Librarian Capital's Monthly Ranked Top Buys (January 2025)
Portfolio Strategy: We review our 2024 performance, look at the year ahead and replace two stocks in our model portfolio.
Introduction
We continue our "Monthly Ranked Top Buys“ series, intended to present a model portfolio to showcase our most-preferred stocks and to quantify our view of each stock’s relative attractiveness. We call this portfolio “Select 15”, and it closely resembles how we manage capital in real life, including more than 80% of our personal assets.
“Select 15” fell 0.9% in December, compared to MSCI World’s 2.6% loss, and finished 2024 with a 13.3% gain:
There was no “Santa Claus rally” this year, and the S&P 500 fell every trading day between Christmas and year-end; the index eventually lost 2.4% in December after what was a flattish month until December 24. Our portfolio was relatively resilient against this decline, showing the defensive nature of our positioning.
The model portfolio’s overall gains since inception – 23.4% in 2023 and 13.3% in 2024 – have been solid in absolute terms, and satisfactory in our view given our defensive positioning, but nonetheless behind both the MSCI World and the S&P 500. While we generated significant gains from holding two of the “Magnificent 7” stocks, the majority of our 2024 return came from structural growers like Philip Morris, Visa/Mastercard and Rightmove. We also made money from “value” stocks like British American Tobacco, NatWest and Bank of America. However, with hindsight, we were too cautious about U.S. macro, and we could have made more from banks than we did. Conversely, we were not cautious enough on how deep cyclical downturns at Estée Lauder, Diageo, Brown-Forman and Spirax could go.
The “Select 15” model portfolio operates under a number of constraints, including a monthly trading window and fixed position sizes, which do reduce its returns modestly. Our Personal Account, which primarily invests in the same companies but is even more concentrated in top positions, more tactical trading and a modest amount of leverage, gained 21.5% in U.K. Pounds (20.7% in U.S. Dollars) in 2024, slightly ahead of MSCI World; this takes our personal gains to 126% since the start of 2019 (more than doubling in 6 years), an annual average of 14.6% (in U.K. Pounds):
The “Select 15” portfolio has gained 1.6% during January 1-21. As of January 21, our model portfolio has gained 42.0% since its inception. Beginning with a notional $1m at the start of 2023, it has risen to $1.42m after ~2 years:
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