Trade Alert #3: Buying a new growth stock, exiting one, and increasing one position.
Derisking the portfolio by exiting a growth position that has doubled and allocating capital to a new growth stock trading at 10 times forward earnings and increasing the position in a European stock.
Let me start straightforward—our portfolio has had a pretty good last few weeks.
Our growth positions appreciated handsomely, becoming multi-baggers in an environment where the S&P 500 remained largely flat year-to-date.
This allowed us to nearly triple the performance of the S&P 500 in the last twelve months.
And this wasn’t because of the hype, our growth positions delivered exceptional earnings, beating their guidance and either reaffirming or raising the full year guidance.
As a natural consequence, those positions skyrocketed and are now largely out of our buy zones.
Luckily, we found another promising growth position that can easily make 4- 5x in the next 5 years.
Today, I am opening a position at that company.
Further, the market also largely recovered from the lows; however, the concerns that caused the decline in the first place, i.e, tariffs, increasing US debt, and higher for longer interest rates, still remain. A pause of the tariffs gave us a relief rally, but I don’t see us going back to the pre-Trump era open trade soon.
This will further elevate inflationary pressures, combined with the fact that the US needs to refinance some $9 trillion in debt this year, and we just had a horrible 20-year action yesterday that sent the 20-year yields above 5%.
In this environment, I also believe the derisking of the portfolio is appropriate.
This is why I’ll also be closing one of the growth positions that has literally doubled since our entry.
I’ll keep some of the proceeds in cash and increase one of our European positions that is currently deeply undervalued on rock-bottom expectations.
Growing the cash position is not because I think it’s time to take capital out of the markets, it’s because I think we will test the lows again due to the headwinds I discussed and if we do, I’ll be a heavy buyer of our existing growth positions and possibly some others in our radar.
In sum, I’ll be executing three trades at the market open today:
Open a new position in a promising growth stock.
Close one of our growth positions that doubled since February.
Increase our position in one of our existing European holdings.
Here are the exact transactions I’ll be making:
The first one is the purchase of an undervalued growth stock.