Momentum, Growth, and 2025: My Investing Playbook and Market Outlook
December 29th, 2024 - Update
Investing in Innovation: My Strategy, Portfolios, and Market Outlook
Every so often, it’s good to take a step back and summarize my investing philosophy and the strategies I’m implementing to navigate the markets. Whether you’re a seasoned reader or new to this blog, this post will give you a clear picture of what I’m trying to achieve, how I’m doing it, and where I see the markets heading as we move into 2025.
My Investing Philosophy
I believe the best way to build long-term wealth is by investing in great businesses that grow profitably over time. Science and technology are driving an unprecedented wave of innovation and wealth creation, and my goal is to identify companies that are not only riding this wave but leading it.
At the core of my approach are three pillars:
Macroeconomic Awareness:
I pay close attention to monetary policy and credit availability to gauge the economic environment. These factors often signal whether we’re heading into “good” or “bad” times for the stock market.Fundamental Analysis:
I analyze companies’ fundamentals using adjusted data, which I believe provides a clearer picture of valuations and performance. This edge helps me uncover opportunities others might overlook.Growth, Innovation, and Valuation:
I focus on companies that:Are growing revenue at 10%+ YoY.
Have improving profitability.
Are actively reinvesting in their own growth.
Are fairly valued or undervalued.
By combining these elements, I aim to identify businesses that can thrive in both favorable and challenging environments.
Adding Technical Analysis to the Mix
In addition to my fundamental approach, I’ve been incorporating Stan Weinstein’s stage analysis to improve my understanding of mid-term trades. This has helped me identify stocks at key breakout points, ensuring that I’m not only picking great companies but also buying or selling them at the right time.
My Portfolios
I manage several public portfolios to test my methodologies and share my progress transparently. Here’s an overview of the portfolios I’m running right now:
1. Underpriced Growth Portfolio (Started: Mid-September 2024)
This is a mid-term portfolio focused on identifying companies with strong growth, improving profitability, and attractive valuations.
Recent Activity:
Last week, my stop-buy order for ARQT (Arcutis Biotherapeutics) was triggered, giving me a full position in the stock. Below is how the portfolio currently looks in terms of active positions.
Scorecard:
So far, the portfolio is outperforming the SP500, but it’s still early days.
This Week’s Plan:
I’m starting 1/3 of a position in AEHR (Aehr Test Systems), a semiconductor company breaking out.Buy Stop Order: $16.52
Initial Stop Loss: $11.97
Beyond this, I don’t plan to make any other moves this week.
2. Momentum Portfolio
This portfolio is focused on short-term momentum plays and has been running for almost two years. With 35 closed trades to date, the annualized return is 82%, and it’s beating the SP500 by a staggering 138 percentage points.
Recent Activity:
I currently have two active positions, both of which are performing well.
Scorecard:
Here’s the current performance breakdown of the portfolio so far:
This Week’s Plan:
I’m creating a buy-stop order for 210 shares of QNST (QuinStreet) at $23.90.Why QNST? QuinStreet is a $1.3 billion market cap business in the digital advertising space. The company is experiencing accelerating sales growth and improving profitability, and the chart looks strong as it touches new all-time highs.
3. Best of ARKK Portfolio
I created this portfolio to test my methodology against Cathie Wood’s ARKK Innovation Fund. I handpicked 11 stocks from ARKK that I believe align with my framework of growth, innovation, and valuation.
Performance:
It’s too early to make a definitive call after just a few months, but so far, I’m outperforming ARKK. I’ll provide a full review of this portfolio every quarter.
4. Yearly Portfolio
This is a set-it-and-forget-it portfolio that I publish on January 1st each year. I don’t touch it for an entire year, and my goal is to beat the index.
2024 Portfolio Performance:
As of now, my 2024 portfolio is up 145%, significantly outperforming the market.What’s Next?
In a few days, I’ll be publishing my 2025 portfolio, consisting of 7–10 stocks. Stay tuned for the full breakdown and rationale behind each pick.
Market Outlook
Macro Indicators
Here’s what the current macro picture looks like:
M2 Growth: Still expanding as of November 2024. Positive.
Inflation Expectations: Under control. Positive.
10-Year Treasury Yield: Grinding higher. Negative.
Financial Conditions: Improving. Positive.
Credit Tightening: Fewer banks are tightening credit, indicating easing financial stress. Positive.
GDP Nowcast for Q1 2025: 1.8%. A modest number that could support further rate cuts.
Overall, the macro environment looks favorable for stocks, though risks remain if inflation spikes or growth slows too much.
Indexes
The Nasdaq closed the week up +0.76%, and all key moving averages are trending higher, signaling strength.
However, the Equal-Weight SP500 tells a different story: Many stocks are struggling under the surface, as evidenced by the declining 50-day moving average.
It’s a mixed market with opportunities for selective investors, but caution is warranted as many stocks are under pressure.
Looking Ahead
2024 has been a strong year, and I’m moderately optimistic about the opportunities in 2025. That said, I’m sure we’ll have rough corrections, although I don’t see a market crash or anything similar. I’ll be keeping a close eye on key macro and technical indicators to guide my moves.
I’ll be back with a special edition on January 1st, where I’ll reveal my 2025 portfolio picks and provide a final update on my 2023 portfolio performance.
For now, I’m staying focused on the companies and opportunities I’ve outlined above.
That’s all for this week!
Important: This is not investment advice. Please consult a licensed financial advisor before making any investment decisions.
Disclosure: The content has been reviewed using artificial intelligence to enhance readability and ensure grammatical accuracy.