The first three months of 2022 has ended. We’ve officially been in this pandemic for over two years. The idea of James Capital was founded in the few months after March 2020 and while I’ve learned a lot but I have also lost a bit. Investing knowledge truly comes with time and experience and for that reason today, I’m announcing a new strategy at James Capital. As usual, I’ll talk about the positions I entered, the positions I exited, my performance against the benchmark, and will end with how I plan to invest going forward. So, without further ado, here we go!
Within the first three months of 2022, I added positions in FSHOX, FSPHX, FSPCX, FSMEX, and FXIAX. Within those same three months I exited, AMAT, WRBY, and UPST. I’m sure you can see a theme here, don’t worry, I will get more into this later in the newsletter. My current performance year-to-date performance is -2.63% as opposed to the S&P' 500’s -4.63%. In the past newsletter, I spoke about how important it was to temper expectations about continuous growth and looking back, I was quite right. The first two months in 2022 were horrendous. The market dipped and a lot of growth stocks that were lifted to obscene valuations in 2021 were reattached to their fundamentals.
In my previous newsletter I also went into detail about the companies that I opened positions in and why they were companies that I wanted to hold for the long term. While my thesis on those companies have some validity, the truth is that I could not stand the day to day swings on how the stocks performed. The only companies that I currently own in my portfolio outside of mutual funds and index funds are, TSLA, FOUR, NVDA, PYPL, and SHOP. (The full list of my holdings will be updated on www.davieljames.com at the time of this publish.)
So, going forward, how do I invest from here. Well, here’s what I’ve realized. My time horizon has given me an edge and at the current moment I’m overshooting my CAGR (compounded annual growth rate) goal by almost 500 bps. There is research that active managers constantly underperform the benchmark, meaning, stock picking isn’t always the best way to achieve the highest return and I’m all about the highest return possible. This had led me to focus less on picking stocks and increasing my positions in thematic mutual funds that have performed well in the past. It has also led me to increase the percentage of cash I invest into securities at the end of every quarter. This does not mean that I will forgo picking individual stocks, it just means that the threshold for me to pick an individual stock has now increased. I must clearly see its value to make an investment for the future. These future newsletters won’t be as long as the ones in the past where I would go in-depth about the new positions that I opened but more a performance review on the companies that I own and the rate at which I continue to deploy cash. As the great investor Warren Buffet says, “I made my first investment at age eleven. I was wasting my life until then.” So, start investing today!
As always, thanks for taking the time to read this quarter’s Performance Newsletter. We’ll see you in the next few months for the Q2 2022 Performance Newsletter update.
la vie en rose,
Daviel