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Refocusing My Quality Investment Portfolio

Heavy Moat Investments profile picture
Heavy Moat Investments


  • I am a 24-year-old investor aiming for financial freedom through long-term investing in companies with good management and growth potential.
  • I made changes to the portfolio, buying stocks such as UFP Industries and Ulta Beauty, and selling stocks like Microsoft and Alphabet.
  • I am open to suggestions and eager to learn from others about portfolio construction.

Multiply sources of revenue. Multiple streams of income

Olivier Le Moal

It has been almost half a year since my latest portfolio update on Seeking Alpha, so let's get started. To check out my prior portfolio updates, click here: First portfolio article and second portfolio article.


This article was written by

Heavy Moat Investments profile picture
'Heavy Moat Investments' is 24-year-old self-taught investor Niklas based in Southern Germany, who recently finished his bachelor of Science in Business Informatics and now works as a Software Developer, besides writing about his investments on Seeking Alpha and Twitter. Niklas formerly wrote under the 'Stock Metal Investment' username but changed it to reflect his investment style better.The main investment themes in Heavy Moat Investments are great capital allocators, Spawners and companies with deep, widening moats. The only investment horizon discussed on this channel is long-term investments, preferably with decades of growth runway. Follow Niklas on his journey to Financial Freedom.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of DHR, TXN, NSSC, ADYEY, UFPI, ULTA, ASML, AMZN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This is not financial advise.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (38)

Have to admit you are the one analyst on Seeking Alpha that seems to think very much like I do, with similar theses and investment goals. Although unfortunately for me, I've started my investment journey 15 years later than you, but better late than never. I've learned a lot from your articles, everything resonates with my own way of thinking. And I can confirm based on my own experiences - owning companies that make you sleep well at night is the most important. Some innovation risk is prudent too in my view as missing new trends can be painful to watch, but not more capital than you're willing to lose if things don't pan out.
Heavy Moat Investments profile picture
@Dan Fronzeil thank you and indeed it is never too late.
@Dan Fronzeil

So, what are your top 5 positions in the portfolio?

And what do you plan to buy during the next 12 months?
@KFYY Top 5 would be TPL, TTD, KNSL, SEDG, MAXN. I own very many software, semiconductor and other tech stocks, but in smaller quantities because there are so many. I want to reduce the number of companies I own, so I'm in the middle of portfolio reconstruction/rebalancing right now, doing as much research as possible to find all the best stocks that will help me sleep well at night (90% of portfolio) plus about 10% of riskier disruptive innovation stocks.
I am Danish and think you have made a good choice buying A & O Johansen at these historically cheap valuation metrics for the compampany. It is currently trading below its historical average valuation.
A professional danish portfolio manager who has a model portfolio in the Danish shareholders' membership magazine has it in his model portfolio.
A model portfolio consisting of shares listed solely on the Danish stock exchange, and that focuses on industry winners and quality companies according to his own statement, and which since 2004 has given an average annual return of 19% and has beaten the Danish stock index benchmark.
A & O Johansen has been in his model portfolio for most of the years, and is still there.
Another danish stock that he has just added to the model portfolio that is currently trading below its historical average (Just like A & O Johansen) is Novozymes B and according to him with good growth prospects for the future.
Novozymes is a much larger company whose shares are also traded on the German and American stock exchanges.
Novozymes is a world leading company engaged in the production and sale of industrial enzymes, microorganisms and biopharmaceutical ingredients.
@Heavy Moat Investments

If you are from Germany, what is your opinion about TUI AG?

What is the probability that it's share price will go up 300% in the next 24 months?

TUI cleaned it's balance sheet after COVID, now it is starting to improve the profitability.
Heavy Moat Investments profile picture
@KFYY No opinion on TUI, I do not see it as a high quality business so I am not interested. Tough business model in a world where most people just book vacations online. I can't be helpful here.
@Heavy Moat Investments

Still, they sell vacations for more than 20 billion Euros per year. There are many people who prefer TUI, especially in Germany.
Ahhhh to be 24 and investment savvy! You are clearly on a strong path. I have a strong inclination to pay attention to ROIC and appreciate your enhancements to this measurement.

Having over 30 years of professional experience, much of it focused on maximizing capital investments - I have an appreciation for how prudent capital deployment unlocks growth.

I'm curious about your largest holding (DHR) - and the factors involved in how you got there? I own the stock and have been dollar cost averaging with some of the recent weakness. I feel the current pressure is due to expected weakness in top line growth with COVID no longer being a spring board so to speak.

Being recently retired, my allocations are heavier toward income. I set and follow strict allocation guidelines at macro level so I'm balanced between equity, income & safer treasury holdings.

A couple things that may be helpful. I pay very close attention to FCF/Debt ratios and look very closely at how companies manage debt loads.Debt is not a terrible thing when managed properly but can act as anchor when businesses face other challenges. I also personally do not carry cash. There are too many liquid investments these days that offer 5%+ interest with high levels of safety. In my daily funding accounts I do keep a few month buffer of cash - but in brokerage accounts there isn't a penny that's not sitting in liquid investments. Easy to move out of these when other new opportunities present themselves.

Best of luck to you!!!

So, what are your top 5 positions right now?
Heavy Moat Investments profile picture
@pomps909 I missed that comment, but I'll reply now. Thank you for the compliment first off!

I wrote a few articles on Danaher, you might want to check those out. I first bought a tiny position in 2020 and have very aggressively bought throughout 2023 from a 1% position to 14% or so now. The continued focus on improving the portfolio towards high growth industries with secular growth is compelling and management is one of the best to do it.

I agree, debt is very important and I always include it in my investment process. I don't like levered companies, it is a popular reasons why great companies fail.
@KFYY As I noted, I'm heavily slanted towards short term treasuries at this time - about 60% of my portfolio is held in monthly paying treasury and bond funds - mostly in SGOV; USFR; with smaller allocations (3-5%) in JPST; VUSB; VCSH. For equities - I'm at or close to a 2% full position in the following - RTX; AEP; VZ; JAA; EPD; AEM; PR; EQT this is amongst about 70 total equity holdings.

All of the above equities mostly are income plays with many also being undervalued. Hope this is helpful!
Maxlzzp profile picture
50/50 split between a Dividend and Growth ETF. Rebalance when prudent.
@Heavy Moat Investments thanks for publishing this article and describing your approach. Focusing on well run companies with good financial results and (hopefully) competitive advantages or moats can never be wrong, although as you say they might not always be "exciting" :)

You did not say much about your own goals for your investments/assets so my advice is in that area. A company may have good financial strength and results, but might not be a good investment for you as owner of their debt or equity. I thought hard about my specific goals for my taxable and non taxable investments and wrote things down to guide me in making choices. One good approach is like a pyramid with your "vision statement" (ha ha but it's a real thing) on top, this is your highest level strategy or "what do you want your investing life to look like". For me, it is "never run out of money" (I'm retired now so mine will be different than yours). Compare this to the old approach of "sell up to 4% of your assets every year and hope that you don't run out of money before you die". That one vision statement drives a lot of lower level goals and objectives. Yours might be "build a big enough nest egg so I can retire at age 50 if I want to" or "so I can buy a boat and become a pirate" or whatever. The pyramid idea is just that any investment you make should support one or more specific objectives, and that objective should support a specific goal, and all your goals should support your vision. Or call it your investing strategy, or your ultimate dream or whatever you like.

For example, at the next level down I have "never sell anything to pay my bills or expenses, only sell to improve investments (take capital gains, get out of a losing position etc)." That leads to lower level, supporting goals like "find investments that pay dividends to cover my expenses" which of course means I have to have a good handle on my expenses and "minimize taxes to reduce expenses" which, in the U.S., might mean "investments that pay tax-qualified dividends" or municipal bonds that can be federal and/or state tax-free. Your goals at your age probably include focusing on no-tax/low-tax growth instead of income right now. My objectives for my IRA (tax-advantaged retirement account in the U.S. which I am not allowed to spend yet without paying a penalty) are totally different than those for my taxable account as they should be for most people. These low level goals are where you filter for how much risk (drawdown, volatility, however you like to measure risk) you are willing to accept, timing (how soon do you need the gains and/or dividends from this investment?), tax issues, diversification and things like this. I won't draw from my IRA for at least 10 years, so everything I buy in it has a 10-year planning horizon (unless something goes wrong with the investment and I need to sell it sooner) so if a good company is having a bad quarter, I don't care. Not true for my taxable account.

When you get down to this level and you are evaluating the financial health of a company, you can also say "do the dividends pay me enough, and keep my taxes low enough" or "does the mix of share price growth and dividends meet my annual return required to be a pirate by age 50" etc etc.

Maybe you are already doing this, but I think a lot of people aren't that clear with their specific goals as an investor and they just think "is that a good fund/company" maybe looking at total return, or dividend yield. The right way to think is "is that a good fund/company which also meets this very specific investing goal of mine".

Hope this helps and best of luck! You are doing a great job already for somebody of your age.
Heavy Moat Investments profile picture
@Uncorrelated thank you for this great comment. I did share this about my goals in the first portfolio article " I aim to build my financial freedom in my young years through long-term-oriented investing in compounding machines that let me sleep well at night."

As you said, income is not a focus for me right now. I expect that this will take care of itself with time. All my companies generate great cash flows, so I'll see some start to pay a dividend through the years (like Napco, who initiated a dividend this year) and others continue to raise the small dividend they already pay.

I like the pirate goal, but as a metalhead I'd prefer to become a viking :P

The pyramid idea is a good one. Right now for me it is all about maximizing the KPIs, while not taking on large risk with speculative companies.
I like your portfolio metrics. If you haven’t already, look at smith fund run by Terry Smith. His extraordinary results validate your plan.
Heavy Moat Investments profile picture
@skehoe Thanks, Fundsmith has a good portfolio for sure.
Based on historical factual cyclical data we are ready for a natural economic/financial reset that no matter what anyone says or does cannot and will not be avoided. Mother Nature can be manipulated/delayed but NEVER, NEVER denied. Ever since 1971 when I first started trading every time that I have defied Mother Nature's cyclicality, I have regretted it. I have learned and benefited from sticking with company's stocks that everyone depends on to live and survive. Fossil fuel energy is here to stay for at least the next 30 years, and buying the formidable generals within that group at a major pull back price which will happen within the next 12 to 24 months, will be rewarding. The same thing with health care, food and related processing/cultivating companies. Utilities, Transportation etc. Every single thing that we can look at, touch, smell, wear, sit on, ingest, throw, catch, read, type has and will continue to have fossil fuel energy. The pills that we take are encapsulated in oil/chemical related packages, they have to be transported, they have to be rapped etc. No matter how many wars we are having, what the fed is doing, what Wall Street is saying doing everyone has to get up in the morning and brush their teeth, eat/drink something and drive and/or be driving to work and/or to the church where they help people financially. My Economics professor taught me that whether the economy is booming or totally destroyed the next sectors do well. When the economy is at its peak everyone is eating, drinking, celebrating, travelling, they get sick and die. When the economy is at its bottom everyone eats more to substitute the lack of other pleasures, they drink more to drown their sorrows, they get sick and die. This has happened since the dinosaurs declared war on Monther Nature.
@Carlos T Baez nice tin foil hat
Tell us what was wrong with any specific thing he said.
@Carlos T Baez

Great comment!

Why do you believe energy companies will go down during the next 12 to 24 months?

What are your top 5 positions in your portfolio now?
Thank you for sharing your thoughts and knowledge. Congratulation for such a fine job.
The only stock of your portfolio that I would certainly avoid is MELI. I will definitively look into AOJ-B.CO
Heavy Moat Investments profile picture
@NunoG Any particular reason why you'd certainly avoid MELI? Political risk?
Random Logic profile picture
The most important investment writing I ever read was "Worldly Wisdom by Charlie Munger 1995-1998"

There's a lot to chew on in this and I found it fascinating. I think its amenable to your approach. Even now as I glanced over Munger's musings to post this, I'm reminded that I need to review it all over again. There are two parts, IMO, that are most vital and I will provide excerpts:

~The trick is getting into better businesses.
We have really made the money out of high quality businesses. In some cases, we just bought the whole businesses. And in some cases, we just bought a big block of stock. But when you analyzed what happened, the big money has been made in the high quality businesses.
Over the long term, it is hard for a stock to earn a much better return than the business, which underlies it earnings. If the business earns 6% on capital over 40 years and you hold it for 40 years, you are not going to make much different than a 6 percent return—even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you end up with one hell of a result.

~Make a few great investments and sit on your assets
There are huge advantages for an individual to get into a position where you make a few great investments and just sit on your ass: You are paying less to brokers. You are listening to less nonsense. And if it works, the governmental tax system gives you an extra 1, 2 or 3 percentage points per annum compounded.

The one comment I would make on your investing criteria is that FCF yield is more an issue of when to buy, that is when it is less expensive, and not a matter of what to buy. The latter is more important. After all, as is said, price is what you pay, value is what you get.

Good luck! It seems to me you're on the right path.
Heavy Moat Investments profile picture
@Random Logic Thank you for the thoughtful comment. 100% agree with the first comment and that's why I try to hold on to high ROIC companies. I don't have the discipline to make just a few investments, but I try to retain my high conviction stocks in my portfolio for a long time. Actually similar to how Berkshire does it: Make more frequent transactions in the small positions and hold onto the large positions.

I agree, FCF yield is my way of valuing a company. I have it as a KPI to have a quick glance at Quality (ROIC), Growth (expected growth) and Valuation (FCF/OE Yield).
Random Logic profile picture
@Heavy Moat Investments I don't have the discipline to limit myself to just a few names, either, but the more important thing is the long hold period as you said. I compensate for the higher number of names by limiting the investment level with a few of them down to the "pets" level where I get less (usually far less) than 100 shares but find the industry they're in to be interesting, e.g., IMAX, GVDNY, MATX, REMYY, MHGVY, and TSRYY for instance.

BTW - I own ULTA and a little TXN and hoping to get more of the latter in a downturn.
Small Cap And Special Situations profile picture
Nice work on this, Heavy. I'd be interested in seeing an article on AO Johansen if you ever feel inspired to do so.
Heavy Moat Investments profile picture
@Small Cap And Special Situations Thank you. Unfortunately, AOJ isn't available on Seeking Alpha, so I doubt it'd get past the editors. I might publish an overview on my substack, if you want to follow me there too: heavymoatinvestments.substack.com/...
@Heavy Moat Investments I was very interested in AO Johansen as well, but found really bad customer reviews. Any insights on that?
You have a bright future in the investing game. I wish i had your knowledge at 24. Keep the the good articles.
Heavy Moat Investments profile picture
@DannyRule1 Thank you for the kind words Danny! Next one in the pipeline is BRO, should be out later this week.
I appreciate the stocks you listed with moats. At my age of 66 I decided to stay away from individual stocks as they have become a little too risky for my taste. I was wondering if you have ever looked at etfs that invest in moat strategies. Those I have looked at are JQUA, MOAT, QUAL and SPHG. If you have or even haven't looked at these would you care to share about them?
Heavy Moat Investments profile picture
@199chamber Thank you for your comment. Great decision to focus on ETFs. I expect to de-risk as well once I plan to fund my retirement from investments. Sadly buying US etfs often is not too easy in Germany, at least with my broker. Many don't comply with regulations we need to have here.

I haven't looked into moat efts yet, I do however own one ETF: MSCI World Quality Factor. It does go in a similar direction, with a focus on companies with stable profitability and high returns on equity.
@Heavy Moat Investments thanks I'll take a look at that
Engineered Quality Investments profile picture
I think you’ve done the right thing my friend. I wish I could have your portfolio, I love it.

4% fcf yield, growing 12% and 22% roic sums the quality to perfection hahah

I’m sure you’ll outperform the market, good luck!
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