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Core Fund Monthly Update

April 21, 2024
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Wiko Steyn
Author
Wiko Steyn

The true meaning of wealth

 

Investing Lesson

It's amazing how much things can change in the course of a month. Last month there was a sense that the bear market might be coming to an end and that market euphoria was making a return. All 20 stocks in our Core Fund were positive, but now only 11 share that privilege. If you have been in the game for a while, you have certainly experienced a bear market before and we can guarantee that this one won't be your last.  

A cynical irony hides in the emotional rollercoaster of investing. Red days bring fear and enough red days bring despair, which usually leads to irrational decision-making. Examining how our brains are wired, these emotions make complete sense. This behaviour has a lot to do with our loss aversion bias, where the pain of losing is psychologically twice as powerful as the pleasure of gaining. Now, the ironic part is that when the market recovers, emotions like regret and even anger might come to the surface. Why? We hate missing out and that is why FOMO is prevalent in financial markets just like it is in other aspects of our life. Hindsight bias plays devil's advocate here by making us believe we can time the market. Somehow we knew it was the bottom and we simply can't understand why we did not buy this stock that jumped 50%. Read our article, Be Wary of Investor Biases, to avoid these potential pitfalls. 

So we have fear, despair, regret and anger, this kind of sounds like a lose-lose scenario and the only way you will be happy is if you strike it big on a meme stock or get rich quick with some new NFT. Firstly, that won't make you happy either, just like winning the lotto probably won't do your psyche any wonders. It is time to get a different perspective of money and more importantly wealth. 


 

The Nothingness of Money

Money is often perceived as having a monopoly over wealth however, being wealthy isn't just a money thing. Relationships, experiences, knowledge and maybe most importantly your health, all contribute to true wealth.

When it comes to the money aspect of wealth, the first question that comes to mind is how much is enough? Some people want F#%k you money, some just want financial security to provide for their families and most want to be financially independent. Maybe it is time to change your perspective of wealth from some dollar amount to rather evaluating your wealth in seconds, days or years. Being rich can buy you things but being wealthy buys you time, and time is ultimately our most valuable resource. This does not necessarily mean that you are going to live longer but that you will be able to spend your time doing the things you enjoy with the people you care for. If you can cover your bills, spend money on experiences, and save/invest the rest, you are already in a great place. Everything else is extra.

 

Rich people need it. Poor people have it. If you eat it, you die. And when you die, you take it with you. What is it?

Take your time and see if you can figure this one out


 

The answer is NOTHING.

Rich people need NOTHING, poor people have NOTHING. If you eat NOTHING, you die and when you die you take NOTHING with you.

 

Portfolio Update Summary

Two of our favourite industries have been hit hard in the last month, Semiconductors and Software stocks. Semiconductors seemed to have attracted one bad headline after the other. Nvidia already had to significantly cut guidance due to a slowdown in gaming and crypto mining which is causing inventory issues meanwhile, the tension between China and Taiwan seems to be escalating every day. This is affecting stocks like Nvidia directly because most semiconductors are produced in Taiwan and any unprovoked attack can have major ramifications globally. The US government dropped the last bomb when they banned companies from selling certain AI chips to China. To be honest, things look very bleak for Nvidia right now and it might drop another 30%. Are we buying or selling? Buying hand over fist. 

These headwinds will probably continue for a year or even more, but if you have a 10-year time horizon, few companies have a brighter future. AI, deep learning, gaming, self-driving cars, robots and virtual reality, if you envision a future where these technologies are ingrained in our everyday life, we can guarantee you that many of them will be powered by Nvidia.

Software is not facing the same degree of headwinds but the fear of a recession and a strong dollar is causing heavy downward pressure on these stocks. The biggest risk with these software stocks is simply their sky-high valuations. If they are not able to convince Wall Street that they will exceed growth expectations, they usually get slashed 20% after earnings. We still believe that data and semiconductors are the modern world's oil and for now none of the 20 companies in our Core Fund has broken our original investing thesis. We will continue to track these stocks to make sure our conviction is still intact but we will not let share price movement force our hand to sell any stock.

Lululemon was definitely a stand-out for us this earnings season, with beats across the board and even a significant guidance increase. In these challenging times, these results personify a true compounder.

  • Buy $250 VEEV at $167.10
  • Buy $250 NVDA at $133.60
  • Buy $500  LULU at $285.44
  • Buy $250 KLAC at $330.92
  • Buy $250 CRWD at $169.80


 

Disclosure

This article is not financial advice and is based on the opinion of the author.  This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. The $20K in the Core Fund is not real money and only a demonstration of a typical portfolio. This is an actively managed portfolio, where we will buy and sell positions as we deem fit without any regard for taxation. Remember, all selling of stocks triggers a tax event in most countries and it is the investor's personal responsibility to always remain tax compliant.


 


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