Date: February 26, 2024

Ducks Are Quacking – Sexy & Exciting Out, Boring & Stodgy In

The ducks were quacking last week, but especially on Thursday and Friday. For newer readers, that means investors were hungry for stocks. Those same people ridiculed and scorned me in Q4 2022 when I pounded the table about a new bull market launching. They laughed at my 2023 forecast labeled “The Year of the Bull”. Today, they can’t buy enough stocks. They want Nvidia and Super Micro and Microsoft. Well, folks, they can have them.

Over the past week we have done some pruning, something I absolutely love to do from a position of strength. You can look below as well as in the archives to see what we sold. When I say “some”, it doesn’t mean we liquidated the position. We simply took some off the table. For example, let’s say we bought a 5% position in XYZ. And XYZ doubles in price and it is now a 7.5% position. Good portfolio management says to trim back to perhaps the original 5% position.

I try not let any one single individual stock get too big in a portfolio because then you have significant idiosyncratic risk along with market risk. No thanks. I do not feel the same way about sector holdings or index holdings where we often take much larger positions, sometimes with leverage.

If you pay close attention, you can see my thesis playing out in our trading activity. Where we have had parabolic or monster rallies in positions, I have trimmed back position sizes. In turn, I have added new positions in beaten down securities that have gone sideways for a while. In other words, we have reduced our unusually large position in technology and added positions in drug, food and cyclical companies. Sexy and exciting get reduced. Boring and stodgy gets added.

On Friday we bought more DOW. We sold some NVDA, META, MSFT, COST, BRKB, CRM, DXHYX and levered NDX.


Paul Schatz, President, Heritage Capital