PLTR - My $10000 'Importance' Portfolio: Concentrating The Portfolio For Success

2023-07-20 06:24:57 ET

Summary

• This month, my long-term investment portfolio consists of eight positions (88.96% stock exposure and 11.04% cash).
• The largest event this month is the sale of CVS, which I have decided no longer fits into the 'importance' portfolio.
• CVS does not seem to be contributing well in solving the vast complexities in the U.S. healthcare system, which is plagued by government oversight and high spending with little output.
• My focus for this portfolio is on companies with strong growth potential, high returns on capital, and a focus on product development which are factors that reflect a company's 'importance'.

Concentrating The Portfolio For Success

It has been a great month. All of my positions are up this month except for my smallest holding PDD Holdings. Furthermore, I am currently sitting with more cash given my full sale of CVS for a very small gain. In my opinion, which I discussed earlier in ' My $10,000 'Importance' Portfolio: The Start Of A New Series ', there should be no room for a company like [[CVS]] in my portfolio. Although the company has a significantly large amount of cash flow, is the company that important? I discuss more about my decision below. Other than selling CVS, I have added a small amount of shares in Sprouts Farmers Market, Block Inc, and Qifu Technologies. Going forward, my portfolio is concentrated for success and flexible with regards to new capital placements. One buyout opportunity that I have found lurking is that of Hollysys, which I may act upon during this coming month ( Seeking Alpha News ).

Furthermore, I have recently surpassed the 500-follower mark which is a huge increase from last month's 150 followers. I am so happy to continue gaining a following for these articles and if you enjoy then follow along for this 'importance portfolio' series as well as my new 'hunt for potential 10x returns' series.

My $10,000 Portfolio Setup

I have replicated my portfolio so that it has an original input value of $10,000. This makes the portfolio anonymous, general, and easy to follow and evaluate. This means that the actual number of shares and the value of the portfolio are not representative of my own, but the % of the portfolio are the same as well as the capital gain/loss % and dividend yield. Let's dive into the portfolio right away.

This month, my portfolio consists of 88.96% stock exposure and 11.04% cash. My increased cash exposure allows me to remain flexible during this time of uncertainty while collecting interest of over 4% from a money-market fund. Let's look into the capital gain % on each position separately as of July 19, 2023.

Other than these new store openings, Sprouts has laid low. The company's stock has steadily been ticking upward which is encouraging. In the next quarter, it will be interesting to see how the company's gross margins will be affected by a lowering level of inflation. If the company can retain its gross margins, then it's a sign that it has strong pricing power.

PDD Holdings (1.1% position; +1.7% unrealized gain)

• PDD Holdings: Internal Competitive Culture Can Fend Off External Competitors

On June 14th, Reuters published an article about a proposed law that removes Chinese e-commerce shipments from the exemption of tariffs ( Reuters ). The exemption, called the de minimis rule, allows imports under $800 that go directly to customers to avoid the 25% import tariff that the U.S. has on China ( Tax Foundation) . If this proposed bill were to go through, it would cause incredible damage to PDD's Temu, which is pushing to expand in the American market. (thank you to @winning life for tipping me on this article!)

In the wake of this news, PDD has announced that it is looking for several compliance roles to be filled in the Boston area. Among these roles is a "Senior Legal Counsel in Boston. The work requires maintaining a sanction screening protocol and policy for the platform, develop a product compliance system to screen merchandize, and make trust and safety policies, among other things." ( Seeking Alpha News ). In all, the news are alarming in the sense that the U.S. has not dropped its pessimistic stance on potential Chinese e-commerce practices (senators claim that goods may be coming from the Xinjiang region with forced Uyghur labor), but it is also positive to see that PDD is being proactive about working to prevent these tariffs. A 25% tariff could be a make or break for Temu's expansion in the U.S., after all.

Cash (11.04% position)

After selling CVS, I have an ample amount of cash on hand that is currently in a money market fund earning 4%+ interest. To me, this is a perfect place to have the cash for the time being. Moving forward, I will likely be beefing up my positions in my current holdings given they retrace downward. Furthermore, I have been eyeing a company called Hollysys Automation ( HOLI ) for a long time now and I am looking to take a position. The company has several times been involved in rumors of being bought out of the market. The current premium suggested is 60%, which would be a great gain. The downside risk is also low since the company is performing well and has a very strong balance sheet where 60% of the company's market value is made up of cash, with ~3% debt.

Conclusion

Thank you for reading the start of my new series which is aimed toward following my $10,000 portfolio. My goal is to provide monthly updates on how the portfolio has developed and how the portfolio companies are performing. As a summary of this month, I have sold off my whole $1,080 position in CVS which as a result increased my cash position by ~6%. Other than that, I have bought into Block Inc and Qifu Technologies with very small amounts. Overall, the companies in the portfolio are continuing to perform very well with roll-outs of new product offerings (Palantir, Block Inc, Tesla) as well as continued strong strategic performance (Sprouts Farmers Market, John Deere).

Reach out to me if you have any questions, comments, recommendations, thoughts, or interesting discussion points!

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