Q1 2022 Portfolio Update

I want to start with a quick thank you.

The TSOH Investment Research service, which launched on April 5th, 2021, will be an ongoing endeavor for many years, and maybe even decades, to come – and that wouldn’t be possible without you. My goal is to produce high-quality, long-term equity research that is additive to your own investment journey, and I hope that has been your experience to date. While it’s always disappointing to underperform, that’s an unavoidable periodic reality for active investors (particularly for those who operate with a concentrated portfolio).

That said, if the process and decision-making are sound, the output will ultimately reflect that reality. While I still have plenty left to learn, I’m confident that my philosophy and investment process are built on a solid foundation. We’ll see how that pans out in the years ahead. Professionally, this endeavor is my sole focus; I’m 100% determined to do all I can to reciprocate the commitment you’ve made to this research service – to me.

Evolution

In early March, I published “Volatility & Portfolio Construction”. As detailed in that post, my portfolio has incurred its fair share of short-term pain, most notably Meta Platforms (Facebook) and Spotify. The remainder of that discussion was focused on a key portfolio construction question that I’ve grappled with: where is the point, if any, where it makes sense to forfeit the benefits of a thoughtfully diversified portfolio in exchange for higher expected returns? Specifically, does it make sense to sell positions that have weathered the storm in order to reallocate funds to the laggards, which (now) presumably offer more attractive returns? I hope that discussion gave you a clear understanding of how I think about navigating that decision; given the market volatility experienced to date, and the unpredictable (but certain) bouts of volatility that we’ll encounter in the years ahead, this an important topic that demands clear thinking (as is often the case in the game of investing, the “answer” is subjective). As discussed in the conclusion of that post, position sizing is a notable area where I believe my investment process has room for improvement; expect more on this in the next few weeks.