If you expect to outperform the market, how can you do it if you act similarly to the market, i.e sell when they sell and buy when they buy? We believe that in order to outperform the market, you have to i) find opportunities in stocks when they are hated (dislocation between the company and the stock), ii) be able to let the stock go when the price appreciates. That's what we would like to discuss today. From the start of the year, cyclicals/ value stocks have been loved by the market, and have posted wonderful performances. At the exchange of such outperformance was the hatred towards growth/tech stocks. Compare two portfolio names, Wells Fargo (a bank - cyclical) versus Microsoft (software-growth): WFC is up 10% YTD, while MSFT is down 7% YTD. Fundamentally, not much has changed for the two companies (it has only been 1 week). What has changed was the market appetite for these two different categories of stocks. One can argue since WFC has been performing, you need to chase it up; however, at WIC, we don't practice that. Rather, we assess whether the price for WFC has gotten too high such that we need to do some selling, and whether the price for MSFT has gotten too low such that we need to buy some.

That brings us to discussing some moves we've recently made:

1. Trimming Wells Fargo (WFC): yesterday we sold some shares of WFC at an average price of 55.94$/share. This reduced our WFC position to a 3.8% weighting. Two reasons: i) we've realized a ~15% gain and ii) banks usually trade up before their earnings but then go down after the prints. Discussing point ii), WFC will report earnings at the end of this week: historical patterns show that they trade up before the print but go down after no matter how good the print was. Given WFC has been going into the print very hot, we would like to do some trimming here and be ready to buy on the downside. 

2. Adding to Apple (AAPL), Microsoft (MSFT): We used some of the capital from our sale of WFC and from the cash reserve to add to our positions in Apple (AAPL) and Microsoft (MSFT). Remember, we sold those stocks in November period last year after a substantial run. We had been sitting on our hands waiting to buy back at lower levels. We are at those lower levels and given the Nasdaq reached 10% correction territory yesterday and bounced back, we believe it is the right time to deploy some capital into the currently-much-hated technology/growth stocks. Can they go lower? Absolutely, and we actually would love for them to go lower, so that we can deploy further our 21% cash towards those names. Remember, nothing about these companies have changed since they made their all-time highs in November 2021 versus now. They are at lower prices because interest rates have risen, making their future earnings worth less now. We'd like to think that the market is close to done discounting the rate increase from these stocks. 

We have toyed with the ideas of buying Amazon (AMZN) and Google (GOOGL), however the stocks would severely distort the weighting of our portfolio (each would be 10%), one that we have worked so hard on to build.