“I learned that if you work hard and creatively, you can have just about anything you want, but not everything you want. Maturity is the ability to reject good alternatives in order to pursue even better ones.”
- Ray Dalio, Founder, Co-CIO of Bridgewater Associates
Happy Monday,
In March 2024, the S&P 500 ended at 5,254, notching a solid gain of 3.1%. Meanwhile, at PointFour Capital, the performance of our public equity portfolio was 5.2%, mainly on the back of the two AI-related stocks that we accurately picked – NVIDIA and Microsoft as well as a rotation into lower valuation industrial / banking / energy stocks.
In Q1 2024, the S&P 500 notched a solid gain of 10.7%. Meanwhile, at PointFour Capital, the performance of our public equity portfolio was 16.2%. Our 2024 year-end target for the S&P 500 is 5,200–5,400, which implies a continued rotation into lower-valuation stocks.
No matter how you slice it one thing is clear – the market rally that began in October 2023 has not been fully supported by fundamental underpinnings. Momentum, yes. Technical charts, yes. Sentiment and emotion, yes. Fundamentals and valuations, not so much. And this is why we never wavered in our position that fundamentals and valuations matter, despite all the external pressure to do so.
Here at PointFour Capital, we are adept at seeing the “big picture” since we have been at this for decades, thus we avoided the 20% meltdown in 2022 and beat the S&P 500 two-year (2022 & 2023) performance by 14%. In 2024, we continue to beat the S&P 500 performance while at the same time reducing overall risk by hedging our portfolio to protect against an expected market rotation and pullback later in 2024.
We achieved our 2022 - 2024 performance by predicting that we would eventually return to a more value-based investment thesis. In addition, we astutely recognize the once-in-a-lifetime investment thesis in AI and identified two of the main participants – NVIDIA and Microsoft. We have since added other stocks that we expect to benefit from the AI boom, such as Amazon and Dell.
We are here for the long term and making a profit and avoiding the latest fads means something to us. We do not see AI as a fad of any kind, instead, we see it as a fundamental technology shift that will alter the world as we know it over the next decade.
In addition, we also continue to take advantage of opportunities in the commercial real estate market. The meltdown in this segment has been occurring in slow motion as defaults increase, especially in the “B” and “C” class office sub-segment. Our strategy is to take advantage of the dislocation of prices today in this sub-segment and continue buying office/industrial buildings in growth markets, like Atlanta, where we believe there will be a substantial inventory shortage in the next 5 years.
Remember that every significant market shift usually involves an over-correction, so we look to take advantage of short-term corrections and set ourselves up for a great 2024 and beyond!
Thanks again for your consideration, ideas, and trust. Have a great April 2024!
Best,
Vincent M. Oddo
Co-Founder & Managing Partner
PointFour Capital, LLC