Portfolio Update: Stocks Sold + 1 New Buy to Enhance Long-Term Performance
This will also reduce the number of stocks in my large-cap portfolio
I just sold 5 stocks from my large-cap portfolio. While these stocks had intrinsic strengths, they didn’t match the performance potential of others in the portfolio. Additionally, for some, the risk/reward profile had worsened due to economic or geopolitical factors. This will also allow me to concentrate my portfolio.
To illustrate the long-term benefits of this decision, here are the key metrics before and after the sales.
Past growth: 15.6% —> 17.3%
Future expected growth (3y CAGR): 11.2% —> 12.1%
Net profit margin: 26.4% —> 28.8%
ROE: 40.5% —> 42.6%
ROIC: 24.8% —> 26.4%
Debt leverage: -0.28x EBITDA —> -0.39x EBITDA (negative = net cash position)
PE: 29.2x —> 29.1x
PE Y+2: 21.4x —> 21.0x
FCF yield: 4.08% —> 4.06%
FCF yield Y+2: 5.63% —> 5.75%
PADI: 1,700€ —> 1,394€
Dividend yield: 1.36% —> 1.29%
Dividend growth: 9.9% —> 9.8%
Share buybacks: 0.72%/year —> 0.77%/year
Expected TSR: 12.6% —> 13.1%
I am not ruling out the possibility of repurchasing the stocks I just sold if their prices drop significantly or their fundamentals improve. In the meantime, the sales allows my to free up cash to either strengthen my existing positions or invest in new stocks with more promising outlooks.
The first sale
The first stock I sold was Accenture, locking in a +26% gain, plus an additional 3.5% from dividends, totaling around 30% since January 2023. While the stock is currently trading 10% below its March 2024 peak and 20% below its all-time high, the current price still appears fair.
However, several factors have decreased the company's outlook: reduced IT spending growth by companies, growing competition in the outsourcing space, and uncertainties surrounding AI and consulting.
The most significant factor, though, is the total shareholder return (TSR) estimate, which I project at roughly 7% annually over the next decade, substantially lower than other stocks in my portfolio. Low potential returns combined with growing uncertainties made this a strategic sale with a solid gain, leaving me a satisfied shareholder.
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