October 2024 - Portfolio Letter
Stock portfolio and watchlist of October 2024
Dear reader,
Welcome to the third portfolio letter.
At the beginning of each new month, you’ll receive an update on the Summit Stocks portfolio, including insights into our holdings, recent transactions, performance, and more. Let’s dive into October!
October kicked off a fresh and exciting earnings season—not because those quarterly results are particularly important for our companies, but because earnings often bring volatility, creating opportunities.
One such opportunity arose with Advanced Semiconductor Materials Lithography, or ASML. The Dutch company, which I’ve covered in detail previously, published worse-than-expected earnings. Not only that, but the company published its report a day earlier than planned. It seems even companies with the brightest minds on Earth are susceptible to innocent mistakes. Indeed, while publishing quarterly results too early seems clumsy, it doesn’t impact the company’s long-term prospects in any way.
ASML’s quarter itself was actually great; the issue lay in the outlook and order intake. Orders came in well below Wall Street’s hopes, while management revised their 2025 revenue forecast to $30-35 billion, down from $30-40 billion. CEO Christophe Fouquet explained:
“While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025, which is leading to customer cautiousness.”
A slower industry recovery obviously means weaker short-term orders. However, with ASML as the sole provider of EUV lithography, customers will return to ASML, whether in 2025 or 2026—it makes little difference in the grand scheme. Following the earnings release, ASML's stock fell about 20%, allowing me to initiate a position. The negative sentiment may continue, and if so, I may add to the position over time.
Beyond ASML, other high-quality companies have reported earnings, including all of Big Tech. Alphabet (Google) particularly impressed me with strong earnings, though its stock price still seems under DOJ pressure, with ongoing breakup rumors worrying investors. I believe Alphabet remains robust and at an undemanding valuation, and while it’s not a holding yet, that could change.
Existing holdings also showed strong quarters. Amazon delivered growth in both revenue and operating income across its segments, a steady ‘business as usual’ quarter that reinforces my intent to hold.
LVMH reported third-quarter revenue. The company is still navigating a tough period, clearly reflected in the weak stock price. I remain confident in the company’s future.
MSCI also reported earnings, proving once again why it’s a quality business. While one of the portfolio’s smaller holdings, it’s one I’m pleased to keep.
Lastly, Evolution posted excellent results, showing resilience amid strikes and cyber-attacks during the quarter. While the stock initially gained, excitement has since cooled, and the stock price remains muted year-to-date. I see no reason to sell; in fact, adding to the current position seems a much more logical bet.
Airbnb and Salesforce have yet to report earnings.
Turning to the portfolio itself, the only transaction this month was the purchase of ASML: two shares at €635.50, and three at €653. I realize the stock price today is even lower, so I may continue adding to ASML.
Below is a visual summary of the portfolio. Compared to last month, there’s little change apart from the addition of ASML, which has slightly reduced the weight of other positions.
I feel increasingly confident in these seven holdings, but I’m not yet satisfied with the portfolio’s current structure. My target is to hold 8–12 stocks, and I’m working toward that.
Performance this month was acceptable, though ending in the red. Excluding the final week of October, the month’s performance would have actually shown a positive 2%.
What changed in the final week? The S&P 500 dropped nearly 2%, pulling the portfolio down with it. I continue to emphasize that short-term gains or losses are irrelevant. Since inception, the portfolio is up by 2%—though I’d feel the same if it were in the negative.
Top performers this month were Salesforce, Airbnb, and Amazon, while LVMH and ASML were the weakest.
The following companies are on my watchlist and may be potential additions to the portfolio in the future. These are outstanding businesses that meet (nearly) all of my requirements:
Additionally, I’m always looking at new ideas, and I’ve got some exciting deep dives on wonderful businesses coming up. If a company isn’t included here, it either doesn’t meet my quality standards or I don’t know enough about it yet. That could mean I’m unfamiliar with the company, don’t fully understand its business model or industry, or simply haven’t gathered enough information to make a sound judgment.
Disclaimer: the information provided is for informational purposes only and should not be considered as financial advice. I am not a financial advisor, and nothing on this platform should be construed as personalized financial advice. All investment decisions should be made based on your own research.
What made you hold off?
I was contemplating buying ASML this past month as well. Didn’t pull the trigger.