2022 is over and the S and P 500 is down 18%. This year was a year of reckoning for many investors. Lot of growth companies got cut in half for a plethora of reasons. Many will cite the fed rate hikes as the reason but honestly, who can really tell. 2022 was a year where values reattached to fundamentals. Companies could not grow into the lofty valuations they rocketed to in 2020 and as such, the market had to readjust and temper expectations for all investors. Myself included. James Capital ended 2022 with a YTD (year-to-date) return of 31%, almost double the S and P 500. As of 12/31/2022, here is the list of current holdings.
In the fourth quarter of 2022, I exited a few positions. A complete overhaul to be honest. In the next few paragraphs, I will mention which positions I exited and a short summary for doing so.
Tesla. (Made a profit). This company had been a part of my portfolio for almost two years. Got in at the end of 2020 and held all the way up and almost all the way down (close to my cost basis). At one point, I had been almost 200% up in this position with “stock pundits” on CNBC mentioning that this stock is one for the future. Well, on Dec 20th I sold my whole position. I sold because while I believe the company is well positioned for the future, there will be some downward pressure on the stock in the foreseeable future due to the founder, Elon Musk taking out a margin loan against his TSLA holdings to fund his purchase of Twitter. We can go into how much of a train wreck that Twitter deal is for Musk but that’s for another conversation. I sold because I found an opportunity to take some profit and diversify my capital into something that’s a little less volatile and not under the duress of major banks.
Shift 4 Payments. (Made a loss). This is another company that I have been holding for over a year. This payment processing company is well-positioned for growth but what led me to sell was the fact that the CEO Jared Isaccman feels very much like a part-time CEO and is very close to Elon Musk, getting his first preferences on deals for consumer payments from him e.g., Starlink (Elon Musk’s other company). Feels very incestous. I’ve been also tracking the company’s SEC filings and it seems like there is a lot of insider selling over the past year. This does not sit well with me that individuals who are part of the board and management are selling shares on the open market to a company that went public about 2 years ago. Now should be the time to double down and invest in the future of the company but it seems like the opposite is happening. I also saw it as an opportunity to do some tax loss harvesting.
Paypal. (Made a loss). This company feels like the grandfather of fintech. In the past, PayPal has been revolutionary in peer-to-peer payment for the consumer. They even tried within the past years to stay young by buying Venmo and bring it into their platform. Think botox and anti-aging cream ad nauseam. The company needs a complete overhaul and needs new leadership and direction. This was also one of my worst performing assets over the last year and again, this was an opportunity to do some tax loss harvesting. Good riddance.
Nvidia. (Made a profit). This company is the bedrock of almost all technological advancement for the next decade. There’s no logical reason to have sold this position except for diversification. Something about eggs and baskets. I was not in the red year-to-date in this position but my since my overall investing strategy for 2023 and beyond is to take on a more hands-off approach, my goal was to reinvest this capital into a mutual fund that has this stock as a 23% weighting (FSELX). Genius! The oracle of Omaha!
A few mutual funds (irrelevant to mention, all loses lol). These mutual funds had a lot of overlapping with some of my other positions. They were also not performing to par so, it just made sense to let them go. There isn’t much more of an explanation to give but to point you to an easy way to lose money in the market. Epic failure.
I consider these moves in the fourth quarter a complete overhaul for 2023. I’m definitely not the type to make too much moves but you can definitely see a theme here. More movement out of single stocks and into diversified mutual funds. Set the automatic investment and relax (or drink coffee, read, run, and travel). I still find that there is a lot of value in updating my community on the moves every three months but there will be a lot less stock picking in the future because while stock picking can be fun, it can also be very expensive. We’ll see if I get that right in Q1 2023.
As always, thanks of reading and share with those interested in learning!
Daviel James,
James Capital.