$27,006,445.30 Just 6 Stocks Portfolio Review (GOOG, PBR, GSL, UNH, NVDA, ADM)

Summary

In this comprehensive portfolio review, the speaker analyzes six major positions, offering a deep dive into each stock's performance, risks, and growth potential. Highlights include Google’s recent surge due to AI, Petrobras’s high dividend yield but exposure to oil price volatility, and Nvidia’s explosive growth paired with high valuation concerns. Other positions, like Global Ship Lease and United Health, are assessed for long-term sustainability, while a focus on value investing and portfolio diversification is recommended. The speaker stresses balancing high-risk, high-reward investments with safer, fundamental strategies for sustained growth amidst economic uncertainty.

Takeaways

• 😀 Ellen’s portfolio is valued at $27 million, with a recent gain of $6 million and an annualized return of 55% over the last 3 years.
• 😀 The portfolio, which was started in December 2022, benefited from a strong bull market but is now shifting towards a balanced, value-focused strategy for long-term compounding.
• 😀 Google (Alphabet) has been a standout performer, doubling in value since ‘liberation day,’ but its current valuation (P/E of 30) makes it a medium-risk, medium-to-high reward investment.
• 😀 Despite strong earnings growth at Google, there is concern over its future performance, especially regarding capital expenditures for AI and declining free cash flow yield.
• 😀 Petrobras, a Brazilian oil company, represents 18.5% of the portfolio and offers a high dividend yield (10-11%), but its exposure to oil price fluctuations makes it a high-risk, high-reward investment.
• 😀 The risk with Petrobras is that its heavy debt load and sensitivity to oil prices could result in a sharp decline in stock price if oil prices fall, with potential for a 50% loss.
• 😀 Global Ship Lease, a shipping company, is considered high-risk, especially when earnings are high. The best time to invest in shipping stocks is when the market is bad, not when things are booming.
• 😀 United Health is performing well, but it falls outside Ellen’s circle of competence in healthcare. The stock is fairly valued, and Ellen is not looking to invest in healthcare stocks.
• 😀 Nvidia has boomed, but with a P/E ratio of 50, it is considered too expensive now. There is uncertainty about whether Nvidia can maintain its growth and reach an $8 trillion market cap in the next 5 years.
• 😀 The portfolio’s shift to value investing is intended to reduce risk and focus on long-term, sustainable growth, as Ellen seeks to minimize exposure to volatile sectors like tech and shipping.
• 😀 Overall, while Ellen's portfolio has delivered impressive returns, the new strategy emphasizes balancing growth with risk management, with a greater focus on value stocks and long-term stability.

Q & A

What is the overall performance of Ellen's portfolio over the past three years?

Ellen's portfolio has achieved an annualized return of 55% over the last three years, with gains totaling around $13 million. The portfolio was started in December 2022, before a bull market began.

What strategy is Ellen currently following with his investments?

Ellen is shifting towards a barbell strategy, balancing between high-value stocks and growth-focused investments. He has also added value components to the portfolio for long-term compounding, although he would not buy Nvidia now.

Why does the speaker mention that they did not invest in Google despite its strong performance?

The speaker attributes their failure to invest in Google to a fixed mindset, where they preferred other stocks over Google at the time. In hindsight, they acknowledge that Google was a great buy but believe their investment strategy still works for them.

What are the concerns regarding Google's future growth and valuation?

While Google’s current performance looks strong with 35% earnings growth and 60% revenue growth, the speaker is concerned about its long-term growth prospects. The stock is now priced at a P/E ratio of 30, higher than its historical value, which increases risk. The speaker questions how Google will perform in two years given its reliance on AI and rising capital expenditures.

What is the risk associated with investing in Petrobras, the Brazilian oil company?

Petrobras is considered a high-risk investment due to its high debt levels and its sensitivity to fluctuations in oil prices. While the company offers a 10-11% dividend yield, the speaker warns that if oil prices drop to $50, dividends may be significantly cut, leading to a 50% potential drop in stock price.

How does the speaker view the outlook for oil in the coming years?

The speaker believes that long-term demand for oil is stagnant, and while Petrobras may benefit from a rise in oil prices, there is a risk of a market downturn. A recession or global slowdown could negatively impact the company’s performance, and the speaker warns against buying oil stocks when things look too good.

Why does the speaker consider shipping stocks to be high-risk investments?

Shipping stocks are high-risk because the industry operates in cycles. When things are good, shipping companies pay high dividends, but when the market turns, they issue shares at low prices. The speaker suggests that retail investors should avoid these stocks during boom times and look for opportunities when the market is down.

What is the speaker’s perspective on investing in Nvidia at this point?

The speaker is cautious about investing in Nvidia now due to its high P/E ratio of 50 and concerns over future growth. Although Nvidia has boomed recently, the speaker questions whether the company can maintain such growth over the next five years, as it would need to double its market cap to $8 trillion to justify the current valuation.

What is the speaker’s view on UnitedHealth as an investment?

The speaker is not particularly interested in health companies like UnitedHealth due to a lack of expertise in that area. While the company’s numbers look good, the speaker considers the stock to be fairly valued and not within their circle of competence.

What is the speaker’s conclusion about the portfolio’s overall strategy?

The speaker concludes that while the portfolio has performed well in the past few years, it carries significant risk. They suggest that the strategy of investing in stocks with high growth potential may not be sustainable long-term, especially during market downturns or recessions. The speaker recommends considering more true value investments and potentially shifting to cash as a safer option.