June +H1 recap at The Reservist portfolio

up 38% in H1 and lots of introspection

Welcome to the June review!

What a first half for the year. A crazy up January and February was followed by a down March, a crashing April and then a ridiculous bounce back May + June. Who knows what the second half holds?

Q2 ended with a literal bang with a middle east war and the prospect of tariffs being snapped back in place.

But….

This isn’t a macro focused portfolio and while I believe in tracking these issues, I’ve found it incredibly hard to invest well off of macro. Instead I find it’s healthy to focus on what you own, have deep conviction and quality insight into factors and valuations that affect your stocks.

So how has the portfolio and The Reservist in general done?

Portfolio review

As a reminder, I don’t plan on sharing monthly performance updates, only quarterly and annual, as I believe that short term tracking isn’t the right way to think about things.

During the first half The Reservist equity portfolio was up 38.7%. Q2 saw a large 25% rise. The entire portfolio performed well, and many of my main positions are at or near 52 week highs: Spotify, Axon, Toast and Meta. I hold a significant portion of cash at the moment due to taking some profits in Spotify earlier this month.

My portfolio at the moment has 65% in core positions, 16% in cash and the rest in trades or smaller positions that I’m following on their way to becoming core positions. Despite trimming several positions during H1 and enjoying the concentration, I’m now actively exploring a few new names, mostly in the payments space, (which I’ve recently shared my industry breakdown).

Despite amazing performance, or perhaps because of it, I’m ending Q2 cognizant that I feel fearful. Which might sound ironic after being up 38 in just 6 months.

I can’t deny that the market rising like this causes me some mixed emotions and fears:

1. I'm up 38.7% YTD. I’m inching closer to reaching my financial goals and the higher my portfolio value the more I have a tendency to 'count my gains before they hatch" A severe pullback would trash this great performance and it's making me scared, even though I’m actually well positioned for such a pullback.

2. Fomo! It's gogo years. People on Twitter are up 30, 40,50, 60.... 100%! It's not that I'm unhappy with my current 38. I don't feel some terrible desire to be up 60%. It's just that I'm aware that GoGo years don't go forever. This “everything is rising a LOT" environment has been here for the past three years and won't last forever. Have I taken advantage of it enough? That’s the FOMO I’ve been fearing. Have I squandered this opportunity? Objectively, the answer is of course not. My equity portfolio is up 157% in just three years. That’s insane. And yet the emotion is there.

I’ve noticed that these fears lead to a desire to take action: do more trades, take on more risk or alternatively take profits. Concretely I’ve encountered these in a few ways:

1. I wanted to lock in profits for Spotify. I didn't want to foolishly lose the massive upside I've gained. To try and avoid taking profits too early I forced myself to reevaluate this decision over and over again (I’ve been seriously considering this for 8-9 months already). I think the decision was well made, as in the process was right. We'll see if it was" right" only in 4-5 years, as the decision was essentially baed on an opportunity cost calculation out to 2029.

2. I've put on a high number of trades this year: Uber, Hasbro, Fiserv and Snap-On. They’re all well managed in terms of thesis and risk / reward, but has the motive been wrong? i.e Have these been FOMO driven trades? That’s a question I’ve had to face every time I think of taking action.

3. I have a high number of invest and investigate or early core positions: Remitly, dLocal, Shift4 and Global-E. In general I don’t like having too many on at the same time a they all require a lot of homework. However here the case is slightly different since many are in the same space (payments, payments vertical SaaS and cross border e-commerce) and overlap on homework. What bothers me slightly is that putting on all these positions implies/is a lack of patience to follow and wait until I find “the” winner. I’ve decided to manage this risk by position sizing (small) rather than time.

It’s been a busy two months:

• I wrote about opening Shift4 and dLocal.

• I took profits in Spotify but decided to stay patient with my Hasbro trade

• I finally posted my payments industry overview which has received great feedback

• I increased my exposure to the lidar sector via Innoviz and Hesai

• I opened a trade in Fiserv and Snap On

• I also shared what I think about Macro here

I’ve decided to take a break from markets a bit until Q2 earnings come out - this should help mitigate part of the emotional ride and help me focus on my continuing research into my new positions. Generally I'd like to make less trades in a given month, and own fewer positions but it will take time until the best rise to the top of my portfolio.

Looking ahead to the next 12-18 months I don’t know where the markets go, but I want to make sure that I improve my process and avoid the mistakes I made during 2024, so this seems like a good time to revisit them. From my 2024 review:

My key lessons from 2024? Very similar:

• Adhere to my disciplined process! Continue to write, continue to do deep research and adhere to the process.

• Pay attention to emotions. Avoid FOMO as much as possible, be cognizant that we’ve been on a record breaking 2 year streak and investing isn’t that easy.

• Position sizing really matters. Make sure that trades are worthwhile and risky positions are sized accordingly.

Specifically in 2024 I didn’t adhere to the process in the case of Innoviz. My buy levels were too close together in terms of price and/or time. I’ll keep my full retrospective for year end but for now I think I’m doing a better job.

Looking ahead, some thoughts for the second half:

1. A lot is being priced into the market and a lot of things could disappoint: tariffs, the economy, trade wars and on. On the other hand, the economy is continuing to muddle along, government spending should increase and monetary policy should start to ease. In short - I have no idea where ‘the market’ will go.

2. Spotify, my largest position has performed incredibly well during the first half, which is why I sold a third of my position. I doubt it continues to perform the same during H2 (I said the same thing at YE24 and Q1).

3. Buying 20-25% pullbacks in names like Amazon, Meta and Axon has historically proved to be a good decision. The magnificent seven however are undergoing a tumultuous year, rightly so. I’m no longer sure the same trade works.

4. Tracking multiple names deeply is really hard and intense work - less is more. I managed to reduce names during H1 but in the final month added several names. My goal is pick winners over the next 2-4 quarters.

5. Patience is the hardest aspect of investment for me, but it’s most important.

The Reservist

I’ve written a total of 25 articles so far this year, several of which are quite in depth (My articles on Innoviz, Adobe, Spotify and Payments industry overview specifically).

Subscribers grew at a steady pace throughout the year until two weeks ago when readers spiked due to my article on payments.

I still have a few articles I’m working on:

1. dLocal investment thesis

2. GlobalE investment thesis

3. Adobe thoughts post earnings

4. What I learned from spending a few days at a hedge fund

5. Why researching competition matters

6. Babe Ruth and my portfolio