2022 Portfolio Update

Dear subscribers,

The below is a summary of the performance of our portfolio during Q4 2022 and Calendar Year 2022. We initiated our portfolio on 28 January 2022.

What you should know before reading our quarterly portfolio update?

• Our portfolio is just shared for transparency purposes. This is not a financial or an investment advice. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

• Past performance is not indicative of future returns.

1. Performance

Our yearly 2022 total return as of 31 December 2022 was negative 9.54% whereas the Q4 2022 return was 1.83%.

Although we did better than the market in 2022, our portfolio traded in the negative territory. As of 31 Dec 2022, S&P 500 fell by 19.44%.

2. Portfolio Summary

The portfolio as of 31 December 2022, consists of 12 stocks with GOOGL 0.00%↑ and META 0.00%↑ being the largest positions with an allocation of 8.4% and 7.7%, respectively. ZM 0.00%↑ which is our smallest position accounts for less than 2% and is considered a tracking position.

During the latest quarter, we deployed more cash reducing cash allocation from c.61.5% to c.43.7% due to the addition of three stocks ($NVS, $EVO.ST and $POOL) and due to an increase in existing positions (META 0.00%↑ , KLAC 0.00%↑ , ABNB 0.00%↑ and ADSK 0.00%↑ ). Given the recent increase in ABNB 0.00%↑ and ADSK 0.00%↑ holdings, these are no longer considered as tracking positions.

The best performing stocks in our portfolio were Greggs Plc and KLA Corporation with a gain of 28.0% and 18.0%, respectively. The worst performing stocks were PayPal Holdings and Alphabet, down by 45.1% and 29.3%, respectively.

Source: Broker, StockOpine analysis

Source: Broker, StockOpine analysis

3. Portfolio movements in Q4 2022

Why did we buy the new stocks?

1. Novartis AG – Novartis operates in an industry with high barriers of entry and we believe that its potential transition into a pure-play innovative medicine company, its focus on 5 key therapeutic areas as well as its strong pipeline of blockbuster drugs, makes Novartis a strong candidate for high returns.

   Biggest risk– Weakness in patent validity resulting to early entry of Generics and/or Biosimilars.

   Write up: Novartis AG - Write up

2. Evolution AB – Operating in a highly fragmented market, yet EVO is the undisputable leader in Live Casino solutions with superior margins and returns on capital compared to peers. Given the total addressable market and its strong relationships with key gaming providers we believe that Evolution can be a long term winner.

   Biggest risk – EVO or its clients not keeping up with complex and inconsistent regulations across jurisdictions.

   Write up: Evolution AB – A ‘sin’ stock with healthy returns

3. Pool Corporation – POOL is a leader in a relatively consolidated industry with a fragmented consumer base and strong track record of execution. Its scale provides POOL with significant competitive advantages, evident by market share gains and operating margin improvement over the years.

   Biggest risk – Tighten monetary policy impacting discretionary spending (new construction and refurbishment).

   Write up: Pool Corporation - Write up

Why did we add to existing positions?

1. Airbnb – The leader in alternative accommodation buzzled investors with its Q4’22 outlook resulting to a drop in price. Nothing appeared to be a thesis breaker from the Q3’22 earnings announcement. Macro environment can impact results in the short run, however, the business model remains strong with improved profitability and upside from potential recovery in the APAC region.

   Most recent memo: Airbnb - Earnings Review Q3’22

2. Meta Platforms – Following Q3’22 earnings announcement, price per share declined below $100, therefore, we decided to increase our position as we do not think that investments in Reality Labs come at all costs. This was also justified by the November layoffs.

   Most recent memo: META – Can it go lower, or did we hit a bottom?

3. KLA Corporation – When the new export rules to China were introduced by US in October (KLA’s sales to China exceed 25% of its Revenue) price per share fell at $260 levels. Given its appealing valuation and considering benefits from CHIPS Act and other secular growth factors (AI, 5G, Electric Vehicles etc.) impacting KLA, we decided to increase our stake.

   Write up: Deep Dive KLA Part 1 & Part 2

4. Autodesk – Autodesk is the leader in CAD (Computer Aided Design) software with high switching costs and strong pricing power. In the past quarters, there were no surprises with the company and the recent pullback in its stock price offered us the opportunity to add to our position at prices that we believe are more in line with the intrinsic value of the business.

   Write up: Autodesk - Deep Dive

Please note that we may have more write ups for each stock than the ones shared above. If you are interested to read more just check our page.

Thank you for reading our newsletter and for being a subscriber!

You can also find us at Commonstock and on Twitter @StockOpine.

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Source of data and methodology

• Portfolio allocation is provided by our broker.

• YTD Performance is provided by our broker and is measured using the time weighted rate of return (“TWR”) which eliminates the distorting effects on growth created by inflows / outflows. Take a time to read this Investopedia - Definition.

• Quarterly performance is calculated by us using the monthly TWR provided by our broker.

• S&P 500 performance is obtained from Yahoo Finance.

Disclaimer: The team does not guarantee the accuracy or completeness of the information provided in the newsletter. All statements express personal opinions based on own financial and business analysis. Any estimates or forward-looking statements made are inherently unreliable. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned.

The content of our newsletter is not a trading or investment advice and we do not provide any personal investment advice tailored to the needs of any recipient. The information provided should not be considered as a specific advice on the merits of any investment decision. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision.

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