April 2025: Month-End Portfolio Update

I remain highly confident in this portfolio, and my conviction has only strengthened following the latest round of earnings. I will continue to capitalize on market volatility.

Dear Premium Subscribers,

Welcome back to the Quality Equities Premium Newsletter.

Each month, I publish updated valuations for every holding in my portfolio. In the past, I’ve primarily used reverse DCFs alongside traditional 5-year and 10-year DCF models.

Moving forward, however, I’m shifting my focus to 5-year discounted EPS and FCF per share growth models. These are grounded in projected EPS or FCF growth and an estimated future earnings or FCF yield. As with any valuation model, the goal is to be directionally right, recognizing that precise accuracy is impossible when working with forecasts.

What’s Happening in the Market?

As of early May 2025, the US stock market is staging a strong rebound following several weeks of volatility. The S&P 500 just notched its ninth consecutive daily gain (the longest such streak since 2004) effectively erasing the losses triggered by the “Liberation Day” tariff announcements made in April. The Dow Jones and the Nasdaq Composite also closed the week higher, each posting gains of over 1.4% on Friday. This surge reflects renewed investor optimism and a shift in sentiment after markets had been rattled by escalating trade tensions between the US and China.

Several factors are fueling the rally. A stronger-than-expected April jobs report added to the market’s positive momentum, showing 177,000 jobs added and signaling continued resilience in the labor market. At the same time, strong corporate earnings and signs that the US and China may return to the negotiating table to discuss tariff relief have further boosted investor confidence. These developments suggest that the economic fallout from the tariffs may be less severe than initially feared.

Portfolio Updates

Given markets have continued to be rather volatile, I continued to purchase shares of my highest conviction long-term holdings, including AMZN 0.00%↑ Amazon, NVDA 0.00%↑ NVIDIA, GOOGL 0.00%↑ GOOG 0.00%↑ Alphabet, ASML 0.00%↑ ASML, SPGI 0.00%↑ S&P Global, and META 0.00%↑ Meta Platforms.

Concentrated Quality Growth Portfolio. Source: FinChat.

The portfolio is trading within a range of reasonableness. Forward PE is 27.1x and forward FCF yield is 3.8%.

Look through fundamental metrics remain strong. For example, ROIC 10-year average is 27.2%, FCF/net income is 103.4%, FCF/OCF is 77%, gross margin is 70%, operating margin is 38%, interest coverage is 115x.

I remain highly confident in this portfolio, and my conviction has only strengthened following the latest round of earnings. I will continue to capitalize on market volatility by adding to my highest-conviction positions. That said, I’m keeping a close eye on PYPL 0.00%↑ PayPal (or “PainPal,” as some now call it). I’ve held this position for several years and have recently given serious thought to trimming it. More to come, stay tuned!

Valuation Update