If you missed our last update, 2022 & 2023 were both model years for our ESG portfolio.
That's because in 2023 specifically, our ESG strategy blew the doors off with a whopping 27% return.
And while that's great for those of you who followed along, now midway through 2024, we now have a whole new host of challenges we need to be ready for.
So after several months of holding strong, we re-ran our algorithms and made some updates to our portfolio.
So with that context, let's get into the ESG portfolio's newest trades! 👇
ESG Overview:
Before we dive into our portfolio's updates, if you're new to this strategy then just click here for the original post or read the condensed version below.
If you already know about our ESG strategy, then just skip down to the section labeled, "Performance" below.
The goal of this strategy, however, is to invest in companies -- ethically. What does that mean?
Well, at a high level, ESG strategies help you invest in a way that reflects your values -- in a way that considers the impacts of the companies you invest in.
Therefore our ESG (Environmental, Social, and Governance) strategy is focused on investing in companies that are contributing to the positivity of the world as a whole.
In a nutshell, we're looking at three factors:
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Environmental: This relates to a company’s negative environmental impacts, such as carbon emissions and other forms of pollution, but it also rewards companies for adopting greener technology.
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Social: This relates to how committed a company is to social causes, like inclusion and the elimination of workplace discrimination.
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Governance: This relates to the company’s corporate culture, executive pay, and corruption.
While the companies we're investing in need to have the right financials to merit an investment, they also need to pass this test to ensure their growth doesn't mean our "society's demise".
But if you're up to speed, let's get into the portfolio's performance and the newest updates!
Performance:
As we mentioned above, the portfolio has continued to outperform the index since inception. That's because the trend has continued with the total portfolio up 27% to start the year!
And while the performance alone is great, we're even happier to announce that this portfolio is also beating the index while investing in "responsible companies". Aka we're investing in companies that are helping the world while also making money.
But what actually drove this period's performance? 👇
Looking at the table we can see that while performance was generally positive, there was a lot of variation from the average.
For example, TSLA & Apple returned -16% and -1.5%, respectively, while NVDA and GS returned 55% and 23%, respectively.
At first glance, this may look pretty confusing. For example, why would Tesla and Apple go down while Nvidia rose so significantly? And why would UNH be flat while Goldman Sachs is up so much? Does it make sense that some "tech" names would skew so widely from each other and sector returns be all over the place even though the index is up?
While there's not a "straight answer" for this predicament, we can oversimplify the conundrum by continuing to reiterate that stock selection is becoming more and more important.
While this is something we've been preaching for a while, it may have fallen on deaf ears for many since many investors over the last decade are used to just investing in top names and watching them rip higher. However in today's era, valuations and responsible growth matter.
And that's why names like Tesla & Apple have gotten dinged while Nvidia has done well. For example, Apple's iPhone growth has changed while Nvidia is still expecting huge patterns of growth.
At the end of the day, there's still a handful of other factors and we realize we're oversimplifying, but what we want you to take away is that bottom-up analysis is king right now. While thematic investing is always important, we are mostly looking at companies from the bottom up rather than the top down.
If you want more insight into our process and what this all means, feel free to reach out!
If not, let's get into the updates.👇
New Portfolio:
The only changes (besides the weightings) in the portfolio this month were the additions of AMAT & AVGO and the removals of GILD & GWW.
While we still like these stocks, they mostly fell outside the scope of our AI's screen for this month.
However, we wouldn't be surprised to see this pop back in depending on how the stock fares over the next month/few months.
Old Portfolio:
To see last month's trades, just click: here