Portfolio
Note:
% of portfolio uses market value.
Cost allocation denotes my cost basis as a % of full position size. 100% means it is a full position, whereas 100% + denotes an overweight position.
Performance
Starts: $NVTA
Adds, Sells: nil
For prior articles:
Commentary and Thoughts
*TradingView compare feature allows the visualisation of my portofolio’s performance as of any time, indexed to 0%. This picture shows the performance of my stocks’ MTD in June.
Portfolio Summary
The optimism that had flowed over from late May into June had a great impact on my contribution timing. On a monthly basis my partner and I try to put a certain amount ($x) into stocks. Generally, if markets broadly correct that will be my trigger to use some of next month’s contribution to buy the dip in my favourity stocks. While over the long run we can’t time the market, there are strong differences in alpha when you buy $ROKU during mid-Feb at $460 vs $320 (late-March, mid-May).
I am currently cautious of the optimism in the stock market. When $NVDA can appreciate from $470 in March to ~$800 in late June for a 62% price appreciation (~$180b increase in market cap), it reminds me that while stocks can always stay higher for much longer, the potential for another 60% price appreciation is quite unlikely (though it can happen). I’m no market timer, and won’t try to raise cash by trimming my portfolio. But, I do foresee contributing a lower $ into equities, thereby also raising cash if and when the correction comes.
You either die a growth stock investor, or live long enough to see yourself get concerned about valuations.
To clarify, valuations are important; they just aren’t important to the evaluation of the business. Valuations can stay stretched for long periods of time, as we’ve seen in this new normal. As stock prices go up, it must mean that future expected returns go down (something something present value of discounted future cash flows…)
Going back to my long-term investing objective:
To get outsized returns over the long term.
I am optimizing my decisions around my objective, and am therefore accountable for it. For your investment target, you must hold yourself and the decisions you make accountable. If over the long-run my portfolio can’t outperform market indices, I must acknowledge my shortcomings, set aside my ego and invest in indices. That won’t be an easy loss to take, so I’ll do everything I can to make sure I outperform the index for as long as I can.
Portfolio Changes - Invitae ($NVTA)
Invitae represented my first foray into biotech (my blanket term for biology, genomics, genetics, and other similar terms). Thinking about the entire biotech scene, my bets are centered around the enablers. We know that the main goal of biotech is centered around the eradication of diseases and genetic disorders. There are alot of companies developing actual drugs that can achieve that goal. As I understand the state of the markets now, clinical data is what drives stock prices for those companies.
It’s an opportunity to be seized, surely. However, I’m no industry expert. Even though folks at 7investing have provided many informative articles and insights about the biotech companies (ref link here for 1 month free), its still too early for me to invest in those companies. All I literally know about biotech is the central dogma of molecular biology:
DNA makes RNA makes Protein
These leaves the actual enabler companies that I want exposure to. In layman’s terms, Invitae provides genetic testing to the masses, aiming to leverage on test volumes to build a valuable network of genetic information, which they can use to affect clinical and healthcare outcomes of patients. Essentially, in democratizing genetic testing (by lowering genetic test costs), Invitae is able to map precisely the genetic profile of the test population, providing insightful data and annotations, to the patients themselves and their doctors to advice on possible next steps. Furthermore, in an industry that has just recently sequenced an entire human genome, I am betting on therapeautic companies finding millions of patient genomic information (from Invitae’s tests) extremely valuable.
I have not finished my research on Invitae, and hence it is currently a starter position. My next potential companies to research are (not in order): Pacific Biosciences ($PACB), Oxford nanopore (rumored to IPO this year), illumina ($ILMN) and Ginko Bioworks (going public via SPAC). Thoughts?
Interesting reads
I think I spend an unhealthy amount of time on Twitter, so I try to make the best out of it via lists and good content consumption habits.
This means I sometimes find streak after streak of good content, but only sharing it via Twitter seems like a waste. Therefore, I’ve collated some reads I found exceptionally good over the past month, and hope you benefit (if you haven’t already read it). I will try to do a quick 1-2 sentences on it as a TL;DR.
Moderna business breakdown here (Business Breakdowns show). Podcast ~70 mins long. Talks about Biotech in general (useful to learn if you’re new and want exposure), before diving deep into fundamental aspects as well as future bull catalysts. I like that the transcript was available; and was able to listen at 1.5x speed. Speakers are very smart and experts in the field.
Lyn Alden’s bullish thesis on the global energy market. Very long read, but the comprehensiveness of it is underrated, as well as its key points. As the tweet says, it is rather difficult to replace fossil fuels, especially as a) demand increases with population, b) low energy ROI means countries whose citizens *need* electrictiy resort to low-cost fossil fuels (coal, oil and gas) and c) renewable energy may not be green (fan blades on wind turbines can’t be recycled). Leads to a recommendation (not investment advice) of Energy and Uranium ETF.
Michael Mauboussin’s report on intangible assets and the use of base rates. In a nutshell, he argues that base rates measure what has happened in the past, and may not be easily extrapolated to the future. He uses the role of intangible assets to provide good context and examples, showing that companies via intangible competitive advantage (e.g. software) will experience greater potential capital return, but with greater left/right tail distributions, as the risk of obsolescence and irrelevance increases non-linearly.
InvestmentTalk’s interview with Christopher Seifel. For a man his age (likely younger than me), he is astoundingly clear about his approach, thought process, and mental models. I have not seen (in recent memory) someone able to articulate thoughts as clearly and as insightfully as he did. Of course, he’s not any investing legend, but his approach to mental models is crucial for anybody wanting to learn how to learn.
Arthur Hayes’ article on the fragility/anti-fragility (my words) of the financial system around us. Infamously renowned for creating the world’s first 100x leverage crypto exchange BitMex, he now spends his time writing thought articles, and I thought this article deserves a read. The article refers to how when Traditional Finance (TradFi) system crumbles, governments must swoop in to help by QE-related measures (see 2008), whereas with a near 50% drop from its highs, Bitcoin (and other crypto-DeFi spaces) are working exactly as they intended.
Enjoy!
Unfortunately the list above is skewed towards the month-end (recency bias). Going forward I will compile a more thougthful list of reads that may benefit you. I think it’s always good to read a diverse bunch of topics aside from the industries you are currently invested in (or investing in general). Though I must admit, I don’t read as often as I should.
Crypto
I’d like to be upfront about this. Not sure if anybody’s interested in this. My crypto portfolio isn’t doing very well right now. I don’t think anybody’s portfolio would be great if they had made no portfolio changes as BTC went from 65k to 30k.
There’s no use crying over spilt milk. I am still largely invested, with about 21% in cash, hoping to buy the dip if it ever comes (not that it hadn’t arrived). I’ll admit that seeing Bitcoin at 65k made me more euphoric than I ever did. It really changes your psyche when you see actual life-changing sums of money. Even now with crypto fears seemingly behind (or is it?), I find myself hoping for the dip to come. Abstracting myself away from this situation, its exactly the retail mindset of the retail investor that will lose money over the long run.
Hope has no place in investor’s mindset. What determines investing success is your actions and inactions. There’s no use hoping for something that when it comes you are somehow unprepared for it.
Fail to plan, plan to fail
Rather cliche, but it’s true. I could have done something with my crypto portfolio when prices hit $x (such as taking profit). I didn’t. That’s on me. It shined a particularly sober light on what I think is one of my key weaknesses.
Decision making impairment
It’s not nearly an impairment, though the title does make it sound like i’m mentally incapacitated, which is a sort of impairment. Having had plenty of time to reflect on my mistakes (thanks to my overthinking) I realised that across my equities and crypto investments, I’ve not had a strong, solid framework for decision making. I tend to make decisions off-the-cuff, kind of like deploying $$$ as growth stocks corrected from Mid-Feb to May.
While the mantra was clear:
Trust your conviction to bet more when the opportunity arises.
It was in the spur of the moment. Though that led me to great entries for my highest conviction stocks, over the long run these spur of the moment decisions will likely harm my investing success more so than it will help. It’s kind of like trusting your brain to be 100% rational in times of great volatility (which is where most investors feel great uncertainty). After reading Thinking Fast and Slow by Daniel Kahneman (would recommend all investors to read this book), I think the brain is not as well suited for an activity that requires you to stay level-headed as everybody else is losing their minds.
There’s where the decision-making framework comes in. Knowing that you (or your brain) can’t be 100% rationale, we ought to create a framework that can make those decisions for us, even as the stock market swings like a pendulum from pessimism/disappointment to optimism/greed.
Sadly, while I preached the idea of buy lists and on-sale lists, I did not follow through on that thought.
Watch as I do, not as I say.
It’ll be at the top of my to-do lists in the coming week or two. Something tells me the markets (growth stocks especially) being optimistic is quite the understatement, and perhaps there may be another correction, I hope! 🤣
A rising tide lifts all boats.
Conclusion
Thanks to all who read thus far. Writing things down and editing it for the public eye allows me to 1) treat it as a journal to reflect on my investing decisions, 2) interact with what little followers I have (appreciate every single one of you), 3) provide something of value to anybody who reads these and 4) sharpen my writing (and communication) skills. See you next month!
- Joey