Out with the old, in with the new.
In fact as a spot of portfolio spring cleaning, I recently exited my heavily loss making positions in ROSSLYN DATA TECHNOLOGIES PLC, Purplebricks and Boohoo Group PLC - albeit offset by takeovers of Crestchic Loadbanks & Amryt Pharma.
Consequently today, I pleasantly find myself with a significant cash holding (40.6%) that I hope to patiently redeploy over the next 3-9 months.
However ‘‘reluctant bears" don't change their spots quickly.
Indeed I suspect the Federal Reserve will keep US interest rates at 5% for most (if not all) of 2023. Which augmented by tightening credit conditions & falling M2 money supply, could lead to both renewed ‘Dollar strength’ and a decline of the #SP500’s 18x PE multiple to between 15x-16x (re higher cost of capital) by yearend.
Worse still, I don’t believe there'll be a significant rebound in GDP next year either. With 2024 SP500 EPS pitching in at around $220/share, & unfortunately triggering a -15% fall for the Index to 3,500 vs Friday’s close of 4,137.
Equally though by H1'24, I suspect a Ukraine/Russia ceasefire will have been announced - which should (at least) improve business confidence and support higher corporate profits for 2025.
Ok so assuming that’s right, what’s the reinvestment plan?
Well it's not too dis-similar to the previous one. That being to gradually rebuild my equity exposure (say 15-20 companies vs 8 today) - by purchasing attractively valued secular growth stocks that possess pricing power, IPR, recurring revenues, high profit margins & strong balance sheets.
A task which (in theory) should get a lot easier if stock valuations do later compress in 2023. Watch this space.
Disclosure: I was not paid to write this article
