🚨Trade Alert #2: Exiting Two Positions, Increasing One, and Reducing One Position
Derisking the portfolio while still maximizing the upside potential.
Hello everybody, I’ll be executing a bunch of trades today at the market.
I have scheduled this post for an hour before opening, so you can have time to read and think about them.
Let me be straight—our portfolio had an amazing time in the last two weeks.
Our growth positions delivered very good news and substantial earnings beats, skyrocketing in price.
Let me answer the question you may be asking upfront—no, I am not selling or reducing them.
These positions increased in price not because of the hype but because of their strong fundamentals and excellence in execution, demonstrated by their earnings.
As they delivered these strong performances while the consumer sentiment has been deteriorating, Wall Street increasingly started to recognize their potential, driving the prices up.
I am not looking to cut these positions. To fully benefit from these picks, you have to hold them very long-term, possibly adding to them on the way, not reducing.
As Warren Buffett says—you shouldn’t cut the flowers to water the weeds.
I’ll sell or reduce these positions only if:
Their long-term growth prospects change negatively.
They become excessively overvalued.
There are better risk/reward plays.
For me, excessive overvaluation means that the stock is priced at a level that won’t be justified even if the company exceeds my long-term bullish scenario. This hasn’t happened for any of those positions yet, so I’ll be keeping.
However, an increase in their prices resulted in them having a much larger share of the portfolio. This exposes us to a larger downside risk in the short term.
I don’t want to sell those positions, and I am also not comfortable with injecting large amounts of fresh capital in the current environment, as I believe the market will start trading on tariff negativity once the earnings season ends.
This is why I am going to achieve derisking by internal capital allocation—and without selling or reducing the growth positions.
This is what I am going to do:
Trim a riskier foundational position and add the proceeds to another foundational position that has been substantially derisked lately.
Sell one of our quick winners as it has become increasingly linked to another stock in the portfolio, so we don’t need it anymore. Will keep the proceeds in cash.
Exit a position that we bought after it had plummeted following the Q4 earnings. Though nothing has changed in my views about the company, I believe it may have a harder time because of tariffs, so we will have a chance to buy it again at these levels or even cheaper. I’ll keep the proceeds in cash.
This way we will have:
Derisked the portfolio without trimming our high-fliers.
Maximized the upside even more as we will be adding on a position that is severely undervalued.
Increased our flexibility as our cash position will grow, so we can use it to buy stocks at cheaper prices if tariff tensions continue.