This morning, we're captivating the volatility in the market this week, specifically the divergence between value/cyclicals and growth/technology to continue to structure our portfolio. Lots of actions here to be written in a short amount of time, so we apologize if they aren't detailed enough.

Trimming Shares of Ford (F)

Even though earlier in the week, we said we would not trim Ford (F) given the big run that it has had in the past week (>10%), we've finally decided to do so today. The decision to trim is actually coupled with the addition of Deere (DE) to our portfolio. We've decided to reduce the allocation to Ford from 18% to 15%, to bring in Deere (DE) at 3%. Effectively, we're selling 25 shares (out of 200) of Ford around 24.5$/share, realizing a 65% gain in this position. This sale reduces our Ford position from 15.65% to 13.69% of our portfolio. We are trying to exercise what we wrote yesterday about not being pigs, but also not selling winner. Even though our bullish thesis in Ford still remains, we believe sentiment has gotten too positive here, and there would be nothing wrong in realizing gains in a small increment. Additionally, this move brings down the dependency of our portfolio on this single name. If you watch diversified portfolios, you will hardly see any names that take up more than 10%. Undeniably, Ford has given us the alpha (outperformance) for the past half a year, and we believe it is the right time to do some de-risking from this position. It is still the biggest position in our portfolio (the second biggest is Disney at 10%, which we will do some trimming in the near term).

Bringing in Deere (DE) To Our Portfolio

We're bringing this agriculture equipment manufacturer into our portfolio, as an additional cyclical/ value play with secular growth tailwinds. We're allocating 3% of our portfolio to this name (taken from Ford). Today, we purchased shares at 378.43$/share, a position that is 1.22% of our portfolio. This means we can buy in 2 other increments. We will be writing a detailed post later, but we'd like to quickly note here that DE is trading at the top of its trading range for the past 0.5 years, therefore there are reasons to expect there are better prices ahead.

Here's our investment thesis in Deere: The global agriculture equipment market size is expected to reach $166.5 billion in 2027, growing at 6% CAGR over the 2020-2027 period. The favorable outlook for equipment purchases in the coming quarters reflects rising farmer income that historically drives new equipment purchases. At the same time, Deere continues to lean into the sustainability movement with its precision ag offering. That technology is helping farmers drive crop yields higher while also realizing cost savings, which makes the new technology a productivity upgrade compared to older equipment. The company's Board of Directors declared a regular quarterly dividend of $1.05 per share payable on Feb. 8, 2022 to stockholders of record on Dec. 31.

Adding to Advanced Micro Devices (AMD)

Yesterday we added to our position in AMD at an average price of 136.07$/share, bringing the weighting to 4.31% (compared to the 5% allocated). This is one of the types of actions in which we're buying because we have been underweight, and the technical picture suggests a decent risk-reward dynamics. Shares of AMD look to be forming a floor in the 130$ area (see chart below), as it has tested this price level twice. As always, we're willing to buy more at much lower prices. The worst case scenario to us is that shares re-visit the MA200 (red line).

Adding to Boeing (BA)

This move is different and one that we would like to write in more details next week. Here's the long-story short: last year we had a very strong conviction for Ford (F) and that gave us tremendous gains. If you ask us again where our strong conviction is placed this year, it's Boeing. Again, a more detailed post will be coming. The story is not the same and not as good as Ford's last year. Before the move up last year, Ford demonstrated strong management from CEO Jim Farley, a clear turn-around story, and there was a dislocation between the stock price and the company's performance (company doing well but stock price not reflecting). What we see in Boeing so far is only that the stock price is not reflecting what the company has done. For example, Boeing announced earlier in the week that they got a big 737Max order from Allegiant, something that investors were looking for all last year, but the stock has not at all reflected such great news. On the management side, we believe CEO Dave Calhoun and company had been doing a very poor job since the pandemic, including mishaps with 787 Dreamliner production and we still don't know whether Boeing needs to do one equity offering (bad for stock price). However, such poor management has been reflected in the stock price. With the recently announced 737Max order, we're seeing signs that management is improving. We're willing to bet that 2022 will be the turning point for Boeing, and we bet that the stock price will advance to 2021's high in the 260s, let alone coming back to pre-pandemic levels.  

Effectively, we're increasing our allocation for this name to 5% (from 3%), and our purchase of the stock yesterday in the 211$ level brought up the weight of this position to 2.76%.