September 2024 Portfolio Review
September 2024 Portfolio Review
The Hedge Vision Portfolio has returned 29.70% YTD
September has historically been the worst-performing month of the year with an average loss of 0.8% since 1945. That wasn’t the case this time, as the S&P 500 and Nasdaq 100 both finished well in the green.
During September, the Hedge Vision portfolio rose by 3.35%, bringing its YTD return to 29.70%. That compares to the S&P 500 and the Nasdaq 100’s YTD returns of 22.77% and 22%, respectively.
Total Positions: 24 compared to 26 as of Dec. 31
Top 10 Positions Concentration: 79.0% compared to 73.8% as of Dec. 31
Rest of Portfolio: 13.8% compared to 19.4% as of Dec. 31
Cash: 7.2% compared to 6.8% as of Dec. 31
My monthly gains were led by Alibaba (BABA), which rose by 29%. BABA’s allocation within my portfolio increased to 9.0% compared to 6.6% a month ago.
On Sep. 9, the company officially joined the Stock Connect program. The program links the Shanghai and Shenzhen exchanges with the Hong Kong Exchange, opening up billions of dollars of mainland capital to the e-commerce giant.
Since then, mainland investors have bought 2.44% of BABA shares outstanding. Mainland ownership is expected to exceed 10% by next year.
My buys and sales in real-time, as well as further analysis and commentary, are shared with contributing members on Substack Chat:
Alibaba has also been buying back its own shares. In fact, it bought back shares on almost every trading day of September, with daily repurchases ranging between 0.01% and 0.03% of shares outstanding. During Q3, the company bought back $4.1 billion of shares or 2.1% of shares outstanding. Shares outstanding have decreased by 6.88% YTD.
China announced a slew of stimulus measures toward the end of September, signaling the beginning of a historic rally for Chinese stocks.
China Stocks Rise on Stimulus Measures
On Sep. 30, the Shanghai Composite Index closed higher by 8.06%, marking its best day since 2008. On the same day, the Shenzhen Composite Index closed higher by 10.9%, its best day since 1996.
The People’s Bank of China (PBOC) helped jump-start the rally by announcing that China would lower the reserve requirement ratio (RRR) for banks by 50 bps with the possibility of an additional 25 to 50 bps cut by the end of the year.
With a lower RRR, banks will be able to provide more favorable interest rates. In other words, borrowing costs are lowered in order to increase liquidity and demand within the country.
The PBOC also announced mortgage rate reductions for existing home loans and a reduction of the minimum down payment requirement for second homes in an attempt to support the struggling property market.
Measures to boost the stock market were also introduced, like providing easier borrowing access to funds, insurers and brokers for stock purchases. Banks that provide capital to publicly traded companies interested in buying back their own shares will be eligible to receive cheap loans to fund the buybacks.
To top if off, Appaloosa’s David Tepper made a rare public appearance on CNBC’s Squawk Box. His main topic of discussion? China.
Tepper’s largest position as of Q2 was BABA with a 12.24% 13F portfolio allocation. He also owned stakes in PDD, FXI, KWEB, and JD.
During the interview, Tepper noted that he had increased his allocation to China following the Fed rate cut and the RRR cut. He added that he would increase his exposure in the event of a pullback.
Below is a quote from Tepper explaining his reaction to the language of PBOC Governor Pan Gongsheng as he was making stimulus announcements:
“You know, he came out and he was like jovial. It's like, whoa, jovial, saying, "We're going to cut, and we're going to, and we'll give you more." And he said, "We'll do more and more if needed." Now, the Chinese to say, "We'll do more and more if needed," they don't say that because it's not been healthy to say those sort of things in China. But they said that the other night. And I listen very carefully to what government officials say. So I took it that they did a lot. They exceeded expectations. And he promised to do more and more and more. Okay. And that's very strange language, especially for, you know, any Central Banker, but especially over there. So that was the first thing that happened.”
On the opposite side of the equation is Stanley Druckenmiller, who noted at a recent conference that “As long as Xi Jinping is running China, I have no interest.” Instead, he said that Argentina is a “great investment opportunity” while he “loves” Japan.
One caveat to investing in China is that their economic numbers still look shaky. Consumer confidence is still near all-time lows. Furthermore, September’s Caixin PMI (Purchasing Managers’ Index) survey, an indicator of private manufacturing and services, tallied in at 49.3 compared to the estimate for 50.5. It was the lowest reading since July 2023. A reading above 50 indicates growth while a reading below 50 indicates contraction.
At the same time, the market tends to bottom before the economic data does. At least in the U.S.
“Looking at recessions dating back to 1957, on average, the S&P 500 bottoms three months after a recession begins but 10 months before the recession ends. Excluding the 2001 recession, all market bottoms since 1957 occurred before the recession or while the recession was still occurring.”
—J.P. Morgan
September 2024 Buys
New Positions: e.l.f. (ELF)
Increased Positions: Alibaba (BABA), Zscaler (ZS)
September 2024 Sales
Exited Positions: None
Reduced Positions: None
Plan for October
October is generally a positive month with a 1.5% return, although that return drops by 2.3% to a loss of 0.8% in election years. That makes sense given policy previews, poll data, and other sources of political volatility the month before elections are held.
My cash balance now sits at 7.2% compared to 9.5% as of Aug. 31. However, my last September buy was made on the 6th as the market began to reverse course and head higher following a rough start.
Ideally, I’d like to decrease my cash balance to 0% by the end of the year. Usually, I deposit cash to my account worth 3% to 4% of my portfolio every year. I still haven’t done that yet.
The #1 name on my watchlist is ELF, which was 0.5% of my portfolio as of Sep. 30. I’m also open to increasing my exposure to Chinese stocks at a lower price.
Hedge Vision - Institutional Insights
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Great job!