This blog post is about my top-ten stock positions—today and since the Covid recession. The pandemic induced economic recession lasted only two months in the USA—from February through April 2020. The resulting bear market in stocks lasted about a month (peak to trough) and then took another five months to recover fully. A round trip of about six months. And while the recession caused all stocks to drop, their recoveries had been uneven. Technology, internet retail, and logistics were among the first ones to recover. Retail real-estate and financials were next. Some sectors are still not fully recovered, such as travel, hospitality, and airlines.
Amid all the upheaval in stocks since the onset of Covid, how my top-ten stock holdings fared? I am happy to report that my positions held on well. There were some movements in the relative positions of each of these ten stocks. The fraction of my portfolio they take has also gone up some. By and large, these top-ten holdings hadn’t radically changed since March 2020. Let’s take a deeper look.
As you can see from this chart, my top-ten positions have gained slightly more weight in my portfolio since March 2020. They have gone up from about 56% of the total portfolio to 62% today. Am I concerned that my portfolio is becoming top-heavy? I answered that question in an early 2020 blog post that I wrote before the pandemic happened. See this: My portfolio is getting top-heavy. I said in that post that I believe these businesses are good for the long term. And that they are not in danger of getting permanently damaged in the next recession. Little did I know then that the next recession would be just weeks away!
At that time, my top-10 holdings were just over half of my portfolio. Today they are a bigger fraction. But my convictions about these businesses still hold true. I am not reducing their position sizes for the sake of portfolio diversity.
Next, we look at how these positions have moved around. See below.
One thing to notice is how eight of these businesses have consistently stayed among the top-ten. Intel had dropped out of top-ten by November last year. Its position was taken by Blackstone. The fact that the remaining eight are still there is a testament to the quality and durability of these businesses. They all went down with the stock market, and then rose again as the market recovered. But their long-term business prospects have stayed mostly intact.
It is not surprising to see big technology and e-commerce firms (Apple, Amazon, Facebook, Microsoft) do well post pandemic. With the hindsight, this was to be expected. It is more heartening to see certain other businesses also stayed resilient, such as Starbucks, Disney, and Costco. Starbucks was forced to close its stores, and then limited to just drive-through traffic. Disney had its theme parks shut down globally. Even today it is still not operating at full capacity. Similarly, but to a lesser extent, Costco also suffered initially when consumers pivoted from physical retail to e-commerce. And yet, through it all, all of them managed to do quite well. Their top-ten positions reflect their individual business resilience.
Why Intel dropped out of the list? Intel’s drop from the top-ten group is mainly due to its own near-term business challenges. It faced issues in productizing newer semiconductor technologies required by key customers, delayed its product roadmap as a result, and then brought on an industry veteran as the new CEO last year. The end result was too much near term uncertainty, and the market punished its stock accordingly. My take on Intel is more sanguine. I haven’t sold any of my shares. I believe Intel will eventually recover its lost leadership position in the industry. It now has a good CEO and meanwhile, it continues to rake in excellent cash flow to sustain its turn-around.
Why Blackstone jumped to #4 position? Blackstone’s near meteoric rise in last two years is also not related (mostly) to the post-Covid economic surge. The business was always excellent with great long-term management. Its stock was not widely followed until it converted from a limited partnership to a C corporation in 2018. Once Blackstone became eligible for index inclusions, its coverage universe also expanded. More analysts started following the business. It didn’t hurt that it had mostly invested in areas that weren’t affected much by the pandemic malaise. Lower interest rates also helped its business model. I have been a long admirer of Blackstone. Last I wrote about it in September. See here: Blackstone credit platform.
Tesla and Blackstone are two stocks that outperformed all others in my top-ten list. Tesla went up from #8 in February 2020 to #1 as of today. Blackstone jumped from #16 to #4. Take a look at the one-year performance of my top-ten group below.
Both Tesla and Blackstone performed far better than all others. Tesla nearly tripled in last twelve months and Blackstone is 2.5 times higher. Tesla is a very volatile stock, but I love its business, nevertheless. When I wrote about my top-20 positions in September 2020, I noted that Tesla was a young disruptor that wasn’t on my top-20 list six months ago. I also speculated at the time that it could drop off just as soon. Sure enough, Tesla stock promptly dropped 50% from February to March last year. But then it recovered and went on to make new highs in January this year. Later in the year, it dropped again by 30%, recovered in late October, and then jumped to a new high as of this week. Meanwhile, I just sit and watch all this volatility. I haven’t bought or sold any Tesla shares in last two years.