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Register for a free website account above and we will send you periodic discounts and other offers to our research, books and Inner Circle membership as well as exclusive perks not available elsewhere.
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Inner Circle Portfolio Performance 28.7% vs 17.3% for the Market
October has just ended and it is time to take stock of our portfolio.
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Our time weighted total return for the year so far is 11.4% better than the S&P 500. As you can see in the chart above, the portfolio performance has led the market throughout this year. This is not typical, but I am happy to see this.
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I will have a full annual report out once the year comes to a close. Monthly check ins give us a quick glimpse of how our strategy is performing and whether there is a cause for any possible course correction. I do not anticipate any major changes. However, please note the following:
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- The portfolio weights have been recalculated to account for the price movements of our holdings. The updated portfolio with new weights is now available at the Portfolio page. Inner Circle members please take a note and adjust as needed.
- I will be adjusting my own portfolio to reflect the new weights over the course of the week next week.
- We are exiting our position in VTRS before we reached our target sell price. This is not a reflection on the value in the stock. It just means that our Kelly Formula based allocation model now recommends reallocating to other stocks in our portfolio that offer better risk/reward.
- We are also lightening up on a few other stocks that have appreciated greatly.
- We are increasing weights in a couple of stocks, one of which is getting close to almost half of our portfolio. I am comfortable with this.
- The portfolio now holds 7 stocks after the update.
The Indexes are the Riskiest Investments Today
The US economy is currently a black box with most government data not reported for the last 1 month. The reported inflation is quite benign, but the prices at the checkout counter has risen significantly for basic consumer products. Labor market is in distress. Housing may be in recession. There is froth in the AI sector. Tech now makes up 35% of the S&P.
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The big question everyone is asking is whether AI is a bubble.
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I don't know the answer to this question. I do know that when most investor capital is concentrated in a a very few names, there are invariably pockets of the market that are being overlooked, and new value opportunities arise.
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I have lived through the internet bubble bursting. Internet fundamentally changed the way we live and work. Still, there was a bubble and it burst. Many "cannot lose" names like Cisco Systems destroyed tremendous amount of investor capital in the last 25 years (CSCO is about to breakeven if you purchased the stock in the year 2000 close to its all time highs - imagine stuck with a stock for 25 years and only seeing red!).
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Should we take this risk in pursuit of quick profits?
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Or should we look for unglamorous ideas that offer tremendous margin of safety, and great rewards if we stay disciplined?
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If you are an Inner Circle member, I will give you unglamourous ideas that offer tremendous margin of safety and great rewards for disciplined investors.
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Inner Circle Portfolio Performance
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The portfolio performance is updated once a month, and tracked YTD until the end of the prior month. Performance is tracked as time weighted total return.
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Upgrade to Inner Circle
- My actual Small Cap Value portfolio with highly profitable but under followed stocks and Kelly Criterion optimized weights
- Detailed investment thesis for portfolio stocks, including target prices and expected returns emailed to you as soon as published
- 1 year membership with NO auto-renewal. Repurchase membership again if you wish to continue for another year once your term completes.
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Piotroski F-Score in Practice: How I Use It to Confirm a Value Pick
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I want to be upfront about something: I do not use the Piotroski F-Score as a primary stock screen most of the time. That might surprise you, given how much ink gets spilled on Piotroski scores in value investing circles. But my process is different: I use it as a confirmation tool, not a discovery tool. Most of the cases, …
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Managing Drawdowns: How I Protect Capital Without Losing Upside
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In 2008, one of my portfolio positions fell 67% in four months. I had bought a small industrial company with a clean balance sheet, a long operating history, and what I thought was a conservative valuation. Then the financial crisis hit, credit markets froze, and customers stopped ordering. The stock went from $18 to $6 in the time it takes …
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Shannon's Demon Explained: Why Rebalancing Beats Buy-and-Hold Over Time
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I want to tell you about one of the most counterintuitive ideas in all of investing, an idea so strange that when I first encountered it, I spent about an hour with a spreadsheet trying to convince myself it was wrong before I finally accepted that it was right. It is called Shannon's Demon. And once you understand it, you …
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