Going forward, I will be writing these short updates on my portfolio’s performance on a quarterly basis. I consider it a diary of my decision making process that I can refer back to when evaluating my successes and failures.
In each post, I will start off outlining the performance of the two stock indices that best represent my portfolio: The S&P500 and the OMX C25. For the period 31-12-2023 to 31-03-2024, these indices gained 10.6% and 6.6%, respectively. I’ll use the average of 8.6% as my benchmark.
Below is a summary of my portfolio’s Q1 2024 performance followed by reflections on key positions.
| STOCK | WEIGHT | CHANGE |
|---|---|---|
| Novo Nordisk (XCSE:NOVO B) | 30.5% | 27.2% |
| Meta Platforms (XNAS:META) | 10.4% | 43.0% |
| Alphabet (XNAS:GOOGL) | 8.8% | 10.6% |
| Berkshire Hathaway (XNYS:BRK.B) | 8.6% | 19.7% |
| Transdigm Group (XNYS:TDG) | 4.8% | 24.9% |
| McKesson Corporation (XNYS:MCK) | 3.6% | 19.4% |
| Charter Communications (XNAS:CHTR) | 3.3% | –22.7% |
| Amazon.com (XNAS:AMZN) | 3.4% | 21.2% |
| Dollar General (XNYS:DG) | 2.2% | 16.5% |
| RCI Hospitality Holdings (XNAS:RICK) | 2.2% | –12.2% |
| Mercadolibre (XNAS:MELI) | 2.0% | –0.8% |
| Intuit (XNAS:INTU) | 1.9% | 6.4% |
| Copart (XNAS:CPRT) | 1.4% | 1.7% |
| AP Moeller Maersk (XCSE:MAERSK B) | 1.2% | –21.7% |
| Danske Bank (XCSE:DANSKE) | 0.9% | 18.7% |
| Index Funds | 6.3% | 8.3% |
| Bonds | 6.9% | –0.2% |
| Cash | 3.1% | 0% |
| Total | 100% | 15.2% |
I’ve outperformed the market with about 6.6% in Q1. The key reason behind said outperformance lies in the massive run-up in both Novo Nordisk and Meta Platforms – coincidentally my two largest holdings. In fact, due to the weighting and appreciation of these two, it accounts for about 70% of my portfolio’s Q1 returns.
Berkshire, Alphabet and TransDigm also contributed positively in a meaningful way while Charter continues to be my portfolio’s biggest drag followed by RCI Hospitality. Below, I’ll offer a commentary on the drivers of these moves alongside some reflections on each position.
But first, let me say this: while I try to take pride in the outperformance in Q1, the ol’ saying “don’t confuse brains with a bull market” is lingering in the back of my mind. In an environment where everything seems to appreciate, everyone can look like an investment genius.
Novo Nordisk: The company’s annual report revealed yet another record-breaking result with a 31% and 51% increase in revenues and earnings, respectively. The stock gained 6.5% in the week following the release of the annual report. More recently, the company revealed promising trials of a new obesity pill, causing a 8.3% rally on the day of the news. In general, Novo Nordisk – alongside i.e. Eli Lilly, Zealand Pharma and Viking Therapeutics – is riding the massive obesity drug tailwind.
Meta Platforms: Speaking of tailwinds, Meta is cruising the AI-highway alongside the rest of the ‘Magnificent Seven’. In length, there is (yet again) a positive sentiment towards big tech, but Meta did also present stellar Q4 and FY results on February 1st, resulting in an almost 21% one-day gain. Hence, it seems Meta’s run-up isn’t just a hype-based mirage although it is trading at a lofty valuation. But again, I was also worried about it being too expensive in late 2023 when I sold 20% of my Meta position at $354. A foolish decision in hindsight, sure. However, realising that gain was what prompted me to (finally!) accept that my thesis on Charter Communications was busted, as I was able to offset my Meta gain with the loss on Charter from a tax perspective.
Charter Communications: .. and praise heavens I did. The stock is one of the worst performers in the S&P500 to date, having dropped from $390 to $290. Owning Charter has been a humbling experience. As I concluded in my June 2022 stock analysis of Charter, I was certain that it was (very) undervalued. As such, I betted big. In fact, it’s the stock I’ve plowed most money into, ever. As mentioned, my thesis was busted. The stock is down 30% since June 2022 while the S&P500 is up +30% during the same period. During its Q4 earnings call, Charter reported a loss of 61,000 internet subscribers and 257,000 video subscribers. As I counted on a 7% annual growth in the former and a ‘mere’ 2% decline in the latter, it’s safe to say that I was way off. Mr. Market’s expectations for Charter is quite dire at this point, and it’ll be interesting to see whether or not he is right to be during the next earnings call ultimo April. I still hold 25% of my original investment, but I luckily sold blocks in September and December at $443 and $390, respectively.
Bonds and Cash: During Q1 of 2024, I sold my stakes in Alibaba, Apple and some index funds to reallocate that capital into bonds. Yes, bonds! Long duration mortgage bonds, to be exact. I’ve bought 1% and 2% Danish mortgage bonds at 64 and 75 cents on the dollar, respectively. The play is quite straightforward: if interest rates go down, the value of the bonds will go up, and (hopefully) quite drastically so given that the 1% bond, for example, has a duration of 21.
Outlook
Back in 2022 and early 2023, you couldn’t find a a macro economist who didn’t expect a recession in 2023. The pessimism was all-pervading. However, as we now know, 2023 was a great year for stocks with the S&P500 and Nasdaq up 24% and 54% percent, respectively. A lot of those economists now believe 2024 will be the ‘Year of the Recession’. Personally, I’ve come to realize that I have a slim chance of predicting the mood of the market. However, I deem it valuable to summarise my current thinking for later reflections:
- Since July 2023, FED has held interest rates at 5.5%. Ultimo 2023, the general believe was that we’d have six rate cuts in 2024. During the March meeting, Jerome Powell & Co. indicated that FED is expecting three rate cuts. That should be a positive for both stocks and long duration bonds.
- To me, it seems FED did what many deemed impossible: a soft landing. Inflation seems to be under control (although it’s a bit sticky at 3.5% at the moment); unemployment is low at 3-4%; and the economy (in both the US and Denmark) is growing.
- Interestingly, all major asset classes seem to appreciate in value. Stocks, gold and Bitcoin have all traded at all-time highs during Q1 while yields on i.e. the 2 year T-bill is an attractive 4.6-4.7%.
The pessimistic side of me can’t help but wonder if there is something to the dire predictions of an everything bubble. I mean, it is unusual that all asset classes appreciate at once, but I suppose all those QE dollars need to find a home. So what do I expect for the rest of 2024? Putting geopolitical issues aside, it’s difficult to see the ‘shock’ that should hinder the stock market from benefiting from the (likely) rate-cuts and as such the most sensible conclusion in my view is to stay bullish. Although the shocks to the markets are always unexpected; that’s what makes them shocks. As Morgan Housel says: “Things that have never happened before happen all the time.” Alas, I’ll continue to stay close to 100% invested with an overweight on stocks, as I am a long-term investor, but also because I maintain a positive outlook on the rest of 2024.
Watchlist
Finally, I want to share my ‘Watchlist’ of businesses that I would one day like to own when I deem a more favorable price-to-value ratio. I’ve listed them alongside the price as of March 31, so I can refer back and – most likely – regret decisions not made. You will notice that all of these are “fantastic businesses”, much in line with the direction I want to take my portfolio in, i.e. long-term compounders thanks to their “excellent economics” and “durable moats”, as the ol’ Oracle of Omaha preaches.
- Waste Management (WM): $213
- United Rentals (URO): $721
- Roper Technologies (ROP): $560
- Danahar (DHR): $249
- MasterCard (MA): 481
- The Sherwin-Williams Corporation (SHW): $347
- Coca-Cola Consolidated (COKE): $846
- CostCo Wholesale (COST): $732
- Constellation Software (CSU.TO): $3.700
- Guidewire Software (GWRE): $116
- Armanino Foods (AMNF): $6.20
I wish everyone a profitable Q2 – and beyond! 🙂