Portfolio Update: 2 Sells, 1 New Buy, 1 General Rotation

Just a checkup on what i'm doing and why

Over the past two years i’ve developed the habit of physically writing letters to my shareholder (future me), and that habit has transformed into this Substack. So now its time for an update.

So far in 2025 I have made some pretty sizable changes to my portfolio overall.

Change #1: No more REITs

Firstly, I have completely exited all of my REIT positions (with modest outperformance all in all). If you’ve read my “Portfolio Summary” write-up then you’re probably wondering “what REIT positions?” These changes were made before that write-up came out.

I did this because I see better options for long term growth, and frankly I don’t think I was wise to buy them in the first place. I saw REITs as a way to hedge against overall market froth, but really I was making a bet on interest rates without fully realizing it. I liked the idea of collecting dividends early on in my investing journey, and I have come to believe that my reasoning was mostly psychological, but not entirely reasonable. Now, REIT’s did function as a hedge for a while. In the 2022 market selloff they held up well initially. But the conclusion I drew from that result was the wrong one. I had a strong view at that time that higher rates would be (and should be) the norm, and somehow simultaneously believed that my REITs would still prove to be a good investment.

This. Was. Stupid.

This is a perfect example of a huge flaw I “used to” have as an investor. I allow short term confirmation to reinforce conviction. This usually doesn’t prove to problematic in the negative. Usually when my holdings fall in value I buy more and focus on fundamentals. I have that part down (I think). Its that other direction (up) that fools me. I liked REITs in theory, but I overestimated their ability to grow beyond their economic environment. I also didn’t fully appreciate how easy it was to be a REIT when rates were so low for so long. I once again must say that I regularly proselytized to other investor friends about the amount of distortion caused by such a period of low interest rates, and yet I was blind to this where it mattered most: my own portfolio.

When rates came up, REITs went down - almost mechanically. And did I re-evaluate? Nope, I added another REIT holding to my portfolio. Now, the second addition of REITs may have turned out to beat the market over a relatively short 1.5-year period, but thats really besides the point. The main thing is that there was better stuff to buy at that time. I hadn’t bought it, and that was a problem. When the market dipped in April, I finally corrected this mistake and sold all my REITs and bought more of some stuff I already owned (TSM/Amazon) as well as some new positions (EXP, AMR, HCC).

I’m writing about REITs only because its important that I don’t suddenly pretend to be wiser than I am just because I’m posting publicly. When I make mistakes I ought to spend more time reflecting honestly on why I made those mistakes than I would on why some other position worked out.

So REITs are done for me. I don’t like the business nearly as much as I like other ideas of mine, and frankly there are other investors who understand the real-estate game much better than me. Perhaps I’ll revisit them when I wan’t to convert my portfolio from growth to income, but that won’t be for quite a while I think.

Change #2: Sold the rest of my Apple

Something that I think about occasionally is this idea that every day I hold a position its as if I’m buying it again - at the current price. I bought Apple for roughly half the price it sells for today, and most of whats occurred since my purchase was good old multiple expansion. I bought Apple because of its incredible moat, wonderful tech, cheap price, and shareholder friendly capital allocation. All of those things are less appealing to me today.

The tech trouble is well documented, as reports of difficulty in AI adoption litter the news headlines. This would be forgivable if it weren’t for the ever increasing regulatory pressure on Apple to weaken its own moat. As an Android user and an Apple shareholder, I had mixed feelings about some of the regulatory pushes to force Apple phones to “play nicer” with Androids. Ultimately, as a shareholder I sort of enjoyed it every time someone would see my green-dot or whatever and scold me for my “weird” choice in phone.

Moreover, the “wise” folks in DC have seen fit to try and force Apple to lower its App store fees - cutting into some of its higher margin business segments. Speaking of high margins, Apple was receiving 20B a year from Google just to make Google the default search engine on the Iphone! This was also also decreed unlawful by anti-trust regulators.

I know there are those that will say regulatory scrutiny on this stuff is just another sign that these guys have a strong moat, and I may agree if the earnings multiple hadn’t also doubled since I purchased my shares. Despite years of basically flat revenue, the market has given Apple a premium multiple. This is inherently unappealing, but its especially troublesome when buybacks are the primary modality for capital returns to the shareholders. Buybacks were great when Apple was trading for absurdly low prices, but at current valuations I just don’t really believe they’re appealing. While I understand that Apple users love their Iphones, I don’t know if plain old pricing power is going to be enough here. How much can Apple really squeeze from their customers…enough to justify the valuation? I’m not so sure.

And then there’s AI. At first I appreciated Apple’s “wait and see” approach, but i’m starting to wonder if we’ll ever really “see” anything that’s worth an upgrade. Meanwhile, Open AI has purchased Jony Ive’s AI hardware firm - a clear sign that Open AI is making moves into the hardware space. I’m not trying to imply that I expect people to buy “Open AI phones” over Iphones or something. The concern is more that whatever capital Apple spends in trying to get AI inference into the Iphone could ultimately be thwarted by Sam Altman and Jony Ives creating some slick new AI device. This could undercut the Apple upgrade cycle even further.

Ok, are any of these concerns in and of themselves reasons to sell? I don’t believe so. But put them all together and give me a better option and yes, suddenly I don’t think it makes sense for me to hold Apple anymore. I could be wrong, and I do still hold Apple through some ETF’s, but i’d rather place capital elsewhere for now. Average gain per share was about 90%

Change #3: Sold Microsoft

To be honest, regardless of how this performed I shouldn’t have ever bought it. I purchased Microsoft at a cheap price in the 2021-2022 selloff. While I may have had a vague thesis about cloud growth and sticky B2B integration mixed with strong financials, I didn’t really do the due diligence I should have. It was a small position which has now doubled in value and I have other things I’d rather own at the moment. Once again, I figure I own it through the ETF’s already, and honestly I would prefer to put that capital elsewhere.

Change #4: Bought Pool Corporation

After spending some time on a research write up on Pool Corporation ($POOL), I became somewhat enamored with the business. I won’t go into too much detail here as I have already laid it all out in that write up (available on the Substack), but suffice it so say that they have a strong moat, great economics, history of capital returns, reasonable valuation, solid balance sheet, and solid growth prospects. I don’t expect to obliterate the market with Pool Corp, but I definitely like that it seems like a quality business which is “out of the way” of any AI froth. They sell pool supplies and they do it well. Thats precisely the sort of company I like to own. I already own a lot of TSM so I consider that to be plenty of exposure to AI. Pool Corp is a new and small position of mine which I intend to grow a slowly over the course of this year. As of today it is my smallest position.

Change #5: Continued buying AMR/EXP

I’ve written both of these companies up already, but i’ll just note that i’ve continued to add to both of these positions and will likely slow those additions as we move through the year. I’ll try and give updates on both companies soon.

In the End

All in all, the last 6 months or so has been a period of heavy turnover in my portfolio. The only remaining position I have that i’m a bit unsure of is Celsius (finally in the black on this one). I’ve taken profits in Ulta, Apple, Microsoft, and the REIT’s while doubling down on Amazon and Taiwan Semi. I’ve also ventured pretty heavily into new sectors with the coal and cement positions. I may take one more bite out of the “secret position” as we’re approaching a few “catalysts” in the back half of this year. I’m basically trying to stay completely out of the way of AI (with one big exception in TSM). I’m reminded of that famous exchange between Buffett and Gates:

Bill says to Warren,

“Computers are going to change everything,” to which Warren replies,

“Are they going to change whether people chew gum?”

“Well, no,” says Gates.

“Then you stick to computers and i’ll stick to chewing gum.”