In 2024, a lot has happened for me financially. I started investing around the middle of 2021. As I come from a family in which investing in the stock market was rather frowned upon (my parents invested in car manufacturers in 2000, which then slipped in 2001 just like everything else and they realized the losses), I only dared to start with small amounts bit by bit on an ETF basis in 2021. Financial flow classic 70% MSCI World ETF and 30% MSCI EM. The good thing about this was above all building up the automatism of investing money steadily and not waiting until the end of the month.
However, in 2024 I started to look more closely at the topic of finance, sometimes watching Berkshire conferences with Warren Buffett and Charlie Munger and realized that I was interested in individual stocks and would like to own Apple (shares) myself, for example. In February 24' I then looked at my EM position and saw that the position had been more or less at 0 since '21. So I sold just under €1000 and put it into Apple. And no, I didn't calculate the intrinsic value of the share first and didn't know at the time that Apple would be launching devices with AI at the end of 2024. I myself work in the field of software engineering/data science and if someone has the choice, you actually always take the Macbook over Windows computers. But that's another topic for debate :)
The Apple shares then performed really well even after the purchase and I was fascinated by the fact that I generated more unrealized profits with a single share or 6 Apple shares within 2 months than with the EM in 4 years. (I'll come back to EM later)
From March onwards, I suspended my savings plan in the ETFs and simply put the money in my Scalable clearing account instead. I didn't know what exactly I wanted to buy now, so pretty much from mid-24' I started to dive more into investing and how to analyze stocks. I had already studied discounted cash flow analysis in my bachelor's degree, back then in the subject of finance with a 3.0 :D. So I built an Excel spreadsheet and started using DCF models to calculate the intrinsic value of shares.
But what exactly should my strategy be when buying shares?
I mean, I already liked getting a dividend from Apple, so did I want to pursue some kind of dividend growth strategy? Should I go for "fast growers" as Peter Lynch would say? But should I then also add so-called "stalwarts" (dividend stocks) and "asset plays" (stocks with very expensive inventories, for example, or investments and cash whose book value is well below their actual value) to my portfolio, as he advises?
"Only buy something that you'd be perfectly happy to hold if the market shut down for ten years" - W. Buffett
Long-term focus
My investment horizon is over 10 years, so it is important to me to have some kind of predictability of income from the companies I want to buy. It was also important for me to be patient when buying from the outset and to allow some time to pass in order to check whether an investment thesis holds up over quarters.
Quality
I focus exclusively on companies with a leading position in their respective industry, either number 1 or number 2 in the respective sector with a large market share. The important thing here is that growth should be primarily organic. This means that the company should either simply build good, irreplaceable products that customers love and therefore remain loyal to, or simply be so influential that they can simply raise their prices without really losing customers ("pricing power" like Apple)
Concentration
Especially for someone coming from the financial flow school where the more diversified the investment, the better, it was hard to get used to this element. The investor Dev Kantesaria, who has successfully managed Valley Forge Capital for years and whose philosophy is also based on mine, once described this very aptly in an interview: "Why should I invest in my 25th best investment idea?". Accordingly, my goal is only to invest in a maximum of 15 individual stocks - I can't even manage to regularly check more in my free time and check whether the investment thesis still holds up.
Discipline
With the Emerging Markets ETF, I have held a position in my portfolio for several years purely out of conviction that this investment in emerging markets will work out in the long term. I also want to hold my stocks with the same conviction that they will perform well over the long term. In addition, I usually invest in companies when their intrinsic value suggests a margin of safety of at least 15-20%. For example, there was a slump in Alphabet shares in the summer with the unrest that Alphabet might be split up. The share was worth around €150 at the time. All of Alphabet's individual businesses have a combined intrinsic value of €250-300. Also related to this strategy element is that I don't really touch individual sectors that are associated with large research and development costs, for example, unless I really know my way around them. So I avoid biotech companies because I hardly know anything about them, but I invest in tech companies because I work in IT myself.
So I look for companies that are quasi monopolies in their respective industries, with strong market shares and a large moat due to irreplaceable or hard-to-penetrate products and a solid margin with a focus on steady free cash flow growth.
So why do I actually have the Emerging Markets ETF?
I asked myself this question and then promptly took another look at just ETF to see which stocks are actually in it. The top 10 holdings accounted for almost 25%. Why is that important? Some people always complain that the Magnificent 7 have such a high share in the S&P500, also slightly more than 25%, but this is usually due to the fact that companies are often weighted by market capitalization. If you then take a closer look at the top 10, 5 of them are Chinese companies. In general, China accounts for just under 25% of the ETF share. Chinese equities are not bad per se, there are some very good companies. However, the constant intervention of the government is a problem, laws can be changed overnight and a company becomes obsolete, or Mr. Ma, the CEO of Alibaba, simply disappears for a few months after having expressed mild criticism of government officials in a speech. These characteristics go against my strategy as formulated above, which is why the EM ETF was thrown out completely in July.
I then slowly tried to build up my individual positions towards the end of July, primarily $CRM (+0,06%) , $ASML (-0,44%) , $MSFT (+0,12%) , $BKNG (+0,17%) , $GOOG (-0,02%) , $V (+0,08%) and $AMZN (+0,03%) . On August 5 there was a small correction, I think it was due to the "Japanese carry trade". That week I made another big purchase, very happy not to have invested all my freed-up EM capital at once. As a result, I was able to invest heavily in Amazon and Alphabet and make them my largest single positions.
Overall, I am very happy with the decision. I am aware that the last stock market year was a very good one overall and that you shouldn't be deceived by appearances. Things will probably not always go so well. My third-largest single position, in which I was in the red at just under €1500 in the meantime $ASML (-0,44%) is good proof of this. Nevertheless, this company is a virtual monopoly in the chip manufacturing sector and will most likely remain so for the next 10 years. Therefore, I can only shrug my shoulders and look at the reports from the Magnificent 7, which are constantly expanding their data centers and in some cases were unable to meet demand in the last quarters of 2024! But there are already some good articles on this here on getquin. A new addition at the end of '24 is $UBER (+0,07%) I will also be steadily expanding my position there, and the watchlist also includes $MELI (+0,01%) , $MCO (+0,3%) , $SPGI (+0,25%) , $CAKE (+0,2%) and $AMD (+0,19%) for 2025.
To summarize:
Portfolio performance: 31% vs. S&P500 25%
Invested capital: approx. 22,000 euros
Portfolio value growth: approx. 42,000 euros
Goals for 2025:
- 30k invested (a large crypto cash-out will take place with approx. 20-30k, not included in the portfolio)
- Beat the S&P500
- Increase portfolio value to 150k
- Sell $TTWO (+0%) (GTA 6 bet, but by the time this appears it feels like you've already done 10x in other companies)
- expansion $SPGI (+0,25%) and addition of $MCO (+0,3%) (credit rating duopolies)
