$52,393.67 | Envision the Future

Hey guys.

I’ve got another Roth IRA portfolio update.

The last few weeks have been a bit rough for my portfolio compared to the market. I’ve got an overweight position in financials, and my financial stocks have underperformed the S&P because of the macro environment of bond yields remaining low. Banks earn a lot of their money from the money they have in their reserves, and if the percentage yields they can get on their cash decline, then that represents a real decline in their overall earnings. Here’s where we’re at as of today.

  • S&P 500 from January 4th – July 17th: +16.98% ((396.61 – 339.03) / 339.03) x 100
  • My portfolio from January 4th – July 17th: +15.25% ((52,393.67 – 6,000 – 708.38) – 39,641.18) / 39,641.18 x 100

If you’ll notice, the above calculation excludes dividends. But, even though before I think my portfolio’s overall return has been ahead of the market, I think we’re slightly behind now, even factoring in dividends. My portfolio yields about 2.8% compared to the market’s 1.3% (according to Y Charts). Given we’ve been tracking for a bit more than six months, I can assume a bit more than half of the 1.5% difference in dividend yield boosts my portfolio’s return vs. the market. However, even with an additional 0.8%, I’m still behind by just about a percentage point.

You can see I went from tracking the market about a month ago in mid-June, to 1.7% behind. This picture of my portfolio slices illustrates how this happened. You can see my “Growth 1st, Dividend 2nd” slice is the best performing over the last month, which makes sense because this slice is the one that most closely mimics the performance of the overall market.

However, I am still optimistic in beating the market by the end of the year – inflation data continues to come in higher than expected, and I think there are many catalysts to come that I think will increase the yield of bonds, which should send my financial-overweight portfolio higher. As always, we will see. I’m not naive to the fact that I could very well end up lagging the market.

Today, I want to focus on the difference between short-term investing and long-term investing, and why I think holding on to stocks that have a good future trajectory makes sense to me.

In looking at some of my lowest performing stocks in my overall portfolio, one of them is a company that I actually like a lot – that’s Beyond Meat (BYND). In the picture below, you will see my worst performing stocks in my entire portfolio, and Beyond Meat is pretty high up there. If you look at it on a total loss basis as opposed to percentage loss – it’s the stock that has lost me the most money in my entire portfolio.

Does this bother me? A bit – but I want to take you through my thesis on a stock like this and why you shouldn’t be too concerned with short-term losses on high conviction stocks.

I want to take you guys back a few years when I worked for e-commerce company in college. As part of my role, we would consistently pull data from industry experts to support the case for e-commerce. Essentially, we were propping up the importance of our organization for future clients, to say “hey, this trend isn’t going anywhere so hop on board.”

The data we would pull was very future-looking and seemed far off. But, it was powerful. The year was 2011, and we would pull research consistently that talked about how the market cap for e-commerce would expand by 20-30 percent annually depending on the study. And over time – in the next 10 years, the overall market would expand by a crazy number like 1,000% (don’t quote me on these, just pulling from memory). I very clearly remember thinking, “oh, that seems cool, I wonder how this will change things.” But, I had no idea what this actually meant in practice, people’s lives would be transformed by e-commerce and mass adoption would create massive amounts of wealth and new industries all over the place.

I think of it like this. As somebody who’s run a marathon before, that sh*t is very hard. But before I ran a marathon, I would look at posts from people on social media who ran a marathon and think “that’s cool, I could definitely do that.” But when you’re actually training for it and running one, that very quick moment you spent thinking about it does not even remotely compare to the amount of time dedicated to being able to do it and do it well.

My thesis is something similar is happening with the plant-based eating trend. In my view, this trend gets misconstrued as only a market for vegetarians or vegans, but there are also meat-conscious eaters who will eat meat-substitutes more often, even though they still eat meat sometimes.

The market is consistently going to grow and grow for a long time.

There’s an article in PR Newswire that projects the plant-based meat market will reach $13.8 billion by the year 2027, growing at an annual compound growth rate of 19.3%. This is a massive annual compound growth rate – but let’s even look past 2027. What will it look like in 2037? 2047? This is the kind of thinking that gets me bullish on stocks in this industry.

Thinking back to the days when I thought about e-commerce gains, let’s take a look at how the stock price of the biggest e-commerce player in the game Amazon fared during this massive e-commerce expansion.

The stock price went from $192.55 to $3,573.63 in about ten years. That’s almost 20x the value of ten years prior. And, the stock still has room to run. This may be a cherry-picked example, but I’m sure you could pull charts of various other e-commerce companies during the last ten years and you would see the same trend.

If you’ve ever heard the saying “a rising tide lifts all boats,” then you’ll understand the reason why an expanding audience of folks willing to utilize your product is a bullish trend for a stock in an expanding industry.

This is also where you have the opportunity to take a 30-40 year view. What does the world look like in 40 years? I actually have a pretty strong view on plant-based meat substitutes. My view is that this culture of humans eating animals is a legacy left-over from the many hundreds of thousands of years where humans needed to eat meat to survive and we will slowly transition to non-animal based food as humanity

If you think about human history, it’s only been pretty recently that we’ve developed highly collaborative and complex supply chains so that humans don’t need to trade labor directly for food, instead, those in the developed world can reliably nourish ourselves by paying money for food.

Why would you not eat plant-based meat if the taste is similar, the price is similar and the ease of consumption is similar? The barriers for those to eat plant-based meat as opposed to real meat are going to slowly dissolve. And while yes, In think there will always be a certain crowd that just can’t give up bacon and will advocate for eating meat no matter what, I think a lot of meat eaters do it for convenience and because they just don’t think twice about it since everybody around them does it, and all restaurants in their vicinity make it so easy.

In 100 years, I would not be surprised if developed society looks back on the way we ate animals as morally questionable and backwards. We care so much about our pets and would do anything for them, but don’t think twice about eating animals, why is this? (I am not trying to make anybody feel bad, it’s just definitely something that I think about after really introspecting).

I would not be surprised if a company like Beyond Meat was 100 or 1000x its current value in 40 years, because of a mega-trend in shifting to plant based foods. This kind of philosophy is why I really don’t mind this stock underperforming heavily this year. Most of the news I read about is how the company is struggling/has struggled during the pandemic because . I honestly don’t give a f*ck about this short term news when I really think about why I bought this company, and you guys should look for those DGAF investments when considering what to put in your investment portfolio.

A disclaimer as I wrap up this article. I am not a financial advisor, and everything in this article is written for entertainment and educational purposes only, and is not financial advice.

Thanks for reading. Until next time!


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