Dreams Of Compounding - Portfolio Check-In

In February, I initiated coverage of my own brokerage portfolio. Transparency is key. I have no value to provide by contributing to this site unless I can back up my recommendations with real results using my own money. For that reason, I'll be covering my own portfolio on a monthly basis which will give an overview of the decisions I made, why I made them, and my current strategy.

Portfolio and Strategy

Portfolio value (as of March 2nd.): $5,805.47

Weekly contribution: $200

Weekly recurring investments: SCHD - $66.50, JEPI - $33.25, BOND - $20

Pre-defined investments: UPRO and TQQQ - buy $5 if it drops 5% on any given day. This amount will increase to $10 when the portfolio balance exceeds $10,000.

I have weekly contributions funded by my 9-5, which I then split into two diverging strategies. I recently began a weekly contribution of $150, but thanks to an 11.5% raise in my 9-5 I was able to increase that to $200/week! As such, my principal balance is set to grow by $10,400/year. My goal is income growth with SCHD, income generation with JEPI, and principal protection with BOND (This is my emergency fund).

I also have a pre-defined strategy to purchase leveraged index ETFs UPRO and TQQQ. Basically, any time these fall at least 5% on a given day, I buy $5 worth (the purchase amount will increase as my portfolio value increases).

Individual Equity Purchase Plan:

These are the companies I'm actively monitoring and researching. The listed price is what I consider a margin of safety price from their estimated intrinsic value. I use very conservative numbers in my estimates for my own peace of mind.

Adobe (ADBE): $351.41 - Read my recent article here. Since writing, I've used an updated valuation model which I believe is a more accurate reflection of the true intrinsic value (my valuation here is different than in the article).

Berkshire Hathaway (BRK.A) - $494,161.41 - Revised down from my estimate in my previous article. I overestimated the growth rates from 2026-2032, so this revised estimate is more accurate I believe.

Block, Inc (SQ) - $55.94 - Read my recent article here.

Lowe's (LOW): $201.40 - Read my recent article here.

Taiwan Semiconductor (TSM): $85.73

Tesla (TSLA): $142.35

February Transactions

In February, I added to my Lowe's and Adobe positions and sold the entirety of my TSM, TSLA, and BRK.B positions. The reason for these sales was opportunity cost. I needed cash for my Adobe purchase, and those sales were to free up cash.

After the market close on February 23rd, Adobe's price sank roughly 8% on the news of a DOJ probe into the Figma acquisition. Looking back to mid-September 2022 Adobe shares tanked about 15% on the announcement of the Figma acquisition. The narrative in September was that Adobe overpaid for Figma, and the narrative in February is that Adobe's growth prospects are dismal without Figma. This is a perfect example of market irrationality. Shares dropped on the announcement of an acquisition and also dropped on the announcement of that acquisition potentially being blocked. I took full advantage of this opportunity and promptly freed up cash by selling TSM, TSLA, and BRK.B and allocated that money to Adobe. I put all the cash I had on hand into Adobe at the $322.80 price point, which has rewarded me since with Adobe climbing to a touch over $346 since the purchase.

Another case of what I believe to be market irrationality was Lowe's price action in the month of February. On February 21st, Lowe's dropped about 5% because Home Depot (HD) announced a weak 2023 outlook. Sure, they are competitors and have very similar business models, but they are not the same business. The weakness that Lowe's is experiencing is not as severe as Home Depot because Lowe's has had constant attention to operational efficiency recently. Lowe's reported earnings a few weeks after Home Depot, and despite earnings growth, the stock dropped almost 10% in a few days. I took advantage of both of these drops and put all the cash I had on hand into Lowe's, which was $119.30 on February 23rd and $75.00 on March 1st. I remain very bullish on Lowe's because they are becoming leaner and more efficient as an organization, and are entirely focused on the $1T+ addressable market in the US following the sale of their Canada operations. Home Depot has far more employees despite operating only a few more stores and has operations spanning Mexico, Canada, and the US. Home Depot doesn't even have 20% of the US market share, so there's plenty of room for growth here, yet they are dividing their focus across the Americas region in the much smaller Mexico and Canada markets. Lowe's has far less market share in the US, and is rightfully focused on expanding this market share instead of capturing market share in foreign markets. Lowe's also has lower total employment costs, which demands less recurring investment. Lowe's allocated only $220M of profit sharing/payroll increases compared to Home Depot's $1B. With nearly 200,000 fewer employees, Lowe's (~300,000 employees) has a much lower total cost of employment than Home Depot (~475,000), which I believe will be helpful throughout what looks to be a tumultuous 2023.

Wrap-up

February was an up-and-down month in the market, which I believe my strategy took advantage of. I added to my leveraged holdings and consolidated my individual equity holdings because of good opportunities. Adobe and Lowe's are both still trading below my margin of safety prices, so I will continue adding to those positions. BRK.A is also still below my target price, so that's something I'll look at adding, as long as the opportunity cost permits. TSM, TSLA, and SQ are currently overvalued from my margin of safety, so I am not considering purchases at this time. However, these 3 companies are strong growth companies that I hope to buy into at attractive prices. I'll be covering this portfolio with updates similar to this monthly. Until April... happy investing!