Beachman's investing plan - Chaos, volatility and beaches
Portfolio: What I am planning to do in the markets and with my portfolio
It has been a very busy week for me, with travel across 4 states…planes, trains and automobiles. Now, I am actually on the beach (picture below of the island beach where I lounge every day)…my happy place. I will be here for most of August with a side-trip to Portugal squeezed in between.
That said, markets don’t care. They continue to do their thing…challenging us on our actions, our hopes, our greed, our hubris.
As an example, let’s take the Beachman portfolio and how I have managed it over the past few months. I ended April with my portfolio up +22% for the year. I wrapped up last week with my portfolio at the same spot +22% YTD. It’s like the last three months did not matter.
I should have sold in May and “gone away” right?
Table of contents
Market signals
Beachman’s plan
Join us on the daily chat
I continue to hear from paid subscribers that our chat line is one of the most useful features of my substack.
If you have not joined us on the chat line here, I highly encourage that you take a few minutes to visit with us.
The chat space is reserved exclusively for paid subscribers and the discussion continues to pick up every week - interesting questions being asked and answered, growing community engagement and real-time access to Beachman and his portfolio actions during market hours. During times like these, when markets are volatile to the downside, engaging with a community of smart investors is especially valuable.
Even if you do not feel like contributing, it’s ok to stop by, peruse the dialogue and get a feel for the sentiment among the Beachman community.
Market signals
May 2024 - Markets were bullishly bouncing higher off the April lows. Q1 earnings reports were generally better than expected and investors started buying the dip.
I started worrying about markets topping and was expecting a few months of meandering to lower market returns that would give me an opportunity to reset my portfolio in a different direction.
While markets kept rising, stocks were getting over-valued in the face of troubling macro signals such as a cautious consumer, anemic labor trends and depressed manufacturing and small business activity.
I started pivoting my portfolio. I trimmed overvalued positions and closed out positions that did not interest me anymore. I aggressively sold covered calls on certain stocks. Over the month of May, I maintained my cash position at about 15%.
June 2024 - The Summer of George was in full swing. Markets had given me enough signals to more clearly articulate and execute my pivot plan. I was not interested in being over exposed or over allocated in that regime. I created a focused list of 6 questions that would guide me on how to invest and position going forward.
I raised more cash in my portfolio, maintaining it at about 20% throughout the month. I further reduced risk by trimming several overvalued stocks and closing out a few more positions.
July 2024 - Then July happened and all hell broke loose in markets. I started building a geopolitical hedge in my portfolio, while looking for opportunities to selectively buy the dip. I scaled back my trading activity because I was traveling.
As markets dipped, I deployed portions of my handy 20% cash position.
But, markets always find a way to kick us in the shin.
CRWD’s global outage was an unexpected black swan event that negatively painted tech stocks with a big sell target. This combined with a jittery July options expiration, a stubborn US Fed and weaker macro data succeeded in taking the Nasdaq (-11%) and mega cap stocks (-15%) into correction territory from their YTD highs. So it was 2 steps forward…1 step back for most of our favorite stocks. Being overweight in AI stocks and in mega cap stocks, my high beta portfolio took a bigger hit than most.
The present - So we come to today, Mon Aug 5th. So much to digest.
Everything seems to be happening all at once. Market sell off in Japan triggered by a local interest rate hike, growing tension in the Middle East, a weaker than expected US July jobs report, the triggering of the Sahm recession indicator, no interest rate cuts in the US until possibly September, cryptos dropping over the weekend, market futures weaker this morning…
Fintwit and finmedia narratives are in overdrive…trying to explain what is happening…trying to predict what will happen. Everyone and their uncle has an explanation and an opinion.
In times like these, I find it best to keep things simple.
Looking at the SP500, there is a lot of support below current levels. There is support at 5,300. There is support at 5,250. Support at 5,200 and even support at 5,000. If we get down to 5,000…that will take us all the way back to…Feb 2024…still higher for the year.
The same applies to the Nasdaq100…at 17,600…at 17,500…again taking us back to Feb 2024.
Market corrections happen for a reason. They happen all the time. They happen every year.
Savvy investors understand this and plan for it.
Beachman’s plan
Given the market signals that I discussed above…
…my simple, actionable, measurable investing plan is as follows: