Sep 2023 - September ends
September has been a busy month for me, both in and outside of the investing world - and so, I apologize for the slight delay in this update. For the same reason, this time I will keep it short and sweet: I will be going over quite a few trades I have made and all the relevant news of my biggest holdings.
Overview
Unlabeled on the chart:
In Consumer: Starbucks (1.0%)
In Industrials/Manufacturing: 3M (0.5%)
In Technology: Adobe (0.9%)
Moves
On September 18th, a stop-loss order triggered a complete exit of Farfetch (FTCH) at an average price of $2.19 per share, marking a loss of 20%.
On September 22nd, I sold my entire holdings of Alphabet (GOOGL) at an average price of $129.75 per share, netting a return of 35.3%.
On September 25th, I increased my position in Realty Income (O) at a price of $51.44, lowering my average to $58.06.
Performance
My portfolio value decreased by just 0.93% in the month of September, outperforming the Dow Jones World Index down almost 5% in the same period.
Dividend overview
| Name (Ticker) | Received | Amount (USD) |
| 3M (MMM) | Sep 13th | $14.77 |
| Microsoft (MSFT) | Sep 15th | $101.30 |
| Realty Income (O) | Sep 18th | $13.93 |
| Total | Sep 2023 | $130.00 |
I received a total of $130.00 in dividends before taxes for September 2023, an increase of 9.4% compared to the same month last year at $118.83.
Commentary & Review
A Farfetched idea?
My time owning Farfetch stock turned out rather brief. As described in last month’s update I picked up a few shares in this online luxury goods retailer with the expectation of a short-term rebound in the stock. Regrettably, September as it often turns out, proved another challenging month for the overall market, causing the stock to persistently decline, despite the absence of any significant news. As I often do with these types of risky trades, I had set an automatic stop-loss order to limit potential losses in case the company’s situation soured. Some time during the 18th of the month, this order was triggered as the investment incurred a 20% loss. This was certainly not the outcome I had hoped for, but it certainly is not the end of the world either. Atleast I was able to exit the position with relatively minimal damage done.
I remain confident that the company will ultimately defy the early death that a pessimistic market sentiment has factored into its stock price, although I may now not have the opportunity to see this through and reap the potential benefits of an upswing. Exact timing always proves to be the most challenging aspect of these types of trades, but that is simply part of the game. No major cause for concern.
Bye, for now, Alphabet
Happily, I also managed to reap some profits this September. Alphabet, commonly known as Google, has enjoyed quite the runup since I acquired shares in the company in May of last year. Split adjusted, my entry price translates to $95.88 per share, resulting in a 35% return in just a little over a year. This sale may appear unexpected, considering my latest post on sticking with your Winners, however, there are a few good reasons for it:
While Alphabet is a quality company, it also comes with a few long-term risks, as I described in this dive on the stock, right after I picked it up. By my assessment, Alphabet is facing a transformational shift, transitioning from being just “the search company” to becoming a leader in the field of artificial intelligence services. Transformation can yield favorable outcomes, as it did with Microsoft (MSFT) and its transformation under Nadella’s leadership embracing a ‘Cloud first, Mobile first’ strategy. The search market is now no longer stagnant, and Google will face competition to maintain relevance as the default interaction layer with the internet. Large language models, as well as massive short-form video content archives like TikTok, are poised to disrupt search. Microsoft, for instance, is integrating its Bing/GPT4-powered Copilot assistant into every aspect of all its services, and there are rumors too that even Apple (AAPL) may enter the field.
I am fairly convinced that Alphabet will continue to perform well regardless, but its trajectory has become somewhat less predictable at this time. I am not counting this stock out forever, I just feel safer taking profits now.
Hello Real Estate
What funds I took from both Farfetch and Alphabet were promptly redirected into real estate, or more specifically into the REIT that I hold already, Realty Income (O). This move is not intended to be permanent, but rather a tactical response to what I once again, perceive as an overreaction in the market. In the wake of rising interest rates, heavily leveraged operations such as this, have taken a significant hit. But this way of operating is entirely natural for a REIT and Realty Income is handling it completely right. Despite executing well, its stock has experienced a 23% decline so far this year. The last time the company was valued this low was during the market crash prompted by the COVID-19 lockdown. This is when I first invested in a few REITs, including this one, and have since enjoyed substantial overall returns in both dividends and growth.
Realty Income boasts a dividend yield now above 6% which it distributes on a monthly basis. For the time being, I plan to park my excess cash here until I finally identify my next long-term addition to the portfolio. In my arrogance perhaps, I do not think this stock can go much lower. It is possible that I may opt to sell in the short term, but equally plausible that I will not. From my perspective, it effectively serves the same purpose as sticking my money in a high-yield savings account, except this one presents further upside.
United against Unity
Unity (U) ran into some trouble this month, to say the least. The company finally announced a revenue-sharing pricing model like its competitor Epic Games has for Unreal Engine. But, it failed spectacularly - and as often is the case, it was an issue of communication. There was no way that Unity’s user base was going to just accept this change - they have waited far too long with this change for the expectation of the service to not be considered ‘basically free’. But where they really messed up was with how complex and opaque they constructed this new model: They instantly caused distress and spread fear.
Whereas Unreal’s model is a simple 5% cut of revenue above $1 million, Unity’s initial model based fees on a per-install system, with several different tiers, thresholds, and unclear ways of tracking it. Despite how less than 10% of Unity’s customer base would have been affected by this, it caused massive uproar and online riots. Studios issued letters of concern, while others shared how they may potentially have ended up paying +100% fees on their revenues.
After some minor backtracking on when and what qualified for an install, it was eventually decided to overhaul the whole model. Unity lost massive amounts of goodwill and trust with its core customer base that week, but what is worse is how this has cost them the ability to monetize existing projects. The new monetization model will only apply on projects created in newer versions of Unity (from 2024 onwards), meaning that unless massively profitable studios today, see an incredibly good reason to upgrade their projects, they will not have to share even a single cent of their revenues. Games like Subways Surfers, Pokemon GO, and similar rake in hundreds of millions already and have done so for a long time, and will now never have to give up any of that, despite Unity powering the entire thing.
For me as an investor, it means I no longer consider John Riccitiello fitting as a CEO. This was his responsibility and he messed it up big time. For me as a Unity developer, it means very little, as the studio I work for will not be affected, just like it is the case with most others. I have had my doubts with Ricciitello in the past and have recognized his good side too. I still think he was the right man to take the company public, but he is not the right man for its next chapter. I continue to hold the stock for the same reasons as previously.
Tesla unveils refreshed Model 3
Tesla (TSLA) unveiled a fresh new look for its second most popular model this month too. It comes with a slightly longer range, a new exterior and interior design, many nice little quality-of-life changes, and a screen for the backseat passengers. A refresh for the Model Y is reportedly also on its way in the next year or so. I love how Tesla continues to improve its products.
I gnawed my way through the new biography of Musk by Walter Isaacson in record time right as it came out, and it is clear that this approach is essential to the way this man runs his businesses and that he has an ability to execute it really well too. Now it is time for Tesla to execute on the Cybertruck launch and continue the ramp-up of its Energy business. If you are interested in my full thoughts on the book, check out the thread on X I have embedded below.
Note: Due to how late I am posting this month’s journal, Tesla has already shared its production numbers for Q3. The company had guided for lower production on the previous earnings call, due to factory upgrades - what turned out to be for the Model 3 production belt in Shanghai specifically.
Watch List
My Watch List sorts stock by sector and notes are included for each one, describing my interest and reservations. The status indicates the likelihood of a position being added to my portfolio. ‘Watching’ means I just keep an eye on them, whereas ‘Top Pick’ means they are very likely to find their way into my portfolio at one point - ‘Under consideration' means somewhere in between, with notes offering some elaborating thoughts. Please note my Watch List is based on my own research and goals and is in no way a recommendation of what to buy.
| Sector | Name (Ticker) | Status | Notes |
|---|---|---|---|
| Healthcare | Novo Nordisk (NOVO-B) | Top Pick | Strong innovator, previously owned, familiar |
| ARK Genomic Revolution ETF (ARKG) | Under consideration | Considering as an alternative for CRSP | |
| Merck & Co (MRK) | Watching | Casual interest, limited familiarity | |
| Medtronic (MDT) | Watching | Casual interest, limited familiarity, attractive dividend | |
| Industrials/Manufacturing | DSV (DSV) | Watching | Interesting strategic M&A expansion, great execution, automation opportunity |
| Elkem (ELK) | Top Pick | Cyclical industry, but well positioned to break out | |
| Otis (OTIS) | Under consideration | Potential dividend growth play, familiar | |
| Norsk Hydro (NHY) | Watching | Casual interest, limited familiarity, attractive dividend | |
| Lockheed Martin (LMT) | Watching | Ethical concerns, too expensive | |
| Corning (CLW) | Watching | Weakening moat, rising competition, familiar | |
| Consumer | McDonalds (MCD) | Watching | Strong brand, limited optionality |
| LVMH Moët Hennessy Louis Vuitton (MOH) | Under consideration | Strong leadership, performance, too expensive | |
| Costco (COST) | Top Pick | Incredible moat, leadership, too expensive | |
| Coca-Cola (KO) | Under consideration | Strong brand, stable giant, too concentrated, familiar | |
| PepsiCo (PEP) | Under consideration | Strong brand, well diversified, familiar | |
| Tapestry (TPR) | Watching | Interesting recent acquisition, high debt, cheap | |
| DoorDash (DASH) | Watching | Automation opportunity, strong marketshare, unprofitable | |
| Energy/Utilities | Ørsted (ORSTED) | Top Pick | Strong positioning, leadership, familiar |
| Waste Management (WM) | Under consideration | Stable giant in a rock solid industry, limited familiarity | |
| NextEra energy (NEE) | Watching | Strong position, too concentrated, too expensive | |
| Enphase Energy (ENPH) | Watching | Rising star, limited familiarity, too expensive | |
| Technology | Embracer (EMBRAC-B) | Under consideration | Incredible acquisitions, not profitable, familiar |
| Sea (SE) | Watching | Core business weakening, innovator, just turned profitable | |
| Palantir (PLTR) | Watching | Amazing tech, highly dilutive, unprofitable, opaque | |
| Meta (META) | Watching | Strong leadership and userbase, undergoing big change | |
| Apple (AAPL) | Watching | Strong brand, loyal userbase, risk of disruption | |
| Mercado Libre (MELI) | Watching | Great execution, growing market, too expensive | |
| Shopify (SHOP) | Watching | Innovator, well positioned, unprofitable | |
| Xiaomi (1810) | Watching | Fast innovator, China risk, previously owned | |
| Nvidia (NVDA) | Watching | Strong brand and leadership, too expensive, previously owned | |
| Finance | Coinbase (COIN) | Under consideration | Strong brand and leadership, unprofitable, previously owned |
| BlackRock (BLK) | Under consideration | Strong execution, exposed to the economy, attractive dividend | |
| Whitehorse Finance (WHF) | Watching | Attractive dividend, strong execution, high risk | |
| SoFi Technologies (SOFI) | Watching | Strong leadership, innovator, unprofitable | |
| NuBank (NU) | Watching | Great execution, interesting market opportunity | |
| JP Morgan Chase (JP) | Watching | Stable giant, overlapping industry with holding | |
| Visa (V) | Under Consideration | Long-term market beater, part of duopoly, familiar | |
| Manulife Financial (MFC) | Watching | Stable giant, attractive dividend, limited familiarity | |
| Real Estate | VICI Properties (VICI) | Top Pick | Strong leadership and execution, attractive dividend, too concentrated |
| American Tower (AMT) | Watching | Interesting real estate space in mobile towers, great execution | |
| Digital Realty (DLR) | Watching | Good positioning, attractive dividend, limited familiarity |
Disclaimer: I am not a financial advisor, the opinions expressed in this article are entirely my own – always invest at your own risk.
