Up 84% For The Year
I disclose all of my trades. Plus: top performers, learnings, and our updated watchlist.
I was lucky to start this newsletter in March when stocks crashed. Though uncertainty was at all-time highs, opportunities abounded.
Portfolio commentary
Our top performers were:
Tesla: +578%
Revolve: +310%
RCI Hospitality: +99%
Duluth: +79%
Twitter: +46%
The portfolio remains concentrated in Tesla. I’ve already sold 40% of my initial position. Tesla is executing well, but the valuation is now stretched. Absent new information, I would buy more if the stock falls +50% from current levels.
My second-largest position is cash. I target a cash position of 15% to 20%. Cash is a drag to returns, but I’m comfortable with the flexibility, optionality, and hedging it brings.
Tesla drove most of my returns this year. While this outsized contribution highlights luck's role, it also reinforces that returns in a concentrated portfolio follow a power law: most gains will come from one or two stocks.
Learnings from 2020
Move faster: The market was filled with attractive opportunities. I missed most of them because I didn’t have time to analyze so many stocks. I need to improve my idea flow.
Act decisively: I should buy more when initiating a position. I must act on my conviction and not try to time the market.
Realize gains slowly: Trimming winners reinforces my conviction in holding them for larger gains. That gives businesses time to compound and keep them as a material portion of my portfolio.
Looking ahead
In 2021, I want to tilt the portfolio to my highest conviction ideas, the ones that present a combination of high business quality and upside potential. I’ll focus on compounders—stocks with high returns on capital and long runways for growth—that are trading at attractive valuations. I want to capture earnings growth and multiple expansion.
My target is to remain concentrated and hold approximately ten names. In the long-run, I aim to compound capital at +20% per year.
Trade Log
Watchlist Update
Happy New Year,
Fred
Hey Fred - you forgot your trademark “hey folks” greeting. Please keep that for future postings... the newsletter is not the same without it.
On top of that, a couple of less relevant items. 1) You’ve grown to become my #1 investment advisor. In following your advice I managed to achieve an annualized return of 85% - for which I’m very grateful. That’s my expectation from now on and I’m confident you will beat the 20% goal. 2) Have you considering starting your own investment shop?
Keep it up! And happy new year!
Ps. I hope in 2021 everyone is as happy as TSLA shareholders.