero balance.


Another area I will be focused on is how the SPAC warrants I own play out. Today, Social Capital Hedosophia Holdings Corp. V (IPOE) announced that it will be merging with a Fintech, SoFi. The warrants went up nearly 60% and I am sitting on a 210% unrealized gain. I will perform a more in-depth review of the investment potential from here, but I am very optimistic about the long-term potential for this company once the merger has been completed.


In any case, being able to perform at a high level requires continued scrutiny of the portfolio, as well as keeping a strong commitment to the long-term winners.







45 views0 comments