Climbing the Wall of Worry: >76% portfolio YTD performance and new picks
October 13th, 2024 - Update
Last week, inflation came in worse than expected, creating some level of panic in the markets. Then on Friday, we had better-than-expected Producer Price Inflation, which calmed the markets.
The 10-year Treasury yield, which is very sensitive to changes in inflation expectations, has been rising since mid-September.
With GDP forecasts for Q3 at 3.1% and for Q4 at 2.7%, signaling a healthy state of the economy, the risk is that the Fed will stop cutting rates or slow down the easing cycle.
If the economy is healthy and an aggressive easing cycle is not needed, then it would be a net positive for the overall economy. Inflation expectations right now sit where they were before the pandemic.
My takeaway
The economy is returning to "normal" after the external shocks caused by the pandemic and exacerbated by unprecedented fiscal and monetary policies around the world. The path to a normal economic cycle is on, and right now there is no recession on the horizon, nor is inflation a concern. So we can focus on earnings growth and valuations to determine where to invest.
INDEXES
The NASDAQ closed positive, and all moving averages are pointing upward on the weekly chart.
Momentum might improve as the MACD indicator could cross the signal line next week. Let’s see how it goes.
We are left with one option: keep climbing the "wall of worry" and manage risk along the way.
Elections are getting close, and some volatility can be expected.
Prediction markets suggest that Trump could be the next President.
PORTFOLIOS
My “Underpriced Growth” Portfolio started well, and I have eight half positions.
APP is the best-performing stock to date at 30% in less than a month. I got into another stock last week, unfortunately at a high price as the stock opened well above my trigger price. Right now, it is the only stock in the red (-8%).
Here are some numbers I will be using to summarize the key information of this portfolio:
The portfolio is beating the S&P 500 by 1.35%, although I am not fully invested. A promising start. Way to go.
This week, I am adding $DLO to my portfolio. Dlocal is in the payment tech sector in South America, growing above 30% year-over-year, with earnings margins above 25% and reinvesting at over 20% (asset growth YoY). It offers a good risk-reward at these levels.
This week:
I am buying 535 shares of DLO if it touches $9.31, with a first stop at $7.69 (-17.4%).
10X MOMENTUM PORTFOLIOS
Starting with my 10X Mid-Large Cap Portfolio:
Here, I am fully invested, with RocketLab and ZETA performing very well. My stops are updated.
Also, I have created a summary of the portfolio performance so far:
After 559 days, the portfolio has returned 137% (76% annualized), beating the S&P 500 by 96%.
I wish I could keep the annual returns of this portfolio around 25%. 76% has been incredible, and I believe it's very difficult to sustain over time. Time will tell.
Lastly, my 10X Small Cap Momentum Portfolio has only one position left:
I want to close this portfolio to manage just one momentum portfolio... yet CMPO keeps grinding higher and is now at a +97% gain. My stop loss is set. Let's see when I'll be kicked out of this trade.
Last, my 2024 7 Picks Portfolio. If you have been following along, you know that I picked seven stocks on January 1st based on high quality and value, similar to my Underpriced Growth strategy. Well, here is where the portfolio is today:
With only three winners so far out of seven, the current YTD return stands at +83%. Not sure where it will be on December 31st later this year, yet it makes me think a lot... 83% returns with no trading at all involved—a one-year bet on great businesses that looked undervalued. My 10 picks for 2023 returned 54%, almost twice the return of the S&P 500, which delivered +26%.
I guess we need a bull market to get great results. I think I need to stay away from the market when the trend changes south. It looks like I can find great companies at good prices, and that is the style I need to master over time.
That's all for the week!
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Important: This is not investment advice. Consult a licensed financial advisor before making any investment decision.