My Portfolio

Although managing my portfolio or recommending stocks isn’t my job, I want to publicize my portfolio for a couple reasons:
1. In the spirit of full disclosure because I will write more about specific companies.
2. I respect those that do and it provides insights into how they think about the world.
3. Theory is important to understand, but putting it into practice is what matters.
4. This blog will increasingly be an investment journal to record my thoughts and actions.
5. If I want to manage other people’s money like I manage my own, it hopefully provides greater clarity, accountability, and credibility.

Disclosure: Do not take this or any post as investment advice and consult your investment advisor before making any decisions, especially based on a random blog you read. Although I hope mine is more helpful to intelligent investing than others’, investing is subjective and you cannot borrow conviction.

Portfolios are always a work in progress, and mine is far from perfect. Some days I’ll think a certain way, only to wake up the next day thinking how dangerous it is to think that way. For example, I hold a couple stocks that have EV/Sales multiples that would look high as P/E multiples. While reading through company filings, listening to management, and assessing the growth opportunities, I can justify my investments. But I wouldn’t be surprised if they get cut in half based purely on sentiment re-rating. My conviction would be tested.

To compound wealth requires patience and a long-term time horizon. My turnover is therefore pretty low. I prefer inaction to action, though inaction is in a way, action. I’ll make more errors of omission than commission, but will commit plenty of the latter. Staying grounded in your process makes decisions much easier to live with, right or wrong. New information causes constant fluctuations in value and price, so filtering through the noise with skepticism, humility, and mental models is critical. My circle of competence is small, but steadily growing. I read widely, and sometimes get overwhelmed by how much I don’t know. Even about the businesses I own! Yet it’s impossible, and likely unnecessary, to know everything. See the forest for the trees. Understand why the financial statements look a certain way, not how to forecast them.

I do not have a concrete methodology for position sizing; it is purely based on conviction. How imprecise and subjective. True! But is that not an accurate depiction of investing more generally? My conviction is based on my estimate of the gap between price and value, probabilistic discounting of the future, and assessment of business durability, adaptability, and optionality. Similar to other investors, I weight more heavily the potential downside than upside, meaning I focus more on what I could lose than on generating super returns. Buffett’s two rules of investing come to mind.

It goes without saying that both skill and luck influence returns. Skill encompasses buying companies for less than they’re worth, holding them during price fluctuations if your thesis remains intact, and reallocating elsewhere if not. Luck encompasses near-term price movements and unforeseeable events impacting the business. Therefore, investment managers should be judged over years and multiple cycles, not months during one part of a cycle. To me, risk is inherent to the investment and is thus permanent loss of capital caused by buying at a price higher than value, as opposed to volatility, which is simply the market’s evolving perception of value.

As I’ve gained more experience, my thinking has morphed from “this is cheap and will go higher” to “this is potentially undervalued if the business executes well against competition and demand grows alongside value-add.” I’d argue, without any evidence, that investors cap out at 80% confidence in an investment. Only Buffett and a few other legendary investors can get to +90%, but that comes with decades of experience understanding businesses, competitive dynamics, and human behavior. By “confidence” I mean shoving all your chips into the pot and knowing you’ll win. Because, for one, there are irreducible future uncertainties, and two, price. I believe Mr. Market is unlikely to offer similar prices as he has historically given the exponential increase in information, skill, and capital chasing similar opportunities. Maybe I’m not looking in the correct places, I don’t know. But I do know overconfidence can be costly.

The goal is to buy and hold quality businesses that offer an attractive risk-adjusted return and that will be worth multiples of their current market valuation. Arguments for and against owned stocks are plentiful, so seeking and evaluating disconfirming evidence is vital to arriving at the most accurate view of the world as possible. All we can do is get a little smarter every day.

I will update my holdings and returns quarterly.

TickerWeight
AMZN18%
GOOG14%
MA8%
DIS6%
AVLR5%
TTD5%
CRWD4%
MSFT4%
ESTC4%
NVDA4%
ADSK4%
FSLY3%
SPGI2%
LMT2%
NOC2%
BRK2%
Cash12%