Nov 2023 - The Grand Plan
In this month’s journal, I will present my plan for the portfolio rebalancing that I will be executing next month. It helps explain a rather dramatic move I have made and reveals what my next venture may be. I will also comment on the Cybertruck launch and other relevant news, including the OpenAI drama.
Overview
Unlabeled on the chart:
In Consumer: Starbucks (1.12%)
In Industrials/Manufacturing: 3M (0.5%)
In Technology: Adobe (1.0%)
Moves
On November 24th I sold my entire holdings of Unity (U) at an average price of $29.00 per share, marking a loss of 46.2% Note: This was done for purposes of tax loss harvesting and for moving the position to a different account. The plan is to reopen the position at approximately the same share count and size in December - hence why Unity is still listed in the Portfolio Overview.
Performance
My portfolio value increased by 9.44% in the month of November, outperforming the Dow Jones World Index up around 8% in comparison.
Dividend overview
| Name (Ticker) | Received | Amount (USD) |
| AbbVie (ABBV) | Nov 16th | $49.07 |
| Realty Income (O) | Nov 16th | $33.44 |
| Starbucks | Nov 27th | $11.35 |
| Total | Nov 2023 | $93.86 |
I received a total of $93.86 in dividends before taxes for November 2023, an increase of 31.63% compared to the same month last year at $71.31.
Commentary & Review
Tax loss harvesting & Unity
Following through on a potential end-of-year portfolio rebalancing that I mentioned in my previous update, I have made my first move: About a week ago I sold entirely out of Unity, the only sizeable position I had in the red, in order to do a little tax loss harvesting. I will be granted a tax deduction equal to my losses, which I can count towards the gains I have had this year. Selling out of this position will cover the taxes I would have to pay on my full-year dividends, as well as some of what I have planned to do next (and which I will cover in a bit).
You see, I have not lost faith in Unity - In fact, I am excited to see the company inch ever closer to true profitability each quarter and excited about the more product-focused direction their new CEO, Jim Whitehurst is taking the company. Hence, the plan is to repurchase my shares in the company following a certain grace period, and ideally at an even lower price point. Another technical reason for this move is that I will be moving the position into a different type of account, providing slightly more favourable future taxation.
Whitehurst partook in his first quarterly earnings call on behalf of Unity on November 9th. I had high hopes for a new change of pace, and I was not disappointed. While the report itself was somewhat lacklustre (partly due to the recent crisis which led to a change of leadership), Whitehurst was optimistic, quick to answer questions, straightforward and honest. The stock took a big dip right at earnings release but recovered nicely throughout the call and flipped to green the following day. It seems Whitehurst is the kind of guy to just rip off the bandage now in order to move on. I like that approach. The company’s CFO also shared that they will be making changes to the product portfolio THIS quarter. I was left with the feeling that we can expect a much higher level of transparency going forward, which the company has not always excelled at.
The rest of the plan
While the sale was for technical reasons only, it did still feel a bit strange to make a move like this, for a stock I usually talk up this much. It was the optimal move, but sentimentally it felt wrong. I must also apologize to those who follow my trades directly, to whom this may have signalled surprising doubts about their own investment in the company. Rest assured though, the plan is to reacquire my position within long - possibly even as early as today, December 1st. The whole thing is part of a greater plan to optimize and rebalance my portfolio.
The next step I have planned is to mirror this move with what was once called my Dividend Portfolio. Since the beginning of this year, with a change of strategy, I have publically moved away from splitting my portfolios into Growth and Dividend. However, behind the scenes, my accounts have still been organized in this way. I plan to do away with this now and consolidate. For this reason, I will sell out of AbbVie (ABBV), Broadcom (AVGO), Starbucks (SBUX), Bank of Nova Scotia (BNS) and 3M (MMM). The first three I will take significant gains on, while the latter two will serve as another tax deduction. Like with Unity, I plan to reacquire stock in these companies within long. In contrast to what I am doing with Unity, I may however change the size of these positions in order to make room for new investments of the same sector. I have teased Novo Nordisk (NOVO-B), Visa (V), Otis (OTIS) and Costco (COST) for a while now as my top picks to buy, and these are all likely to be part of the mix.
The third step of my plan is to exit Realty Income (O) and REITs category entirely, despite having increased my stake in it over the past few months. This is for the happy reason that my girlfriend and I have been granted approval from the bank to purchase our first home. The idea is that my exposure to the real estate sector, through this future acquisition, will dramatically increase and that it makes sense to take out what I have saved up here as part of the down payment. Now, we have not actually found our dream home yet, but the plan is to pull the trigger as soon as we do.
Tesla and the long-awaited Cybertruck
The fourth and final part of this rebalancing of my portfolio will be to decrease my stake in Tesla (TSLA) by around 10%. This is where the deductions achieved from tax loss harvesting will really come in handy, as I will be selling shares at 1200%+ gain. I began reducing my exposure to Tesla early last year, selling a few percent, almost at its peak of what is $330 per share split-adjusted. This time, I will be selling shares at around $250 each, which is outrageously cheap in my opinion. I hope to squeeze out as much as I possibly can in a potential December rally, but the clock is ticking, tax optimization-wise, with the new year soon to come. These funds will like with Realty Income, go towards a future down payment on our first home. It is likely that I will be selling more shares in the new year for this same reason.
While I will admit that the continued erratic behaviour of the company’s leader has put a damper on my enthusiasm, I cannot for the life of me, not see Tesla continue to grow. When I look at it objectively, I see a great company, doing things differently and positioned first in a market that is only now starting to take off. It is one of few megacorps with basically zero debt, and the only automaker or even energy company to (ever?) prioritize like that. This, I think will mean so much, in the high-interest rate environment of 2024, when competitors on all fronts, whether it be legacy auto, new EV makers or renewable energy companies will have to renew massive and expensive debt, while Tesla will not.
Last night, Tesla released its Cybertruck, which has been in the making now for over 4 years. First deliveries took place, while long-awaited details on the product were shared. Impressively, the Cybertruck can outhaul even the best-performing diesel truck, the F350, and easily beat competing EV trucks like the Rivian and Lightning. And in classic Tesla fashion, the Truck beats a brand-new 2023 Porsche model 911 on the track, while hauling ANOTHER Porsche 911 (See video below). Mindblowing performance.
Now, I get that the Cybertruck will not be everyone’s cup of tea, but with trucks being the biggest vehicle category in the US and with over 1 million preorders I do think we can expect high demand. I have also seen a lot of comments complaining about the price - and while it is much higher than originally announced, it falls in line with its competition. On the other hand, many stock analysts have been complaining about Tesla lowering prices over the last year, so maybe we should be happy as investors to see a higher-than-expected price on at least one flagship product.
Next level CEOs and next generation chips
While the biggest story of this month, and probably even the year, has been the drama at OpenAI (of which Microsoft owns 50%) and the unexpected exit of Sam Altman, I will refrain from repeating what you have probably already read in the news here, as the situation was eventually resolved. That said, from all this, it was really nice to witness once again, just how good Satya Nadella really is for Microsoft (MSFT). When all this happened, Nadella immediately stepped up and turned what could have been a disaster for the company’s leading role in AI, into an opportunity, by offering room for Altman and his team at Microsoft. While that did not come to pass in the end, I am so thankful for how Nadella handled the entire situation. Instead, it became an interesting peak into the risks of the unorthodox company structure of OpenAI from an investment perspective, and a masterclass in what makes a great CEO - applicable to both Altman and Nadella.
But Microsoft still made strides in AI this month, with the reveal of two new custom chips that will be used to train LLMs on the Azure cloud. This will improve cost, and performance, while decreasing reliance on Nvidia (NVDA). Naturally, with the chips being the best of the best, they are of course manufactured by TSMC (TSM), potentially benefitting my investments in more ways than one.
In a similar fashion, Amazon (AMZN) also announced new AI chips for AWS, although deepening their relationship with Nvidia. Regardless, these are likely to be made by TSMC as well.
Watch List
My Watch List sorts stock by sector and notes are included for each one, describing my interest and reservations. The status indicates the likelihood of a position being added to my portfolio. ‘Watching’ means I just keep an eye on them, whereas ‘Top Pick’ means they are very likely to find their way into my portfolio at one point - ‘Under consideration' means somewhere in between, with notes offering some elaborating thoughts. Please note my Watch List is based on my own research and goals and is in no way a recommendation of what to buy.
| Sector | Name (Ticker) | Status | Notes |
|---|---|---|---|
| Healthcare | Novo Nordisk (NOVO-B) | Top Pick | Strong innovator, previously owned, familiar |
| ARK Genomic Revolution ETF (ARKG) | Under consideration | Considering as an alternative for CRSP | |
| Gubra (GUBRA) | Under consideration | Hidden gem, versatile, familiar, though unprofitable | |
| Merck & Co (MRK) | Watching | Casual interest, limited familiarity | |
| Medtronic (MDT) | Watching | Casual interest, limited familiarity, attractive dividend | |
| Industrials/Manufacturing | DSV (DSV) | Watching | Interesting strategic M&A expansion, great execution, automation opportunity |
| Elkem (ELK) | Top Pick | Cyclical industry, but well positioned to break out | |
| Otis (OTIS) | Under consideration | Potential dividend growth play, familiar | |
| Norsk Hydro (NHY) | Watching | Casual interest, limited familiarity, attractive dividend | |
| Lockheed Martin (LMT) | Watching | Ethical concerns, too expensive | |
| Corning (CLW) | Watching | Weakening moat, rising competition, familiar | |
| Consumer | McDonalds (MCD) | Watching | Strong brand, limited optionality |
| LVMH Moët Hennessy Louis Vuitton (MOH) | Under consideration | Strong leadership, performance, too expensive | |
| Costco (COST) | Top Pick | Incredible moat, leadership, too expensive | |
| Coca-Cola (KO) | Under consideration | Strong brand, stable giant, too concentrated, familiar | |
| PepsiCo (PEP) | Under consideration | Strong brand, well diversified, familiar | |
| Tapestry (TPR) | Watching | Interesting recent acquisition, high debt, cheap | |
| DoorDash (DASH) | Watching | Automation opportunity, strong marketshare, unprofitable | |
| Energy/Utilities | Ørsted (ORSTED) | Top Pick | Strong positioning, leadership, familiar |
| Waste Management (WM) | Under consideration | Stable giant in a rock solid industry, limited familiarity | |
| NextEra energy (NEE) | Watching | Strong position, too concentrated, too expensive | |
| Enphase Energy (ENPH) | Watching | Rising star, limited familiarity | |
| Technology | Embracer (EMBRAC-B) | Under consideration | Incredible acquisitions, not profitable, familiar |
| Sea (SE) | Watching | Core business weakening, innovator, just turned profitable | |
| Palantir (PLTR) | Watching | Amazing tech, highly dilutive, unprofitable, opaque | |
| Meta (META) | Watching | Strong leadership and userbase, undergoing big change | |
| Apple (AAPL) | Watching | Strong brand, loyal userbase, risk of disruption | |
| Mercado Libre (MELI) | Watching | Great execution, growing market, too expensive | |
| Shopify (SHOP) | Watching | Innovator, well positioned, unprofitable | |
| Xiaomi (1810) | Watching | Fast innovator, China risk, previously owned | |
| Nvidia (NVDA) | Watching | Strong brand and leadership, too expensive, previously owned | |
| Finance | Coinbase (COIN) | Under consideration | Strong brand and leadership, unprofitable, previously owned |
| BlackRock (BLK) | Under consideration | Strong execution, exposed to the economy, attractive dividend | |
| Whitehorse Finance (WHF) | Watching | Attractive dividend, strong execution, high risk | |
| SoFi Technologies (SOFI) | Watching | Strong leadership, innovator, unprofitable | |
| NuBank (NU) | Watching | Great execution, interesting market opportunity | |
| JP Morgan Chase (JP) | Watching | Stable giant, overlapping industry with holding | |
| Visa (V) | Under Consideration | Long-term market beater, part of duopoly, familiar | |
| Manulife Financial (MFC) | Watching | Stable giant, attractive dividend, limited familiarity | |
| Real Estate | VICI Properties (VICI) | Top Pick | Strong leadership and execution, attractive dividend, too concentrated |
| American Tower (AMT) | Watching | Interesting real estate space in mobile towers, great execution | |
| Digital Realty (DLR) | Watching | Good positioning, attractive dividend, limited familiarity |
Disclaimer: I am not a financial advisor, the opinions expressed in this article are entirely my own – always invest at your own risk.
