2023 Year in Review: A Working Strategy
Welcome to my 2023 year in review! Join me in the fourth annual retrospective analysis of the past year, where I evaluate my performance and strategies, and decipher what worked and what did not. Whether you are a seasoned reader or a new follower, rest assured that you will discover reflections and lessons learned here that can contribute to your journey toward financial freedom – just as they will for me. This year’s review encapsulates major market themes of the year (mainly in Big Tech), shedding light on how I navigated through them. For those new to this journey, here is a quick summary of previous years' reviews, with full versions linked for eventual exploration:
2020: In a record year, my portfolio returned a massive 144% led by Tesla (TSLA). I began the process of reallocating some of my newfound wealth into stable dividend-paying companies to create a source of passive income as I started University.
2021: In my now split portfolios I returned 55% in my Growth Portfolio & 30% in my Dividend Portfolio respectively, with global markets tracking just 17%. I received a total dividend income of $1272 and learned to better disengage from partaking in market euphoria to focus on ‘quality’ companies.
2022: Became a horrific year, breaking my 8-year annual outperformance of the market with an insurmountable loss of 50.81% in my Growth Portfolio & minuscule 0.27% in my Dividend Portfolio, with the S&P500 down 19.44%. Hard times taught me to truly appreciate a dividend income and provided me with a newfound respect for more conservative investing strategies.
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Overview
Let us kick off by examining the revamped composition of my new consolidated portfolio as it stands at the end of 2023. Over the course of the year, I have bid farewell to three long-term positions - namely Adobe (ADBE), Alphabet (GOOGL), and Danske Invest Denmark Index (DKIDKIX). In their place are a cohort of newcomers, each contributing to a diversified portfolio with now at least 2 positions across all sectors. Worth noting, however, is that many of these constitute only 1% less of my overall holdings, continuing the previous year’s trend of a significant tilt in one particular direction. The newcomers are Costco (COST) in the Consumer category, Visa (V) in Finance, Novo Nordisk (NOVO-B) in Healthcare, American Tower (AMT) & VICI Properties (VICI) in Real Estate & Waste Management (WM) in Energy/Utilities.
Unlabeled on the chart:
In Consumer: Starbucks (1.1%)
In Industrials/Manufacturing: 3M (0.6%)
In Finance: Bank of Nova Scotia (0.9%)
In Healthcare: Novo Nordisk (0.9%) & AbbVie (0.9%)
In Real Estate: Realty Income (0.8%), American Tower (0.8%) & VICI Properties (0.9%)
While there is still work to be done in terms of diversification of my holdings, for the first time in a long time I am really happy with how things look. As I trim my Tesla position over time and contribute to other positions or see them grow I can finally achieve a great balance between what I believe to be the best stocks across each sector. Keep in mind however that in sometime hopefully this year, you will see the Real Estate category cease to exist as I plan to purchase my first home and will gain outsized exposure to the sector in this way.
Performance
My portfolio value increased by 53.06% for the full year 2023, vastly outperforming the Dow Jones World Index up around 23.5% during this same period.
Big Moves in Big Tech
With tech heavily outperforming the market this year it should come as no surprise to anyone that 2023 was also a great year for my portfolio. Broadcom (AVGO) took the lead with more than a 100% gain alongside Amazon (AMZN) and Microsoft (MSFT) returning over 50%. I managed to exit both Alphabet (GOOGL) and Adobe with big gains as well (35% and 66% respectively) and recovered mostly from the disaster that was last year.
The underlying theme behind these gains was Artificial Intelligence boosted into the mainstream by OpenAI’s ChatGPT last year. Investing ahead of this trend really paid off this year, with AI being the driving force behind some of the most significant developments of the year. Microsoft secured a 50% stake in OpenAI already in January granting the company commercial access to its GPT-4 model, which was subsequently integrated into nearly every Microsoft service, instantly threatening Alphabet’s long-established lead in this space.
But it has not been smooth sailing. While Alphabet fumbled in the beginning they eventually turned up the heat and released a very similar offering to Microsoft, alongside Amazon’s AWS which immediately ramped up its AI efforts as well. Despite initial success with Microsoft Bing it did not manage to take any market share away from Google’s search either. I personally switched to Bing myself - something that I thought would never happen - and enjoyed it for a while. However, core search is still a lackluster experience and as Microsoft eventually split its LLM away from Bing (becoming Copilot) I likewise split from Bing and returned to Google search. Perhaps more interestingly was late in the year when OpenAI founder and CEO Sam Altman suddenly got the boot ensuring chaos: A clear sign that something was wrong and everything was not going as well as perceived. In an act of grace and a display of supreme leadership skills Microsoft CEO Satya Nadella turned the situation on its head, luring Altman and every one of his loyal employees to come work directly at Microsoft instead. After this, almost the whole OpenAI organization boycotted the board and new management until the decision was eventually reversed and Altman back in place. Strangely, we never did really find out why it all happened…
Fittingly, I did my thesis on AI in digital design this year also and graduated from university with a keen understanding of everything that had been going on, from a technology perspective as well as in social perception. 2023 was indeed a remarkable year for AI and one where my professional understanding as well as my investment experience all tied together, benefiting me greatly.
Big Layoffs in Big Tech
But 2023 was likewise another year of uncertainty and big volatility - something that has characterized the markets ever since the COVID-19 bubble. We fought massive inflation with the only tool we know that works - rising interest rates - which have constrained the growth prospects of many companies, especially those that rely on borrowing for future cash flows. It is a new reality and as a result, companies across the board have shifted their focus from expansion and experimentation to optimization and profitability. A strict focus on the bottom line has meant cost-cutting, increasing efficiency, and laying off workers. Alphabet, Meta (META), and Microsoft alone have laid off tens of thousands of employees throughout the year, while Unity (U) under new leadership, in just its latest round of layoffs had to let go of 25% of its staff.
While I do think that big organizations tend to quickly become bloated, this is not fun for anyone. Even as an investor, I prefer it the other way around. New ventures and growth naturally demand new hires, while process optimization means the opposite. It can be healthy - For Alphabet and Meta, even for Unity, it may have been necessary. But mass layoffs often also lead to the loss of softer skills - such as in HR, customer service, or UX - parts of the organization undervalued and overlooked - but often necessary to create true magic. As a new graduate, it has certainly been felt, with a huge discrepancy between job postings and demand. We are still recovering from what was hopefully a once-in-a-lifetime global crisis and as both an investor and professional I cannot wait for it to be over.
Big Acquisitions in Big Tech
What has probably taken up most of my time this year following along as an investor has been acquisitions. After a long battle in court with the FTC, Microsoft finally managed to close on its $69 billion acquisition of gaming giant Activision Blizzard. As I took a bet on this occurrence, the deal’s success has benefited me doubly. Trading in and out of Activision before finalization netted me an extra 20% win this year, benefiting me in the short term, and with the company’s massive game library now in the hands of Microsoft, it will benefit me long-term by strengthening its Xbox subscription services. Ultimately, Microsoft did have to compromise a little bit, handing over exclusive cloud gaming rights in Europe to Ubisoft (UBI) for the next decade, but I am sure there is a lot of untapped value to be found through this deal still.
Broadcom likewise succeeded in its mission to absorb VMWare for $61 billion, solidifying its position as an avoidable infrastructure behemoth for any data center customer. Software margins now make up a much bigger part of the overall business - which is exactly what I invested for back in 2021. In my great portfolio rebalancing, I did shortly let go of my shares in Broadcom netting me a 67% gain while somehow managing to perfectly time getting back in, increasing the overall size of my position ever so slightly and now sitting on another 20% unrealized gain from just mid-December.
Adobe failed to gain regulatory approval for its $20 billion acquisition of Figma, which to investors was seen as a win (Adobe stock initially fell on announcing the deal, as investors thought the price for Figma to be too high). I sold the very same day of the news as shares popped 3% and I took home a total return of 66%. I now seriously fear for Adobe’s future (long-term) and eagerly await another opportunity to invest in Figma. On the positive side, Adobe did manage to nail its go-to-market strategy with AI, pioneering “safe-to-utilize” models (only training models on content it owns) which means they still have a lot of good things going for them in the short term.
Finally, my least successful trade of the year was with luxury goods seller Farfetch, now part of Coupang (CPNG). I had bet on Farfetch to avoid bankruptcy - which I guess they ultimately did. But long before it even found its savior, a stop-loss order had already been triggered for me resulting in a 20% loss. People who unlike me stayed invested will not see any benefit from the deal - which is expected, but still really unfortunate. I plan on watching Coupang very closely going forward as a Southeast Asian player with now a clear path to international expansion and higher margin business in luxury.
Dividends
| Month | Amount (USD) |
| January | $127.88 |
| February | $372.22 |
| March | $132.61 |
| April | $127.25 |
| May | $72.39 |
| June | $132.58 |
| July | $85.32 |
| August | $73.42 |
| September | $130.00 |
| October | $149.40 |
| November | $93.86 |
| December | $162.33 |
| Total 2023 | $1659.26 |
$1659.26 in dividends received represents an increase of 5.6% over the full year 2022 coming in at $1571.25. Taking inflation into account this means that my dividend income has stayed mostly flat - something that while expected, is a little disappointing. The explanation can be found in a divergence from the pattern I usually follow each calendar year, which is to take the top off some of my big growth winners like Microsoft and Tesla and reinvest my gains into stable, dividend-paying companies - and while I did sell off around 13.5% of my position in Tesla, the cash has been set aside for a down payment on my future home.
For this very same reason, my expectations for dividend growth in 2024 are modest. Every spare cent I make this year, even from stock sales, is likely to be put towards this purpose. Additionally, with my portfolio rebalancing, I shifted even further toward a dividend growth strategy over a higher starting yield. The overall yield of my portfolio now is just 0.77% with many of my new long-term holdings such as Visa and Costco paying out a similar-sized yield. I hope that by pursuing quality over instant gratification I will eventually achieve a much higher yield on cost. In my most popular post of the year: Learn from my Mistakes: Stick with your Winners & Embrace the Dividend I explained how despite its low yield (coincidently 0.77% like my own), Microsoft is such a big winner for me that it returns 6% (now 7%) of my initial investment to me in dividends alone, every year. Former Microsoft CEO Steve Ballmer is set to make $1 billion a year this very same way - maybe I will get there too eventually!
Learnings & Reflections
I learned a lot this year, although in a much more specific and narrow way than in previous years. By following the court case of the Microsoft-Activision acquisition as closely as I did this year, I have picked up on a whole lot of legal and regulatory-related knowledge. This I believe puts me in a better position to take advantage of future arbitrage plays, trading on expected deals or even adjusting expectations for when my long-term holdings make a move of this kind. I have likewise familiarized myself with the character of Lina Khan, the chairperson of the FTC - a powerful woman, driven by an agenda to break up Big Tech. While she has been unsuccessful so far, it is clear that she with her meticulous combative approach could pose a short-term risk to US tech powerhouses.
The EU has long taken on this role alone, making it harder for big companies to absorb and distribute data as they please or stifling competition before it turns viable. But now US Tech is under scrutiny from the inside as well, for the first time in a long time, which may create some interesting scenarios for new players on the scene by limiting Big Tech’s control. 2023 has also taught me to be more on the lookout for early signs of a bloated organization, which could lead to future underperformance. This has been prevalent in Big Tech since COVID-19 and is something I will attempt to avoid when timing future investments.
Finally, I think that the strategy I laid out in my 2022 Year in Review turned out to be the right one. Even better? I have actually managed to follow it:
My portfolio is now broadly diversified across each sector (admittedly still skewed to one side)
It consists mainly of cash flow-positive, profitable, and even dividend-paying companies (Unity being the only exception)
I leveraged my interest in technology to do more short-term trades and profited from this (I also successfully traded Coinbase (COIN) early on in the year).
I have consolidated my holdings into one single portfolio encompassing all these aspects (Probably more important to me than you).
And because this has worked out so well for me, I do not expect to make any meaningful changes to my strategy in 2024. I have very little idea what kind of year we are going into, but I think regardless of what happens I have now put myself in a position where I am not too vulnerable to anything outside of another global crisis. War in Europe remains an issue, potentially even more so depending on the outcome of the upcoming US election. China’s economy is under pressure and tensions in Gaza remain elevated. But for all that could go wrong, just as much can go right. And it is about time for that too. I expect more people will come to realize the growing economic importance of Southeast Asian countries, in particular, Indonesia and India in the coming years, as am I optimistic about political and economic betterment in South America. These are markets I am keeping a keen eye on myself in 2024 and areas where I am considering diversifying towards and gaining more exposure to.
Thanks for reading along in 2023. Thanks to those of you who bought me a cup of coffee helping me to pay for hosting the site. Thanks to those of you who reached out for a chat or just for quick appreciation. Thanks to those of you who also follow me on X. And thanks so much to Stock Events for becoming my ever first sponsor! Best of luck to all of you in 2024!
And as Costco included in its first quarterly report since I became invested: A goodbye to Charlie Munger - The other half of Berkshire (BRK), who despite letting me feel the “reverse Buffet effect” at the beginning of the year truly has inspired us all as investors. I will leave you with a great compilation of some of his best moments. May he rest in peace.
Disclaimer: I am not a financial advisor, the opinions expressed in this article are entirely my own – always invest at your own risk.
