Q1 2024 Model Portfolio Review

Portfolio return of +2.6% for Q1; exiting DOLE to add to two existing positions.

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Value Situations is NOT investment advice and the author is not an investment advisor.

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I’m pleased to report the Value Sits Model Portfolio delivered positive absolute performance in Q1, appreciating +2.6%, although it underperformed my preferred equity market benchmarks of the S&P 500 (SPX) and the European STOXX 600 (SXXP), which rose +10.2% and +7% respectively for the quarter.

Despite this relative underperformance, I’m satisfied with my Q1 return given that it has built on the positive performance of last year thanks to idiosyncratic value drivers playing out, and without any exposure to the “Magnificent 7” or other hype-stocks of the moment such as Super Micro Computer (SMCI), ASML Holding (ASML) or Novo Nordisk (NOVOB), which appear to be propelled by speculative fervour devoid of any fundamental valuation considerations.

As I’ve highlighted in previous Portfolio reviews, a small cohort of stocks have been largely responsible for “market” returns over the past year. This trend persisted in Q1 with the Mag7 names accounting for 29% of the SPX’s market value but 37% of its overall return for the quarter. Notably, within the Mag7 four names (Nvidia, Microsoft, Meta Platforms and Amazon) which account for ~18% of the SPX’s value were responsible for almost half (47%!) of its 10.2% return in Q1. Given the speculative momentum behind such names, I remain comfortable not having any exposure to these in the Model Portfolio.

Furthermore, as I explain below the Portfolio continues to benefit from the Arithmetic of Asymmetry, with its positive performance achieved thanks to the market-beating performance of just 3 stocks (out of 11 positions in total at quarter-end). As such, the Portfolio continues to perform as intended and with a number of names now experiencing value-unlocking events and/or well positioned to capitalise on supportive outlooks for their businesses, I believe the Portfolio’s prospects are very positive for the remainder of this year.

Now lets examine the Portfolio performance in further detail, beginning with a review of how the Portfolio was positioned at the end of Q1, followed by a brief discussion of each position and some changes to the Portfolio post-quarter end (made as of this morning).