Portfolio Update: 11.5% in January. Here's What I'm Doing Next.
A portfolio rebalancing update - possibly cutting two positions and redeploying capital.
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Performance
A reminder: short-term fluctuations are noise. The focus remains long-term value creation.
January returned 11.5% against the market’s roughly 2.5%. This brings cumulative returns to 87% since inception - a 22.5% annualized rate of return.
A strong start, but the more important work is portfolio construction. This update covers the changes I’m considering and the reasoning behind them.
Portfolio Concentration
My top three positions currently make up over 55% of the portfolio. One position alone sits at nearly 28%, having appreciated over 25% since purchase.
Should I trim it?
Peter Lynch put it simply: selling your winners and holding your losers is like cutting the flowers and watering the weeds.
Philip Fisher went further. He argued that if you’ve done the work correctly when buying, the time to sell is almost never - unless the thesis breaks or you find something materially better.
The question isn’t whether 28% feels uncomfortable - it’s whether the expected returns from here still justify the position.
They do. Margins came in ahead of expectations. The balance sheet continues to strengthen. Management is executing. Nothing in the original thesis has deteriorated.
Trimming now would reduce exposure to a business I understand well and redeploy into either cash or something with lower conviction. That’s not risk management, that’s giving up edge for the sake of looking prudent.
As Munger would say, the big money is in the waiting.
I’m holding.
Cutting Two Positions
While I’m keeping the winners, I am looking to exit two positions that aren’t working.
Position A1 is down over 17%. Position B2 is up less than 3% - essentially dead money over the holding period.
Combined, these represent approximately 22% of the portfolio.
The core issue with both is that the path to value realization has become more difficult than I originally anticipated.
Position A operates in an industry facing regulatory uncertainty. Sentiment has soured and the timeline for recovery keeps extending. The thesis isn’t dead, but the opportunity cost of waiting is real.
Position B is a quality business with strong free cash flow generation ahead but it’s fighting a weak UK consumer backdrop - discretionary spending is under pressure and management’s outlook was notably cautious.
Both positions are cheap. But both face headwinds and won’t be easy re-rates.
Meanwhile, I’m seeing opportunities elsewhere - stocks with positive news flow and genuine optionality to the upside, rather than companies simply trying to avoid negative news.
The question isn’t whether these positions could eventually work. It’s whether my capital could work harder somewhere else.
I think it can.
Cash Position
There’s another factor: cash.
My cash position is currently less than 1% - essentially fully invested. Part of the reason for exiting these two positions is also simply to raise some dry powder. Not all of the proceeds will be immediately redeployed.
I’m also expecting some cash inflows into the portfolio over the coming months, which will help rebalance weightings and give me more flexibility to act when opportunities arise.
New Opportunities
I’m currently evaluating several names across three themes:
Vertical market software - businesses with sticky, recurring revenue that compound quietly without requiring constant reinvention.
Specialty finance - companies where complex balance sheets obscure quality earnings streams.
Industrial technology - niche players with pricing power that the market undervalues.
Several of these offer expected returns above Position A and B with clearer paths to realization than what I’m selling. I expect to publish detailed research on at least one in the coming weeks.
Paid subscribers will be updated whenever I make any of these moves in the portfolio.
What’s in the rest of this post:
Full Statement of Assets - every holding, weighting, and current gain/loss
5 companies on my buy list - names I’m actively researching for potential addition
The two positions I’m exiting - and the specific reasoning behind each