More Blood, More Shopping

Core Fund Update 4: #14 of 20 stocks added

A week ago we published our article We Went on a Shopping Spree. Well, the market continued its bloodshed earlier this week, so we did what we do best and look for quality companies that are on sale. Even though the US market turned green at the end of the week, there is no way to tell if we have reached the bottom of this bear market. Or, was Friday only a relief rally and we are still heading lower? We might even be at the start of a 10-year bear market. If you look at all the news headlines and the debates between bulls and bears on social media, the only conclusion one can draw is that nobody truly knows. One thing we can learn from the history of the market is that if we zoom out far enough, the graph always goes to the right and mostly up. In order to reduce your risk, lengthen your time horizon. The two images attached show the probability of making a loss in the S&P500 over different investment periods.

Source of images: https://rokpovsic.com/what-is-the-chance-of-losing-money-in-the-stock-market.html

Over an investment period of 16 years, your risk of losing money approaches 0% and if you account for inflation this period increases to 23 years. So why is investing so difficult? Human psychology prohibits us from making rational decisions that far into the future.

Our Plan

We will continue to execute our investment plan for the Core Fund, by looking for industry leaders with bright futures, great management, solid financials, established moats and strong business models. If these companies happen to be on sale, who are we to complain. Emotionally, all these red days can be very taxing, that is why it is so important to establish an investment plan and have the discipline to stick with it. There is an old saying:

Most wealth is created in bear markets

Two New Stocks

Illumina is probably the only biotech company that will be allowed into our Core Fund. Illumina is the worlds leading manufacturer of DNA-sequencing equipment and the consumables for this equipment. Personalized medicine is the future of healthcare and Illumina is capitalising on this transformational trend. DNA sequencing is vital for the early diagnosis and targeted treatment of many diseases. 

Bull Thesis: They are the leading picks and shovels play in genetic sequencing.

KLA Corporation is not a well-known name like AMD or Nvidia in the semiconductor industry, but they do play a crucial role in this growing industry. KLA is a market leader in the semiconductor manufacturing process control and has more than 50% market share in the sector. They provide metrology, inspection and data analytics solutions to chip makers. A quote from their website:

 KLA is proud to be part of the most significant technological breakthroughs. Virtually no laptop, smartphone, wearable device, voice-controlled gadget, flexible screen, VR device or smart car would have made it into your hands without us

Bull Thesis: Multiple tailwinds for this innovative semiconductor equipment manufacturer.

Portfolio Update Summary

Along with our two new positions, we continued our dollar-cost averaging into some of our current holdings. 

• Buy $250 MELI at $694.30
• Buy $250 AMZN at $2096.50
• Buy $250 ASML at $515.53
• Buy $250 KLAC at $309.48
• Buy $250 ILMN at $214.58

Disclosure

This article is not financial advice and is based on the opinion of the author. 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 investors personal responsibility to always remain tax compliant.