I launched the Freedom Portfolio in October of 2018. It effectively happened right as the market was taking a very sudden and very pronounced dip (especially so in growth/tech stocks) right at the end of the year. Sound familiar? That dip seems to have been largely forgotten now, and if you look at a chart of the S&P500 it can even be hard to identify it. That drop is burned into my memory, though, because it caused me to have to write this in my first quarterly recap of the Freedom Portfolio:

Ouch.

It’s hard to think of any other way of describing the start to the Freedom Portfolio. It’s also hard to think of a better way of describing the performance of the stock market over the past month. As of the time of this writing, the all-time high for the S&P 500 was September 20th, 2018. That was about a week and a half before the official start of me tracking the performance of the Freedom Portfolio. I couldn’t have picked a worse starting time if I tried.

The S&P 500 opened at 2926.29 on October 1st and closed at 2506.85 on December 31st. That’s a return of -14.3% over the quarter, which is a pretty extreme downturn. During that same time, the Freedom Portfolio is down 22%, which is obviously even worse.

The Freedom Portfolio – January 2019

So a little end of year Christmas crash doesn’t really phase me much anymore.

One thing I have noticed about myself during times like these, though, is that it tends to motivate me to concentrate my portfolio into my higher conviction picks. It’s easy to want to own anything and everything when the market is soaring and a high tide is lifting all boats. But when the going gets tough, it’s a lot easier to sleep at night when your investments are all in companies you know very well that you have high confidence in.

To that end, recent events have convinced me that it’s time to make some further tweaks to my portfolio to circle the wagons around companies I feel strongly about. The end result is cutting two companies entirely and beefing up my position in some high conviction picks that have been particularly beaten down lately. Check out my thoughts below:

Added to Novocure (NVCR): For those with a short term investing horizon, I can understand why you might be selling Novocure right now. Their recent earnings weren’t great, and showed some signs of slowdown in their core business of treating glioblastoma. However, for those willing to look out a year or more, it’s hard for me to find a company that seems like a more obvious big winner than Novocure. They’ve had nothing but great results for their trials for treating other forms of cancer so far, and those other cancers will explode their total addressable market far beyond where it is now. Just 6 months ago, Novocure was trading over $220 a share (it’s at $90 a share now). Assuming they are able to execute at all on these new opportunities, this feels like a big winner in 2022 and beyond.

Added to FuboTV (FUBO): I understand the short term bearishness with Novocure. I totally don’t understand it for FuboTV. Their recent earnings looked pretty great to me as they continue to grow at a rapid pace. The gambling side of the business seems to be slowly but surely getting set up while ad revenue has been skyrocketing as well. I’m a bit confused what people might have seen in the earnings report which would make them want to sell. I’m a happy shareholder, and happy to pick up some shares on sale.

Added to Sea Limited (SE): It’s been awhile (over a year) since I have added to my position in Sea. Part of the reason has been because I have a general rule of not adding to positions that get to be Babylon 5 level positions and Sea has largely been hanging around that level for awhile. However, this recent pullback caused it to drop below that level and I could resist getting shares around 30% cheaper than they were just a month ago. Sea is one of my highest conviction holdings over the next 5 years and it’s hard for me to imagine this not seeming like an absolute steal years down the line.

Added to Mercado Libre (MELI): Pretty much everything that I said about Sea could be said about Mercado Libre as well. The biggest difference is that Mercado Libre’s drop had been going on for a bit longer (~4 months) and had been even more extreme (~40% off highs). Maybe people are concerned about the political situation in Latin America, but Mercado Libre has proven that they have been able to expertly deal with any problems that have arisen in the past so I am not overly concerned. Once again, this seems like a great opportunity to get shares of one of my favorite companies at a big discount.

Trimmed Tesla (TSLA): I generally find that as one of my positions grows, so does my conviction. I also very rarely worry about valuation when it comes to companies and hate using that as a reason to sell. Tesla has been an exception to both of those rules, and unfortunately it has been much to my detriment. For whatever reason, Tesla as a trillion dollar company makes me incredibly nervous. It seems like too much upside is already priced into the company. Over the past 14 months, I’ve trimmed my position 5 different times (not counting this trimming) and every time it has been a mistake. Had I simply held onto all of those shares, Tesla would easily be my top holding right now and would have even surpassed Shopify (SHOP). My portfolio performance would’ve also been much better. So I’ll probably regret this trimming as well, but I remain undaunted. I simply sleep better at night knowing that Tesla remains a significant portion of my portfolio, but not the biggest position.

Sold entirety of JD.com (JD): This was a tough one to sell. JD was the last remaining member of “the JIB” and was one of the 8 veterans that I wrote about in the most recent Freedom Portfolio update that had been around since I started tracking my performance on this site. It has even been a pretty great performer, having solidly beaten the S&P during that time.

So why did I sell it? In a word: uncertainty. It had always been difficult for me, as somebody who doesn’t live in China, of judging how well JD.com was doing against its competition. Was Alibaba eating their lunch? How about Pinduoduo? Are newcomers disrupting them? I had previously thought iQiyi had a chance to be the Netflix/Youtube of China, but overestimated their position in the space. I was worried about doing the same with JD. Adding to the uncertainty was founder Richard Liu stepping back from day-to-day operations, perhaps as a precursor to stepping down as CEO entirely. Finally, it’s no secret China has been cracking down on tech companies and CEOs who were seen as becoming too powerful. Would Richard Liu and JD.com be in their cross-hairs next?

It all added up to a bit too much uncertainty for me. I still think JD.com can be a winner going forward, but there were other companies I felt that offered a better risk / reward for my money, which is why I sadly had to say goodbye to my JD position.

Sold entirety of Skillz (SKLZ): I consider myself to be a bit of a hardcore gamer, but I also realize there is a huge market for more casual style of games. I can remember when Myst and Deer Hunter would bafflingly sell more copies that games that I thought were far superior, like Starcraft. So I thought there could be a lot of opportunity for Skillz to capitalize on that casual gaming audience with their platform. Unfortunately, because those types of games aren’t in my wheelhouse, I never got overly passionate about the company and it always stayed as a lower conviction pick (and one that I knew less about than my other picks). Combine that with some mediocre returns and this was an easy choice to drop (far easier than selling JD).

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