Space-Investor @Space-Investor: "𝗛𝗼𝘄 𝗠𝘆 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝗶𝘀..."

Australia

Edited

𝗛𝗼𝘄 𝗠𝘆 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝗶𝘀 𝗗𝗲𝘀𝗶𝗴𝗻𝗲𝗱 𝘁𝗼 𝗣𝗲𝗿𝗳𝗼𝗿𝗺 𝗶𝗻 𝗥𝗶𝘀𝗶𝗻𝗴 𝗼𝗿 𝗙𝗮𝗹𝗹𝗶𝗻𝗴 𝗠𝗮𝗿𝗸𝗲𝘁𝘀 There’s an old joke in economics, “He’s a brilliant economist; he successfully predicted 9 of the last 3 recessions!” It applies equally well to forecasting stock markets. I don’t know which way the market will go next, and far smarter people than me don’t know either, so I don’t try to make predictions and instead I have endeavoured to design a strategy to maximise gains and minimise losses regardless of what happens. Below is an outline of my plan for this portfolio and our exposure to the 3 main investment factors I target; Small Cap, Value and Momentum. 𝗜𝗳 𝗧𝗵𝗲 𝗠𝗮𝗿𝗸𝗲𝘁 𝗚𝗼𝗲𝘀 𝗨𝗽 This will likely be indicated by the $SPX500 and $NSDQ100 rising. In this case you’ll likely see only limited portfolio activity. Momentum We’ll continue to ride the rising market which will likely cause our Momentum investments to continue rising and their trailing stops will rise as well ready to automatically close those positions if the market subsequently drops. Our Momentum positions are ones that have risen above what I believe is their intrinsic value over at least the 2 previous quarters and which we have held for longer than 12 months. Small Cap The rising market has already caused some of our Small Cap stocks to become Medium Cap and this trend would likely continue in a rising market. I will try to invest more into some of our Small Cap holdings to keep the portfolio balanced, but only if they continue to exhibit Value characteristics. I may also trim some Medium Cap positions to maintain balance. I will also invest in new companies should there be new IPOs or new assets added to eToro that have both Small Cap + Value status. I define Small Cap as companies with market capitalisations below USD $3 billion. Value These are companies that I believe are either trading below their intrinsic value or which have low ratios such as Price-To-Book and Price-To-FCF (Free Cash Flow). Value stocks have become harder to find over the last few quarters and that will likely continue in a rising market with many of our Value investments turning into Momentum investments due to causes such as multiple expansions. 𝗠𝗮𝗿𝗸𝗲𝘁 𝗖𝗼𝗿𝗿𝗲𝗰𝘁𝗶𝗼𝗻 This would be the major indexes going down by between 10% and 20% from their most recent highs. In this case you would likely see more portfolio activity than in the rising market scenario. In fact I have many Limit Orders in place to automatically open new positions if this happens. Momentum Once Momentum has run its course the Trailing Stops we have in place would likely be triggered causing the positions to be closed automatically to prevent losses. This will then increase our cash balance ready to be invested in new positions. Small Cap Some medium cap companies, both in the portfolio and on my watchlist, would likely drop back down into Small Cap territory while possibly decreasing this factor’s weighting in the portfolio. In this event I will likely open new positions in some companies on the watchlist including Small Cap and some Large Cap holdings in order to keep the factors balanced. Value Thanks to some recent Momentum positions being closed, we already have sufficient cash on hand to invest into many companies that will begin to exhibit Value characteristics. Many defense related stocks have backlogs and future projected earnings that are not directly linked to the broader economy’s performance so we’ll likely invest in more of these types of stocks. This is what I did during 2021 and early 2022 which helped the portfolio to outperform the $SPX500 by more than 25% in 2022 – see bullaware.com/etoro/space-investor 𝗠𝗮𝗿𝗸𝗲𝘁 𝗖𝗿𝗮𝘀𝗵 This is when the major indexes drop by more than 20%. If this happens then not only would all of our Trailing Stops have been triggered, our small number of Hard Stops are also likely to trigger closing those positions and leaving us with plenty of cash ready to invest in under-priced stocks even after our automatic buy orders have been filled. When the $SPX500 had a 24.77% drawdown in 2022 we only had a 13.42% drawdown and I used the remaining cash balance to buy up undervalued quality stocks which led to our strong performance in 2023 and 2024. I have a long shopping list of companies I will manually review to ensure they’re still in good health and I’ll use our remaining cash balance to buy up the best of the discounted stocks. Momentum With few or none of these stocks remaining in the portfolio at this point, I’ll be looking to find undervalued big tech stocks with space related activities such as $MSFT (Microsoft), $GOOGL (Alphabet Inc Class A) and $AMZN (Amazon.com Inc) and open new positions if their valuations are attractive which will hopefully become future Momentum plays again. Continued in the comments...

7 Mentioned Show all

SPX500

NSDQ100

SPX500

MSFT

Microsoft

GOOGL

Alphabet Inc Class A

AMZN

Amazon.com Inc