The broader market is up very nicely today, with the S&P500 up 2%, the Nasdaq up 3% and the Dow Jones up 1.4% at the time of this post. Today's gain is a continuation of yesterday's gain, after multiple weeks of Omicron and Federal Reserve - induced weakness in the market. At the depth of the sell-off we were about 8% off from all-time high (on Friday last week), and today we're only 1% from all-time high. 

During the depth of the selling carnage, we wrote:

"Don't Panic - Hindsight Of March 2020 Is 20-20: The sell-off we are seeing is similar to Covid worries from March 2020 and those for the delta variant. These lead to a "shoot first, ask questions later" mentality.  When we see a pick up in volatility, it can be a great buying period, and with hindsight being 20-20, that's exactly what March 2020 turned out to be. While watching the market gyrate is never fun for stockholders in particular, it is such a great opportunity for strategic investors or active portfolio managers like we are. Being at an advantageous position of having a strong cash position (we came into Thanksgiving week at 25% cash), having a calm head and long-term horizon will allow us to put the volatility to good use. We are looking through this market decline for opportunities to add to our portfolio. Our rule of thumb on these big sell-offs is buy on the 3rd day of decline (that would make it Tuesday)."

And now sitting above the sell-off, we can say that hindsight being 20-20, we were damn right. Over the past week post Thanksgiving period, including the initial weakness at the opening yesterday, we added to multiple positions including Ford (F), Disney (DIS), Salesforce (CRM), Apple (AAPL), Morgan Stanley (MS), Advanced Micro Devices (AMD), Skyworks Solutions (SWKS), Eli Lilly (LLY). We also initiated Boeing (BA) and Chevron (CVX) at the depth of the sell-off and even our small position in Boeing is sitting on an incredible 6% gain. Our cash position came from 25% before Thanksgiving week to now only a 5%, after having made multiple purchases as laid out above. This has been a really great example of discipline and portfolio-management approach that we want subscribers to note and appreciate.

With the market recovery, as of today, multiple purchases that we made during the sell-off have produced nice gains, such that we're actually in a position to do some trimming. However, with a strong evidence-backed view (as laid out here) that there will be a Christmas rally, we're happy to take a back seat to the portfolio and watch for more gains ahead. In that theatrical performance, we want to provide an update to subscribers about the current state of our portfolio, including the stocks that we hold, our cash position, details on our stock positions and out intentions going to the end of the year.

What stocks we are holding: for new subscribers, we have a real-time Excel sheet providing details about stocks that we are holding, our cost-basis and the weight that we dedicate for each stock.

Cash position: as mentioned above, we went down from a 25% cash to now a 5% cash, equal to what we always want to have. What this means is, going forward, unless this cash position grows, before we want to buy something we always have to sell something else (again, so that our cash position is always at or greater than 5%). Even though we keep both a fundamental and technical approach to the market, there are always unpredictable events that can take the market down multiple percentages in a heartbeat, so it's very important to always have a cash position to ready to be deployed in that scenario.

Portfolio Weighting: in case this has not been clear, for each stock, we designate how much of this stock relative to the portfolio do we want to own. For example, as much as we love Ford (F), we don't want F to be much more than 15% of our portfolio (i.e say the portfolio is $100,000, position in F should be $15,000). This is for diversification purpose. When the weight grows larger than 15% (we call overweight), either because the stock of Ford has gained much more money than the rest of the portfolio, or because the portfolio has decreased in value, we have to do some trimming of this Ford position. When the weight decreases below 15% (we call underweight), either because the stock of Ford has lost value or the portfolio has gained a lot, assuming we still have a cash position greater than 5%, we can deploy the cash into buying more Ford to bring the weight towards 15%. This is portfolio management example.

Overweights (more than 1%): Currently, we do have some overweights in our portfolio. This include Ford (17% compared to 15%), Salesforce (4.6% compared to 3$), Disney (14% compared to 10%), Kinder Morgan (7% compared to 5%). 

Underweights (more than 1%): Currently, we are underweight in Apple (3.6% compared to 5%), Microsoft (1.4% compared to 3%), Pfizer (1.1% compared to 3%), Nucor (3.9% compared to 5%), Chevron - a new position (1% compared to 3%), and Boeing - also a new position (0.9% compared to 3%). 

Our approach: our current view is that some of the overweights may have more room to run, while the underweights are so high we don't want to buy them yet. While we know that's not the best discipline to have, one of the reasons we're laying them out here is that we will keep a close eye on those overweight positions and look for fundamental/technical reasons to sell into strength. Once we have made some sales, we can bring up our cash position, and deploy them into the underweights when the price is right.

Outlook for this week: at the moment, our view is that the market can go higher than where we are, get really close to all-time high. There is nothing in the news docket that can worry the market for the next couple of days. On Friday this week (December 10th), we will get the latest inflation measure through CPI reading. If numbers indicate inflation has peaked, this will provide additional push for the market to the upside. Then next week the focus will be on December 15th, when the Federal Reserve holds their FOMC meeting. This is when many key decisions will be put into focus, including the pace of taper which Powell hinted at changing last week, and also about how interest rates will likely change next year. Given the volatility level we are heading into, we expect to do some trimming and raise some cash to prepare for any Federal Reserve-induced sell-off next week.