📊 Portfolio update May '24
Hello friend! 👋
My name is Yorrin, also known as ‘‘Fluentinvalue’’.
I am pleased to have you back here for another portfolio update.
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As mentioned in my previous portfolio update, I am changing my portfolio. This results in the loss of positions, adding new positions, costs for adding and removing positions, and overall lack of profitability, but that is okay!
I am investing for the long term. If this means I have to give in on the shorter term, that is fine by me.
May has been another month where changes have been made. I have become more strict in my investable universe and the requirements I like to apply to businesses. This resulted in some big changes, let us talk about it.
Down here is a list of the transactions from May:
I sold out of Otis Worldwide, Graco, Fortinet, and Lamb Weston.
All these companies are in my opinion still wonderful. Each benefits from a solid MOAT, a solid sector where growth is expected, and overall decent financials.
So, why did I remove them?
Mays dropouts
Otis Worldwide does not fit in my investable universe because the return I would like for my portfolio can not be found at Otis Worldwide. Otis Worldwide benefits from the maintenance it does and other services it offers. Of course, safety regarding elevators and escalators is crucial for everybody and is even recommended, giving Otis Worldwide a solid edge. The sole reason is that I am certain the results will not match my requirements.
Fortinet also has a solid moat, an attractive industry, and loyal customers, and is poised for success in the upcoming rally for increasing demand in the new online world. With Fortinet, the issue for me is that I do not align with their vision for now. This discrepancy resulted in me selling out of the company. This does not mean that I might be on board again at a later point, but for now, I do not align with its future outlook.
Graco is the same story as it is with Otis Worldwide. Graco is operating in a niche, generating reliable returns, and gaining market share, but the results I am looking for as a minimum can not be found with Graco. Graco also did not pass my quality test, resulting in a dropout of my portfolio.
Lamb Weston has a lot of debt and is operating on a big debt level, which I am not a fan of. Lamb Weston is a market leader and will perform solid, I am sure of this. However, the current risk that comes with Lamb Weston is not something I am comfortable with, resulting in a complete dropout of my portfolio.
I added some new wonderful positions that I am pleased with and thrilled to have as a position.
Mays new additions
In May I added some serious quality compounders to my portfolio, let us talk about it in short.
Ulta Beauty is one I am thrilled about! Ulta Beauty operates in the beauty segment, the lower-end side of beauty. Ulta Beauty has a wide range of products it offers, and extremely loyal customers (95% are part of Ulta’s program), also provides wonderful in-store services and has shown to be a solid investment during tougher times worldwide.
Ulta Beauty also wants to expand its operations over to Mexico, creating a new market where it can operate. Adding to this, Ulta Beauty is showing us that management is picking very profitable projects, shown by its high ROIC. Ulta Beauty is a quality compounder and I am happy to have it in my portfolio.
Lululemon is also a new quality compounder that I have added to my portfolio. Lululemon operates in the high-end sector for yoga and sports. Lululemon offers a solid range of products on the more expensive side. This is reflected in its margins, Lululemon benefits from a 58% gross profit margin, which is high compared to its competitors who have an average of 30% gross profit margin.
Lululemon also benefits from a cult-like following. Lululemon shoppers are big spenders. Lululemon sponsors mentors and instructors, creating lower marketing costs, to push its products along with clients of those people. Lululemon even sometimes changes its stores into places where people can do their yoga and sports, creating a close community. Lululemon caught my eye and it never left, I am pleased to have Lululemon.
LVMH Moet Hennessy Louis Vuitton must speak for itself. This premium brand, and its sub-companies, provide luxury products for consumers. LVMH Moet Hennessy Louis Vuitton benefits from high margins, pricing power, brand power, and networking power. LVMH Moet Hennessy Louis Vuitton has a solid MOAT and, to this day, has been acquiring new businesses that fit their needs, creating more shareholder value. This luxury segment will never die out, everybody wants to show their status and they do it via showing off LVMH Moet Hennessy Louis Vuitton products.
Accenture is a consulting firm. Accenture has no debt and extremely good margins for its sector. Management is picking out solid projects, creating more shareholder value, high ROIC, good capital allocations, recently did a good acquisition, and has a vision for the long-term. Accenture was undervalued due to the recent drop, creating a solid buying opportunity for me.
Are there stock I am curious about and might be adding to my portfolio? Let us chat about it!
Stocks in my watchlist
As of now there is Adobe.
Adobe is a company I would love to be part of my portfolio. But, at the current levels and multiples Adobe is just too expensive for me. I hope to see Adobe hit the $430 levels and I would happily add this wonderful company to my portfolio.
Outlook
June will be like this month.
I will be reallocating my capital to fits my requirement, requiring me to make some more actions in my portfolio. I am aiming for July to be the start of a quit, less active, and more peaceful portfolio.
Performance
Last month I performed in line with the MSCI All-World Index, a small underperformance. However, like I said in my previous portfolio update, this will continue until I have tweaked my portfolio to my liking.
I am still tweaking and I think I will be done by July. Actions will decrease then, giving me more space to ramp up my portfolio performance. As I mentioned earlier, I am here for the long term, so giving in on the short term is something I am not worried about.
Down here is the the performance since I started with DeGiro, my current broker:
As you can see, I am in line with the MSCI All-World Index.
As of now this is not a issues to me. I am reallocating my capital to, hopefully, outperform the market the coming years.
Disclaimer
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