Jun 2023 - The Vision for the Future
From Unity (U) soaring, to Tesla (TSLA) flourishing, to Microsoft (MSFT) giving the FTC a run for its money in court, June has been a wave of good news for my major holdings. As the first half of the year has passed, my portfolio has achieved a 55% return YTD; The troubles of yesteryear seem now like ancient history as losses have nearly been regained. With such success, the question arises: can we expect the same in the next half a year?
Overview
Unlabeled on the chart:
In Consumer: Starbucks (1.0%)
In Industrials/Manufacturing: 3M (0.5%)
In Technology: Alphabet (1.2%), Activision Blizzard (1.1%), Adobe (0.8%)
Moves
No active moves were made this month.
Performance
My portfolio value increased by 12.38% in the month of June, tripling the return of the Dow Jones World Index up around 4.5% in the same period.
Dividend overview
| Name (Ticker) | Received | Amount (USD) |
| Microsoft (MSFT) | Jun 9th | $103.41 |
| 3M (MMM) | Jun 13th | $15.17 |
| Realty Income (O) | Jun 16th | $14.00 |
| Total | Jun 2023 | $132.58 |
I received a total of $132.58 in dividends before taxes for June 2023, up 9.8% compared to the same month last year at $120.74.
Commentary & Review
The rumors were true!
In last month’s post, I mentioned that Apple (AAPL) would kick off this month with an exciting announcement: They introduced the Apple Vision Pro, a mixed-reality headset - a new hardware platform and interface of the future. Just over a year ago, I picked up on some subtle rumors that Unity could benefit from this launch, and lo and behold, it was true: Apple selected Unity as an exclusive third-party developer tool to help bring real-time 3D experiences to the new platform. Within minutes of Unity’s logo appearing on stage, the stock jumped as much as 25% - it was quite the thrill for me to watch.
I believe that this serves as just one example of many such milestones to unfold for the world to realize the importance of RT3D and Unity’s unique positioning for it. While it has undoubtedly put the beaten Unity stock back on the radar of many investors, it has not fundamentally altered the company’s circumstances. It remains to be seen what kind of success Apple will see with this new platform, even as it does launch sometime next year - and it is unlikely to help Unity overcome its primary challenge of high expenses and management’s approach to this. But it was enough for Wells Fargo to reiterate a $48 price target for Unity, which later on in the month helped boost the stock once more, alongside the arrival of a new AI category in the Unity Asset Store, launching with new verified tools.
If Unity plays this right, they can certainly leverage the current hype surrounding AI for not just short-term benefits, but for the long-term as well. I hope they do and I think AI has a ton of potential to offer new Unity-powered experiences, improve the workflow, lower the barrier to entry and generally just speed up the process for developers. However, true long-term investors should not get too excited, as Unity’s AI department also took a hit this month, as Danny Lange, the head of their AI efforts and a thoroughly brilliant guy, which I have had the pleasure of meeting, is leaving the company in favor of working on AI for Alphabet (GOOGL).
Unity stock is a comeback story in 2023 and now finally nearing my own average price entry. But it remains to be seen whether they manage to take advantage of this first half year’s momentum and turn it into fuel for achieving the long-term mission of the company. I remain cautiously optimistic and will continue to hold.
Tesla’s charging standard becomes the US standard
Following the surprise announcement of Ford late last month, General Motors have now also jumped ship and announced that they will also adopt Tesla’s charging standard (NACS) in order to make use of Tesla’s charging infrastructure network. Soon after, Rivian and Volvo followed suit - and even Electrify America, the competing charging network announced that they too, would support the standard going forward. This is a huge win for Tesla and its customers, as they have successfully made others adapt to their standard, rather than converting to the same (lesser) one that we use here in Europe (CCS). This is what has boosted Tesla’s valuation this month, regardless of the fact that is unlikely to boost revenues in any significant way. I believe that much like with Unity, this reaction is simply a result of investors having their eyes opened to an overlooked truth. Tesla is absolutely dominant and so far ahead of the competition in every conceivable aspect.
What may perhaps be more interesting is that in June, Cybertruck sightings have become much more commonplace, alluding to an imminent launch. Several trucks have been spotted at once, some in camouflage as is customary once a vehicle design is finished. The truck was flown to New Zealand, where the Model 3 was also tested right before beginning production. It seems that by the end of the quarter, Cybertruck will go into production, which is great for several reasons. Not only is it nice to see, given how the product was delayed for several years, due to the pandemic - but also because the truck category remains the single largest vehicle category in America and with 1.5 million reservations and a wholly unique design, Cybertruck is sure to have an impact.
Microsoft dominates in court
I also just want to touch on the status of my latest investment into Activision-Blizzard. While no decision has been made yet (Should be within the first week of July) it is clear that Microsoft has a much stronger case than the FTC, which is aiming to block the deal over anti-competitive concerns. I have been following along every day, through the very helpful Twitter profile of Florian Mueller, a patent lawyer and regulation expert who has attended the event in person and covered it live and in detail. I am now extremely confident to have made the right decision betting on the deal going through and I am excited to see the concerns of Sony (which really are just anti-consumer at this point) hopefully be entirely shut down. I try not to be too cocky before the final decision goes through, but it is difficult, seeing how much the FTC struggled to make a coherent argument in their favor.
Wrapping up
As if it was not enough, I will leave you with a few more quick-shot positive developments concerning my holdings: Reuters reported in June that the EU is likely to approve the Broadcom (AVGO) VMware merger, just like they did for the Activision-Blizzard deal last month.
3M (MMM) FINALLY managed to settle one of their extremely major, concerning lawsuits: In the 4th largest settlement in history, 3M has settled for $10.4 billion for their responsibility in the development of PFAS - also known as “forever chemicals”. While the size of the settlement is bonkers, it is a relief to see them come out on the other side at all. Now “just” one remains before I can make a decision whether or not I should stick with this investment. I am currently down 38% on my shares.
Nothing (nothing) the private company in which I have been lucky enough to take a small stake in, has announced the launch of their second generation smartphone, the Nothing Phone (2) on July 11th. Just a few days ago, they also announced having successfully raised $96 million in another round of funding - and with this shared that they have already sold 800.000 units of their first smartphone - exceeding my own expectations.
Now, does everything seeming so great right now, mean we can expect the same for the next half year? Can we blow off fears of recession and move on already? In my humble opinion, unfortunately, no - not quite yet. While an increase in productivity (powered by AI) is the one thing that can actually counter an expected recession, I think the forward-looking nature of the stock market skews the picture a little. While I think that the market rally we have seen is somewhat justified, given last year’s overreaction, I do also think that the coming quarters will be much more muted than the previous. Things are better yes, especially as the mood has changed and startups can find funding again - but we will also now start to feel the effect of higher rates. I do not personally have great plans to throw more money into the markets right now. There are still good deals out there to be made, but I think most are now outside of tech and more in the industrial, and real estate sectors. Should a recession bare its teeth, even just a little, there may also be a great opportunity in the consumer sector.
Watch List
My Watch List sorts stock by sector and notes are included for each one, describing my interest and reservations. The status indicates the likelihood of a position being added to my portfolio. ‘Watching’ means I just keep an eye on them, whereas ‘Top Pick’ means they are very likely to find their way into my portfolio at one point - ‘Under consideration' means somewhere in between, with notes offering some elaborating thoughts. Please note my Watch List is based on my own research and goals and is in no way a recommendation of what to buy.
| Sector | Name (Ticker) | Status | Notes |
|---|---|---|---|
| Healthcare | Novo Nordisk (NOVO-B) | Top Pick | Strong innovator, previously owned, familiar |
| ARK Genomic Revolution ETF (ARKG) | Under consideration | Considering as an alternative for CRSP | |
| Merck & Co (MRK) | Watching | Casual interest, limited familiarity | |
| Medtronic (MDT) | Watching | Casual interest, limited familiarity, attractive dividend | |
| Industrials/Manufacturing | A.P. Møller - Mærsk (MAERSK-B) | Watching | Lacks ambition in electrification efforts |
| Elkem (ELK) | Top Pick | Cyclical industry, but well positioned to break out | |
| Otis (OTIS) | Under consideration | Potential dividend growth play, familiar | |
| Norsk Hydro (NHY) | Watching | Casual interest, limited familiarity, attractive dividend | |
| Lockheed Martin (LMT) | Watching | Ethical concerns, too expensive | |
| Corning (CLW) | Watching | Weakening moat, rising competition, familiar | |
| Consumer | McDonalds (MCD) | Watching | Strong brand, limited optionality |
| LVMH Moët Hennessy Louis Vuitton (MOH) | Under consideration | Strong leadership, performance, too expensive | |
| Costco (COST) | Top Pick | Incredible moat, leadership, too expensive | |
| Coca-Cola (KO) | Under consideration | Strong brand, stable giant, too concentrated, familiar | |
| PepsiCo (PEP) | Under consideration | Strong brand, well diversified, familiar | |
| Hasbro (HAS) | Watching | Strong product line, shaky mangement | |
| Energy/Utilities | Ørsted (ORSTED) | Top Pick | Strong positioning, leadership, familiar |
| Waste Management (WM) | Under consideration | Stable giant in a rock solid industry, limited familiarity | |
| NextEra energy (NEE) | Watching | Strong position, too concentrated, too expensive | |
| Enphase Energy (ENPH) | Watching | Rising star, limited familiarity, too expensive | |
| Technology | Embracer (EMBRAC-B) | Under consideration | Incredible acquisitions, not profitable, familiar |
| Sea (SE) | Watching | Core business weakening, innovator, just turned profitable | |
| Palantir (PLTR) | Watching | Amazing tech, highly dilutive, unprofitable, opaque | |
| Meta (META) | Watching | Strong leadership and userbase, undergoing big change | |
| Apple (AAPL) | Watching | Strong brand, loyal userbase, risk of disruption | |
| Mercado Libre (MELI) | Watching | Great execution, growing market, too expensive | |
| Squarespace (SQSP) | Watching | Familiar, too concentrated, too expensive | |
| Shopify (SHOP) | Watching | Innovator, well positioned, unprofitable | |
| Xiaomi (1810) | Watching | Fast innovator, China risk, previously owned | |
| Nvidia (NVDA) | Watching | Strong brand and leadership, too expensive, previously owned | |
| Finance | Coinbase (COIN) | Under consideration | Strong brand and leadership, unprofitable, previously owned |
| BlackRock (BLK) | Under consideration | Strong execution, exposed to the economy, attractive dividend | |
| Whitehorse Finance (WHF) | Watching | Attractive dividend, strong execution, high risk | |
| SoFi Technologies (SOFI) | Watching | Strong leadership, innovator, unprofitable | |
| NuBank (NU) | Watching | Great execution, interesting market opportunity | |
| JP Morgan Chase (JP) | Watching | Stable giant, overlapping industry with holding | |
| Manulife Financial (MFC) | Watching | Stable giant, attractive dividend, limited familiarity | |
| Real Estate | VICI Properties (VICI) | Top Pick | Strong leadership and execution, attractive dividend, too concentrated |
| Digital Realty (DLR) | Watching | Good positioning, attractive dividend, limited familiarity |
Disclaimer: I am not a financial advisor, the opinions expressed in this article are entirely my own – always invest at your own risk.
