Portfolio as of April 2021

I believe outperforming the stock market average (so the S&P 500 or similar index fund) can only come from owning a concentrated portfolio. This was how I achieved 400%+ returns in past 12 months. Meaning you own a limited number of stocks that you have high conviction in, and not a list of 100’s of companies. If you own too many stocks then your performance will mimic the performance of an index fund, and you also won’t be able to know enough about your stocks to have the conviction to hold through downturns.

Currently my portfolio contains around 25-30 names, with over 50% of my money tied up in my top 10 stocks. Studies also show that 25 uncorrelated stocks is typically enough to achieve effective diversification. Below is the list rundown of my top 10 with a very quick synopsis of the bull thesis:

1. Oil stock basket - As oil demand comes back post-COVID, the supply destruction that occurred in 2020 will lead to an oil deficit in 2022. Look out for $4 gas next year! “The fear of peak oil demand will lead to the reality of peak oil supply”

2. Macerich (MAC) - Not a “dying” mall operator but a play on class A urban/suburban real estate that will always be in demand. Financial distress/bankruptcy scenario has been eliminated with recent liquidity actions

3. Wells Fargo (WFC) - Primed to benefit from cost cuts, rising net interest margin, and removal of punitive asset cap. Trading at significant Price/Tangible Book Value vs. peers

4. United Natural Foods (UNFI) - Food distributor with irreplaceable physical assets that will rapidly pay down its debt, which will reveal its hidden monster free cash flow generation ability

5. Sequential Brands (SQBG) - House of retail brands that can be sold for much higher value than current equity value

6. Cleveland Cliffs (CLF) - Iron ore miner that has transformed its business through vertical integration. Go-forward earnings power will be much higher than previously, which sell-side has not yet caught up to in their forecasts

7. Scorpio Tankers (STNG) - Owns largest publicly traded petroleum product tanker fleet. Will benefit from increasing gasoline/diesel/jet fuel transportation demand as well as reduced tanker supply from scrapping / IMO 2030 regulations

8. Essential Properties (EPR) - Owns theme parks, arcades, theatres and other “experiential” properties. Should greatly benefit post-COVID as consumers release pent-up demand for going out after a year of lock-down

9. Uranium stock ETF (URA) - Current supply of uranium mining supply is not enough to meet growing uranium demand as 3rd world countries expand nuclear power plant fleets. As stockpiles shrink, uranium prices should spike

10. Armstrong Flooring (AFI) - Undervalued residential/commercial flooring manufacturer with net cash position post land sale, and management laser-focused on turning around previously mismanaged operations

In addition to the top 10 list above, there’s another 15-20 stocks I’m also bullish on and have smaller positions. In future posts I may post more in detail about why I like these stocks. What are your thoughts on this list? And what your personal “Top Ten" stocks?