Followers of mine will be familiar with my strategy of managing two completely separate portfolios. My main portfolio, with roughly 70% of my invested assets is peppered with 49 large-cap, blue-chip companies, the vast majority of which pay healthy dividends and can be set on autopilot for years at a time without much worry.
My other portfolio however is my high-octane, let 'er rip, tribute to the gambler in me - my high-growth portfolio. This article will focus on my high-growth portfolio and how I have structured it around eight key themes driving the future.
I began the concept for the two-portfolio approach back in late 2015 when I caught myself taking way too many risks in my one and only portfolio. Back then, as a spritely 34 year old, this was not too much of an issue; however, I did recognize that as I grew older, I needed to build a foundation of solid, semi-permanent positions for my financial future.
I recognized that I needed to separate the side of me that watches 'Murder, She Wrote' reruns, takes all of my daily vitamins and goes to bed at 9pm from the side of me that once had a few too many rum and cokes and spent 48 hours straight at the card room at Soaring Eagle Casino in Mt Pleasant, Michigan, waking up on the 15th hole of Bucks Run golf course.
So I came up with a rule, my 75/25 rule - if I had $10,000 to invest, I would invest $7,500 in my safe portfolio and $2,500 in my high-growth portfolio. I do not rebalance my portfolios: if my high-growth portfolio overperforms, so be it; the same if it underperforms - my initial investments will always be split 75% safe, 25% high risk.
Now my "safe" portfolio is not all utilities, banks, and staples. I do hold sizable positions in the likes of Facebook (FB), Microsoft (MSFT), Alphabet (GOOGL), NVIDIA (NVDA), Amazon (AMZN), Netflix (NFLX), Tencent (OTCPK:TCEHY), Alibaba (BABA) etc. Technology companies make up roughly 25% of the safe portfolio. However, the vast majority of my current 49 positions in the safe portfolio are in dividend-paying, large-cap, blue-chip companies and REITs.
The high-growth portfolio however is strictly made up of aggressive growth companies, predominantly in the small- to mid-cap range, and focuses on emerging themes in the future economy.
I have chosen to focus my investments in the high-growth portfolio on eight overarching themes. As you will see, my concentration into each of these themes is not equal - some are vastly more concentrated than others and this is a function not only of available and attractive companies to invest in but also in the maturity of the sector. As each sector grows and matures, so will my investments in the sector.
Without further ado, below, from smallest to largest are the themes and holdings that make up my high-growth portfolio:
Momentus Inc. (SRAC) - 1.4%
AST SpaceMobile, Inc. (ASTS) - 0.9%
Virgin Galactic Holdings, Inc. (SPCE) - 0.1%
Total - 2.4%
Space tech is still a very new concept and finding investable pure plays at this point is a very tough ask; however, Momentus and AST Space Mobile both have a ton of potential and with each falling like stones recently, I initiated positions in both with the idea of gradually increasing them if I see tangible progress for each.
Virgin Galactic is beginning to become interesting again after the recent drop from an interstellar $60 down to a more reasonable $22. I currently hold only a place holder position as I sold nearly all of my shares in the mid $50's recently after purchasing originally in the $18 range.
3D Printing/Additive Manufacturing 2.0
Desktop Metal (DM) - 2.1%
Velo3D, Inc. (SPFR) - 1.1%
Markforged, Inc. (AONE) - 0.9%
Total - 4.1%
3D Printing / Additive Manufacturing 2.0 is an area that I am very excited about for the future; however, it is very early days for the sector. In my opinion, the 3D printer industry has been divided into multiple different groups focusing on legacy plastics / medical devices and those looking to revolutionize complex metal manufacturing.
With my 3 holdings in this field, I believe I have captured the leading companies in the field of additive metal manufacturing, which if successful could lead to outsized returns. This field is moving very quickly, however, so I will be agile in picking up new entrants with unique, patented technologies.
Telos Corp. (TLS) - 2.5%
CyberArk Software (CYBR) - 1.6%
CrowdStrike Holdings (CRWD) - 1.3%
Total - 5.4%
Cybersecurity is a future-proof sector given that as technology evolves so must the methods we use to protect it. In this field, what I am looking for is unique companies performing mission-critical functions. I believe all 3 of my holdings in the sector achieve that need. The main issue I have always had in adding positions to this sector is valuation.
On my wish list is Zscaler, Inc. (ZS), SailPoint Technologies (SAIL) and Okta, Inc. (OKTA). I missed a golden opportunity to buy Okta recently around $200 and was not able to pull the trigger. I will not make that mistake again.
Ameresco, Inc. (AMRC) - 2.2%
Enphase Energy, Inc. (ENPH) - 1.8%
SolarEdge Technologies (SEDG) - 1.1%
QuantumScape Corp. (QS) - 1.0%
Total - 6.1%
Alternative energy is definitely here to stay as both sides of the aisle tend to agree in some form that we need to shift to cleaner energy sources going forward. The key to investing in that shift is to find where the greatest profit sources are going to be in the future.
This task is not easy; however, it does seem to be clear that those building the systems and those supplying the inverters / EV batteries will have an edge in profitability. I do have some overlap here with my safe portfolio as I hold First Solar (FSLR) and Hannon Armstrong Sustainable Infrastructure (HASI) as long-term, sizable positions.
I am currently digging deeper and researching Array Technologies (ARRY), Gibraltar Industries, Inc. (ROCK), ChargePoint Holdings (CHPT) and MP Materials Corp (MP) as potential additions to my holdings in this sector as I would like to increase my exposure; however, finding pure plays with durable potential future profits is a difficult exercise.
CRISPR Therapeutics (CRSP) - 3.4%
Intellia Therapeutics (NTLA) - 2.7%
Editas Medicine, Inc. (EDIT) - 1.8%
Total - 7.9%
I truly believe that the future of medicine is here right now with CRISPR technology and the ability to manipulate and edit genetic codes. The possibilities are mesmerizing; however, we must remember that these companies are still many years away from the potential first commercialization of a CRISPR product and while initial readouts are coming in from trials and do look promising, this is by no means a sure thing making diversification an absolute must.
In the sector, I have purchased the leading 3 companies and I am looking to add Beam Therapeutics (BEAM) in the near future to round out my holdings.
AbCellera Biologics (ABCL) - 4.2%
Schrodinger, Inc. (SDGR) - 3.4%
Twist Bioscience Corp. (TWST) - 2.1%
SomaLogic, Inc. (CMIIU) - 2.0%
Berkeley Lights, Inc. (BLI) - 1.8%
Genocea Biosciences, Inc. (GNCA) - 0.9%
Quantum-Si Corp. (CAPA) - 0.7%
Total - 13.1%
Biotech 2.0, to me is the intersection of biotechnology and the power of computation / AI. This field holds immense promise and will clearly be an area of increasing investment into the future. As computing power increases and our understanding of the interactions of molecules, proteins and antibodies continues to build, the possibilities here are limitless. In my group of holdings, I have covered areas such as advanced drug discovery, synthetic biology, and proteomics.
Palantir Technologies (PLTR) - 5.1%
Dynatrace, Inc. (DT) - 4.9%
Elastic N.V. (ESTC) - 4.0%
Splunk Inc. (SPLK) - 2.8%
Alteryx Inc. (AYX) - 1.8%
Snowflake, Inc. (SNOW) - 1.7%
UiPath, Inc. (PATH) - 1.1%
Total - 21.4%
Data Analytics represents a vast and largely greenfield opportunity for virtually any business and organization to utilize and control the data that they themselves produce. The vast majority of data analysis to date has been done largely using excel spreadsheets and only in the last half decade have we truly begun to scratch the surface to the possibilities.
eCommerce / Online Shift
Kaleyra, Inc. (KLR) - 7.7%
Liberty Latin America (LILA) - 7.1%
MercadoLibre, Inc. (MELI) - 4.6%
Unity Software Inc. (U) - 4.5%
The Trade Desk (TTD) - 3.2%
Despegar.com (DESP) - 2.9%
Coupa Software (COUP) - 2.9%
Zillow Group, Inc. (Z) - 1.4%
Total - 34.3%
By far the most mature and with the widest array of companies from which to choose is the eCommerce / Online Shift theme. This one is certainly not new however. It is evolving rapidly making attractive valuations extremely difficult to find.
The growth of the internet, communications, and the software that powers it is in the middle of a super cycle that looks to have legs as far as the eye can see. I simply see no turning back as the internet will continue to dominate nearly every part of our lives into the future.
I must admit to holding Liberty Latin America almost as a cash substitute in the portfolio. While I do believe it is undervalued and a solid holding going forward, it is a bit out of place in the high-growth portfolio and, over time and as opportunities come, I will sell down this holding.
Profound Medical Corp. (PROF) - 1.7%
II-VI Inc. (IIVI) - 1.6%
Total - 3.3%
Not all of my holdings fit neatly into thematic baskets; however, both of these holdings fit into my overall vision of the future. Profound Medical uses a novel MRI guided ablation method for curative Prostate Cancer surgery among other therapeutic areas such as uterine fibroids and palliative bone cancer therapy.
II-VI produces photonic solutions (lasers) for a wide range of industries such as semiconductors, optical communications, defense applications, and the medical sector.
Both of these holdings may not be perfect fits in any one category I have listed; however, both of them fit nicely into my view of the future and will stay in my portfolio.
Is my high-growth portfolio perfect? No, it certainly is not. However, I believe my reasoning and holdings for each theme along with my view of the potential future is sound. Valuations have kept me for some time from pushing forward in the cybersecurity and alternative energy sectors where I feel that I am underinvested. I will look for opportunities to further add to these areas.
Space tech and 3D printing / additive manufacturing 2.0 are areas that I am also watching very closely as the potential is absolutely massive; however, there is absolutely no track record from which to view progress or to base investment decisions on.
Once I become more comfortable in the space and, if the companies I am watching begin to deliver on their goals, I plan to roughly double my exposure to the respective sectors.
Since I began this experiment in 2015, I must admit to feeling satisfied with the results. Having a clear delineation between the two sides of me gives me peace. I am able to indulge my wild side and throw caution to the wind in this portfolio, while having a base of operations in my "safe" portfolio to plod along into the future.
So far my high-growth portfolio has outperformed my safe portfolio by roughly 25% over the last 5 years and while I have no misconceptions that the last 12 months have certainly been a period favoring risk, I do think that the companies I have chosen in the portfolio have a chance to continue to add to this outperformance in the next 5 years.
Let me know your thoughts in the comment section and thank you for reading!