Oct 2023 - Time to move on!
Overview
Unlabeled on the chart:
In Consumer: Starbucks (1.2%)
In Industrials/Manufacturing: 3M (0.6%)
In Technology: Adobe (1.0%)
Moves
No active moves were made this month.
Performance
My portfolio value decreased by 10.33% in the month of October, vastly underperforming the Dow Jones World Index down only around 4% in comparison.
Dividend overview
| Name (Ticker) | Received | Amount (USD) |
| Broadcom (AVGO) | Oct 2nd | $23.04 |
| TSMC (TSM) | Oct 13th | $46.72 |
| Realty Income (O) | Oct 16th | $33.50 |
| Bank of Nova Scotia (BNS) | Oct 30th | $46.14 |
| Total | Oct 2023 | $149.40 |
I received a total of $149.40 in dividends before taxes for October 2023, an increase of 62.98% compared to the same month last year at $91.67.
Commentary & Review
Goodbye, Riccitiello!
In the wake of all the troubles Unity (U) ran into last month, something good finally came out of it: On October 10th, John Riccitiello stepped down as CEO, effective immediately. In last month’s journal, I declared that he had lost my support as an investor to stay on - and I guess they listened. As I said then, I still recognize how he has done a great job bringing the company public. But as he has been unable to properly control communications or build any kind of trust with Unity’s core clientele, he simply is not the right man for this next chapter.
Jim Whitehurst, former Red Hat CEO, and IBM president, was made interim CEO. I have already heard good things about him from both former and current employees and I think a product-focused guy like he is, is exactly what the company should be looking for long-term also. For a brief moment, due to the timing of it all, I had imagined my favorite product-focused executive, Panos Paney, taking the reins. Right around the same time, he left Microsoft (MSFT) after 20 years, leading product development of Surface and Windows to huge success. But as it turns out, Paney will instead join Amazon (AMZN), another investment of mine, leading its consumer hardware and services division.
It will be really exciting to see how ends up taking charge of Unity more permanently. From first impressions, Whitehurst could potentially be it, but that is not quite a call I am ready to make yet. Unity’s Q3 earnings are about to come up and I look forward to hearing him lay out a plan for the future. I continue to be optimistic on Unity’s long-term performance, although I am currently down in the dumps. If you are looking for more in-depth thoughts on the subject, check out this recent post, specifically about what is going on at Unity right now.
A done deal, finally.
A few days later, on October 13th, Microsoft was finally able to announce the closure of its acquisition of Activision Blizzard. I have been glad to benefit from this deal in the short term with the trade I made, buying shares of Activision, a few months back and selling out at a 20% gain, after it cleared a few regulatory hurdles. I am also glad to have learned so much about this type of trade, even though I still stand opposed to the kind of regulatory resistance that has played out here. I must also admit that it has put a bit of a damper on my excitement for the opportunity of this deal long term, as I in particular had been excited about what the acquisition would mean for Microsoft’s cloud gaming efforts. Something, which has now been partly licensed out to a competitor in order to close. Regardless, Microsoft now owns a ton more great and established IP. I hope they will be able to execute and keep these franchises alive and well, but even more, I hope for them to revive a few forgotten gems, that I know have been sitting in Activision’s back catalog for a while.
Tesla’s earnings miss…
Tesla (TSLA) reported earnings on the 18th and unfortunately ended up disappointing a little. It is important to remember that Tesla had guided for lower production this quarter as factory upgrades took place globally, but it seems investors ultimately ended up more concerned about continued falling margins. While that is unfortunate, it is also not all that surprising, given just how tough the current macroeconomic situation is for any automaker right now. I think Tesla is doing a good job, and I believe it is the right call to temporarily sacrifice some gains right now, in order to maintain its go-to position when people think of an electric vehicle. We are now on the adoption curve for EVs globally, where Norway was sitting just 10 years ago. A country where almost 9 out of 10 cars sold are now electric and where even a legacy car maker like VW recently shared plans to stop selling ICE cars from next year already. I know Norway is not directly comparable to the rest of the world, but I am sure we are now right at the brink of mass adoption.
Once again, the earnings call itself was a letdown for me, with Musk rambling about unrelated issues, and with the new CFO not making a very good impression. Both seemed flustered and not at ease in the situation. What positive came out of it was a firm date on the first Cybertruck deliveries, November 30th, and an uptick in Tesla Energy production and margins. I firmly believe that investors underappreciate the opportunity of Tesla’s non-auto business units and I do not think the current pullback can be justified.
Where is Realty Income heading?
Last month I decided to put all the excess cash I had into my favorite REIT. Realty Income (O) has experienced a huge drop in valuation due to macroeconomic uncertainty, despite performing excellently as a company. On October 30th, I unfortunately experienced another big drop in the value of this stock as they announced a $5 billion acquisition of a competing REIT. As is often the case, this deal is dilutive, and so, the stock was punished. I have not looked too much into this other REIT quite yet, but I am sure it will work out in the long term. Realty Income now trades at a level not seen since the March 2020 COVID lockdown scare, when I was first acquainted with this category of stocks, and where I have since made a pretty good deal. The increased size of my position here is also partly responsible for the 60%+ growth in dividends I have received this month compared to October of last year.
Time to move on!
It is a tough environment to navigate for just about anyone right now. And for that very same reason, you might get the vibe that I am trying to cling a little bit to whatever good that we do have. The latest developments with Unity and Microsoft allow us to move on to better times and I really do think that is worth celebrating. Despite the rough last few months, my portfolio has still recovered nicely since a disastrous last year. I am up 32% year to date, but at the same time, I have a handful positions in the red. For this reason, I am considering a minor portfolio rebalancing, as we move closer to the end of the year - Which might include trimming large positions and establishing better entry points for some of the positions I that have struggled this year, optimizing tax-wise.
Watch List
Updates to the Watch List this month: Added Gubra (GUBRA), a biotech company of which I recently became familiar with and have taken an interest in after reading an insightful report.
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.
