Continuing the Beachman portfolio tune-up

Portfolio: Juicing up the highest conviction themes and sectors

It never ceases to amaze me how a simple exercise throws up some of the most interesting learnings. It is easy to get numbed by the dollars and cents of our investments, the % gains or losses, YTD returns etc. It helps once in a while to step back and look at the forest versus staring at the trees.

In a recent post, I shared the five-step process that I have been using to evaluate and fine-tune my portfolio. I just completed steps 1 and 2 and the results (see below) were very enlightening. I definitely need to make some changes.

Which sectors do I like most today?

At the beginning of the year, I picked 6 major themes that I wanted to invest in 2022.

Beachman's current equity allocations by theme:

• Semiconductors 19.79%

• Cloud

  • Cybersecurity 9.13%

  • Infrastructure management 12.37%

  • Data management 6.74%

• E-commerce 16.89%

• Climate change 0%

• Cryptocurrencies 5.10%

• Healthcare 14.93%

• Cash 15.05%

Additionally, there are a couple of accounts where I can only own mutual funds. Here are those mutual fund allocations by sector:

• US large cap 27.78%

• US mid cap 20.59%

• US small cap 14.69%

• International developed markets 19.92%

• Emerging markets 13.31%

• Cash 3.76%

Key observations:

• I still like the themes I picked for my portfolio. At this time, I am not considering any new theme or sector.

• Cloud cybersecurity and infrastructure management could be viewed as a basket. Cloudflare (NET) is in the infra side, but is also doing cybersecurity stuff. The same holds true for Datadog (DDOG). Additionally, there are several joint partnerships and go-to-market collaborations amongst these companies when they do not directly compete against each other.

• I definitely need to allocate more to the data management theme. I need to add to my SNOW position and I am working on a comparative analysis between MDB and CFLT - I will likely use those findings to add a new position.

• I might trim a bit off my e-commerce section. I am worried about a slowdown in consumer spending and the risk of a mild recession.

• I have to get back into my favorite climate change position via a good copper stock or ETF. My analysis is in progress on this front.

• I need to add to my emerging markets mutual fund. These stocks have taken a beating recently, with the rising US$ and speculative commodity prices.

Beachman plan:

1. Complete my comparitive study between MDB and CFLT. Add funds to the data management theme accordingly.

2. Complete my search for a good Copper stock or ETF. Open the new position when commodity prices take a breather later this year.

3. Add to my emerging markets mutual fund position.

4. Complete rescoring my current stocks and several others (a cohort of about 50 stocks) to ensure that I own the highest scoring companies. Get rid of the rest.

5. Continue fine-tuning my portfolio by analyzing/comparing the individual stocks under each theme, including their position sizes.

We change the oil in our cars every 5,000 or 10,000 miles. Our portfolios need a similar tune-up every quarter after we receive new information from the companies’ earnings reports. The analysis above helps me make sure that I am topping off fluids in the right places.