Lubomir Kramar @onk342: "𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐭𝐡𝐨𝐮𝐠𝐡𝐭𝐬 𝐚𝐧𝐝 𝐮𝐩𝐝𝐚𝐭𝐞𝐬 Dear copiers..."

Poland

Edited

𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐭𝐡𝐨𝐮𝐠𝐡𝐭𝐬 𝐚𝐧𝐝 𝐮𝐩𝐝𝐚𝐭𝐞𝐬 Dear copiers and followers, There have been quite a few important moves in our portfolio and the markets over the last few weeks. The most important ones to us included a correction in the European defense and the return of confidence to the US markets. Firstly, I’m not bothered by a cooldown in the European defense. If you zoom out on some of the biggest names like $RHM.DE (Rheinmetall AG) you will find out that over the last few years, there have been several serious drawdowns which are perfectly normal for stocks with such vertical runs. For starters, investors take profits and volatility inadvertently attracts traders, momentum players, and many inexperienced individual investors. Once there’s a hint of a downturn or some bearish news (and every major company gets its share of bearish news on a regular basis), traders happily ditch their longs for shorts, momentum players jump horses (like switching back to the hotter again US market), and most individual investors get either spooked or have their stop losses hit. This is not to say that some of the EU defense companies aren’t greatly overvalued. I have been asked a few times on and off eToro about my views on stocks like $HAG.DE (HENSOLDT AG) or $R3NK.DE (RENK Group AG) and my answer has always been the same since 2024 – these companies don’t have enough revenue growth out for them to compensate the risk their ballooned valuation carries around. Does it mean that further stock price growth is impossible for these companies? Absolutely not. $PLTR (Palantir Technologies Inc.) valuation outshining powerhouses like $LMT (Lockheed Martin Corporation) (while having a fraction of its revenue) is one of many such examples. Perhaps one of the most important things every investor has to internalize is that the growth of a stock price and the growth of a company walk in two different lanes: 1. The demand for the stock can outpace the demand for the company’s products. 2. The demand for the company’s products can outpace the demand for the stock. Ultimately, it is this inefficiency that allows investors to profit from the stock market altogether. However, it’s very important to keep in mind that over a longer period of time the revenue and the stock price tend to converge. That’s why chasing the stock outperformers is much, much riskier than adding a sleepy stock with a vibrant company behind it. There’s nothing wrong about profiting from speculation. Just don’t sugarcoat the risk. You’re going to get yourself in trouble if you do. Secondly, having immersed myself deeply in the defense companies over the past couple of years, I know for a fact that the biggest multibillion contract announcements for companies like $RHM.DE (Rheinmetall AG) or $LDO.MI (Leonardo SpA) are still ahead of us. $AM.PA (Dassault Aviation SA) is set to have an exponential production ramp-up till late 2030s, and $QQ.L (QinetiQ Group PLC) and $BA.L (BAE Systems plc ) have just started gearing up for the UK’s rearmament. Isn’t it already priced in? For some companies it’s a yes, for some companies (perhaps surprisingly) it’s still a no. Either way, the market won’t stay idle when $20 billion deals will be announced. It never does. Having trimmed down my defense positions in March 2025, I do not exclude trimming some of them down further this year if they continue to vastly outperform their fundamentals. If not, I’m going to allow the sales to catch up with the stock prices. Over the last 3 months, a lot has been done to rebalance this portfolio. I poured back a significant chunk of the portfolio into the US market. The logic behind these moves is quite simple. 1. It’s quite clear that we are facing an AI version of an industrial revolution. Tech companies once again will vastly outperform more traditional industries. They are much more shielded from any trade disputes too. Any volatility in the process is simply noise. 2. Volatility brings a lot of bargains in almost any sector. As I like to take contrarian bets, I often buy sell-offs that I see as unjustified. Once the beaten stocks go back to their fair valuations, I will be taking some chips off the table to rebuild the portfolio’s cash position. Those of you who have been tracking my portfolio for a while have probably noticed by now that I take months to both build a position and exit one. By the end of 2025, I intend to exit some of the stock positions I have held since 2023 and bring this portfolio’s stock count under 30. Finally, the most recent US inflation and job market data might be reassuring to some, but I am more interested in seeing the 2025 Q3 and Q4 numbers. I will be cautious about excessive optimism until then. Best regards, LK $SPX500 (SPX500 Index (Non Expiry)) $NSDQ100 (NASDAQ100 Index (Non Expiry)) $GER40 (GER40 Index (Non Expiry)) $UK100 (UK100 Index (Non Expiry)) $FRA40 (FRA40 Index (Non Expiry))