Portfolio update #1
An update on the Guru Gems portfolio
Today I’m sharing a quick update on the Guru Gems portfolio. Next week I’ll be back with the usual format including a deep-dive on a long-term investing Guru and a potential Gem to add to the portfolio. In case you missed it:
Guru Gems portfolio holdings
Here is a quick overview of the portfolio and the average purchase price:
LVMH
I initiated the position in LVMH on 14th April at a price of EUR 528. As I wrote in the first newsletter, I would add more if the price were to drop after the release of the Q1 earnings. I added to my position on 15th April and thereby lowered the average purchase price to EUR 516.6.
In the first newsletter I mentioned how Guy Spier (one of our Gurus) recently started a position in LVMH. Guy just re-shared an article which he wrote about 7 months ago. The article talks about why, according to him, Berkshire never bought Louis Vuitton. He argues that luxury companies create envy which is ultimately harmful to society. He therefore questions whether owning luxury businesses is the right thing to do for him.
This is a bit conflicting with what he later wrote in his annual letter. Maybe he re-shared the article because he is rethinking his purchase.
In any case, I will keep the position for now, also because Bernard Arnault has continued to buy shares over the past weeks:
Alphabet
I started the Alphabet position on 28th April at a price of $162.4.
On Wednesday 7th May Alphabet plunged more than seven percent after an Apple executive said in a court case that Google Search volumes on its Safari browsers declined in April for the first time.
Alphabet quickly put out a statement saying that the number of search queries was still growing, and that users are “accessing it for new things and in new ways” (for example through the Google app).
I took advantage from the significant drop on Wednesday and added to my position at $151.2, which brings the average purchase price to $157.7.
In my view, Alphabet is still a Gem and unless I see significant selling from the Gurus over the next quarters, I will do nothing.
I just read an interesting article titled ‘The Lesson in Buffett’s Winning Apple Bet’. It details how Buffett bought a few billion dollars’ worth of Apple stock in 2016, when it was at around $25 per share, and how in less than 10 years, it went up to about $200 per share. Here is a very interesting part of the analysis:
Buffett wanted a company with a reasonably cheap price/earnings multiple of no more than 15, based on the next 12 months’ projected earnings, The Wall Street Journal previously reported. Berkshire managers had to be at least 90% sure that the stock would generate higher earnings over the next five years. And he wanted Berkshire to be at least 50% confident that the company would grow a minimum of 7% annually for at least five years.
Alphabet may be in a very different position than Apple was in 2016 and there are definitely some clouds in the sky (antitrust case, declining dominance in search, …) but with a Forward P/E of 16.6 (cheapest of the Mag 7) and a revenue CAGR of 10% over 3 years, I certainly see some parallels with Buffett’s big move.
Berkshire Hathaway
Berkshire has not significantly moved after Buffett’s announcement to retire, so it hasn’t been added to the portfolio. I keep it on the Watchlist for now.
Slow but steady
My goal is to build a portfolio of 8-12 stocks that will hopefully beat the index in the long run. This means it will be key to be very selective and therefore building out the portfolio may take time. As I mentioned in my first newsletter, this will be a journey where I want to learn as much as possible about the long-term Gurus and their portfolios.
I’ll be back next week with a new Guru and a potential new Gem to look into!
Great stuff - looking forward to the next gem!