2024 Portfolio Update
Total return of 17.9%.
Another year has passed, and both our portfolio and newsletter continue to move in the right direction. Our 2024 performance came in at 17.9% while our subscriber base grew from 3,213 at the end of 2023 to 8,427, an impressive 162% increase. We are deeply grateful for your continued support in helping us grow, and we remain committed to delivering even more value to you in 2025.
Before diving into the details of the 2024 Portfolio Update, here’s a quick recap of the long-form articles we published this quarter—just in case you missed any!
Adobe: Is AI expected to kill the company or help it thrive?
Leslie's, Inc. (LESL): Swimming Against the Current - Buy the Dip?
Estee Lauder: New Leadership, Insider Buys, and a Brighter Future?
Google Cloud and Beyond: Can Alphabet’s $2 Trillion Valuation Soar Higher?
1. Another Year Older, Even Wiser
In this year’s update, we want to highlight two key market events that stood out to us and then provide a broad forecast for 2025.
a. August 5th
On this day, the market took a sharp dive: the Dow Jones experienced its worst day in nearly two years, dropping 2.6%, while the S&P 500 fell by 3% and the Nasdaq by 3.4%. Fears of a recession, triggered by the July jobs report, led to a global sell-off. Yet, by the end of the month, the S&P 500’s total return was up 9.05% from its August 5th low.
Key lesson: Panicking is your worst enemy. Staying out of the market during such moments can cost you. Drawdowns are an inevitable part of investing, but history shows the stock market trends upward over the long term.
What we did (as communicated in the premium chat): On August 5th, we exited FactSet, trimmed Google, and freed up cash to deploy if volatility persisted (which we later put to work). Simultaneously, we added to Amazon and Adyen. Whether it was luck or not, our moves proved effective.
Source: Koyfin (affiliate link with a 20% discount for StockOpine readers —> annual StockOpine members can benefit from a 3-month Free Trial)
b. Elections (5th of November)
As shown in the chart below, cryptocurrencies experienced a meteoric rise in a short period following Trump’s election, attributed to perceptions of his pro-crypto stance. However, it’s important to acknowledge that what goes up can come down. The current market displays signs of euphoria, and it’s essential to approach what you see online with caution. What happens if Trump shifts his stance?
That said, can you make money in crypto? Absolutely! Allocating a small portion to cryptos in a diversified portfolio can make sense. However, you need to exercise caution and, at the very least, ensure you understand the risks involved (just our two cents, not financial advice!).
Source: Koyfin (affiliate link with a 20% discount for StockOpine readers —> annual StockOpine members can benefit from a 3-month Free Trial)
c. Expectations for 2025
We expect 2025 to continue as the ‘Year of AI’, but we anticipate that investors will demand tangible progress in monetization. Stocks that underperform could be harshly penalized, making it a year of separating winners from losers—though this remains a long-term game. We believe our portfolio, which includes a number of the big tech companies among others, is well-positioned for the year ahead.
AI also depends on managing costs, and energy consumption driven by computing power is a significant expense. As AI continues to grow, we can expect energy demands to rise, benefiting energy stocks. Nuclear power is an interesting energy source due to its high energy density and low carbon emissions, though safety concerns remain a challenge. It’s worth noting that Google is moving towards nuclear energy, joining other big tech companies in the shift.
Currently, StockOpine's portfolio is not focused on energy, as we consider it a commodity. However, we will examine energy opportunities in the year ahead to see if any align with our strategy.
Finally, there’s growing excitement around robotics, and Nvidia recently announced the Cosmos World Foundation model to advance "Physical AI." With autonomous vehicles in mind, we believe Google will continue to push forward with Waymo, expanding into more states and potentially leveraging its technological edge in other robotic applications.
Without further ado, let's dive into our performance analysis and the rationale behind this quarter's transactions.
2. Portfolio Performance
As of December 31, 2024, our total return for Q4 2024 was 1.5%, bringing our yearly return to 17.9%. This lagged the S&P 500's yearly return of 25%. It’s worth noting that the primary driver of our "underperformance" was not holding Nvidia, which contributed 5.6% to the S&P 500’s total return. Excluding Nvidia, the index would have returned 19.4%.
Since inception (January 28, 2022), our cumulative return is 45.7% (annualized at 13.7%), outperforming the S&P 500's cumulative return of 38.9% (annualized at 11.9%).
Source: S&P Dow Jones Indices, Broker, StockOpine analysis
3. Portfolio Insights
From this update onward, we have decided to include additional key weighted metrics for our portfolio. These metrics will help us evaluate the quality of our holdings and identify underperformers. In the notes below the table, we briefly explain the importance of each metric and outline the minimum thresholds for our portfolio. While individual companies may occasionally fall below these thresholds due to short-term challenges, the overall portfolio should consistently exceed the minimum accepted ratios. If not, a significant portfolio revamp would be necessary.
Source: Koyfin (affiliate link with a 20% discount for StockOpine readers), StockOpine analysis
Notes:
EBIT Margin % (LTM): Indicates healthy profitability, suggesting efficient cost management and potential pricing power.
ROIC (LTM): Measures the effectiveness of capital allocation, often reflecting strong competitive advantages.
Estimated Revenue CAGR (3Y): Ensures that our portfolio is tilted toward companies with projected growth exceeding GDP over the next three years.
FCF EV Yield (LTM): Highlights potential undervaluation (higher yields). Growth companies like big tech, which reinvest heavily, may show lower yields. However, this does not necessarily imply overvaluation, as growth itself holds intrinsic value.
EV/EBITDA & Targeted Upside: These are informative metrics:
EV/EBITDA provides a sense of the portfolio’s overall valuation.
Targeted Upside reflects analysts' projections of stock potential but does not directly influence our decisions.
As of December 30, 2024, the portfolio consists of 23 stocks,