2023 Review
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I’m pleased to report the Value Sits Model Portfolio delivered very strong performance in both relative and absolute terms in 2023, returning +23.9% for the year, in line with reported performance at Q3-end, following effectively flat performance for Q4 (-0.2% vs. Q3).
For the year, the Model Portfolio marginally trailed the S&P 500 (SPX) by -0.3% (SPX +24.2% for 2023), but significantly outperformed the European STOXX 600 (SXXP) by +11.2% (SXXP +12.7% for 2023).
Reflecting on FY23 performance, I’m very pleased with how the Model Portfolio performed in two particular respects:
My objective of achieving positive absolute returns regardless of broader market performance was achieved, as evidenced by the composition of the Model Portfolio - I effectively matched the SPX’s performance without owning the key driver of the index’s performance, i.e. the Magnificent 7 (or what I previously referred to as the Megacap 8, including Netflix); excluding the “Mag7,” the SPX’s performance in 2023 was flat, and so I take some satisfaction in the Portfolio’s market-matching performance being driven by idiosyncratic situations such as YCA, SOL, TE and DOLE, which all comfortably outperformed the broader market on their own merits and uncorrelated to the Mag7 phenomenon.
The Portfolio again benefited from the Arithmetic of Asymmetry, with its market-matching performance achieved by the outperformance of just 4 stocks to the extent that their performance (+48% on average) more than compensated for the negative performance delivered by the other 6 names held in the Portfolio (down -14.9% on average).
Furthermore, the Portfolio’s +23.9% return is even more pleasing when I consider that it represents a positive +36.2% swing vs. 2022’s performance, fully recovering the -12.3% loss posted last year.
Now lets examine the Portfolio performance in further detail, beginning with a review of how the overall Portfolio was positioned as at year-end, followed by a discussion of each of the names held and my outlook for 2024.