Loading up on Amazon, avoiding Apple and Nvidia

Our conversation with fund manager Dan Davidowitz

Large Cap Growth Stocks

On this week’s episode of The Compound and Friends, Michael and I were joined by Polen Capital’s Dan Davidowitz who manages over $50 billion in the firm’s Focus Growth strategy. Dan is looking for quality companies at reasonable valuations and really trying to identify the ones with the most potential. That sounds obvious, until you understand how many large cap managers are just trying to check boxes across sectors and come as close as possible to index returns. Dan’s selecting for earnings growth, not managing for benchmark approximation.

Dan’s largest holdings as of December 31st - subject to change

Dan’s portfolio is comprised of a very tight list of just 20 to 25 “high conviction” names, which means he has to be very deliberate about what he’s buying, what he’s avoiding and why.

Michael and I got to ask him about some of his largest holdings, like ServiceNow, Netflix and Amazon, which is almost 15% of his portfolio. We also talked about the stocks he doesn’t own at all right now, like Apple and Nvidia.

This week the world lost Nobel Laureate and the Godfather of Behavioral Finance, Daniel Kahneman. We also saw the sentencing of Sam Bankman-Fried yesterday. We get into all of that stuff and more.

Michael and I spend a lot of time talking about the stock market, but this time we got to talk about the stocks themselves - and that was a lot of fun. If you want to hear more of these types of conversations on the show, let us know! Send an email to askthecompoundshow @ gmail dot com, we’re always listening.

You can hear this episode below at Apple, Spotify or the podcast platform of your choice:

It will be up on our YouTube channel later as well.


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10% in Cash?

My colleague Ben Carlson asked and answered “What if you kept 10% of your portfolio in cash?”

This is something people are wondering about all the time given the extremely high rates we’re receiving (relative to recent history, at least) on cash balances and money market funds.

Have a look at the below chart for a historical look at how that would have played out:

Over the very long term, it’s definitely a drag, but maybe it’s an acceptable drag given the reduction of short-term volatility?

Here’s Ben, writing at A Wealth of Common Sense:

The returns for the more cash-heavy portfolio have actually been better than the 60/40 portfolio over the past 10 years. That makes sense considering we just lived through the worst bond bear market in history.

Bonds have had better returns over the past 20, 30, and 40 years, but the annual returns are not markedly better for a 60/40 portfolio than a 60/30/10 portfolio over the long term.

We have these kinds of conversations with clients every day at Ritholtz Wealth Management. If you’re looking for a certified financial planner to discuss your questions with or you are curious about how RWM differs from other advisory firms, now’s the time to get in touch. You can talk to us here.