A spin on indices, I introduce to you the Plebdices. Beginning each year, I will publish a few blended portfolios to provide ideas for the coming investing year. You’re welcome to use the indices as a guide in crafting your portfolio but do recall – No Investment Advice! 🙂
Portfolio Themes
The example portfolios were crafted for varying ranges of risk tolerance. Each portfolio is designed:
- To follow a Growth at a Reasonable Price (GARP) strategy; however, one mimics the famous “60/40” portfolio.
- To minimize Exchange Traded Fund (ETF) fees.
- To expose you to diverse sectors.
- To consider the current macroeconomic backdrop.
- To mimic the performance of a hypothetical investment of $10,000 for 2023 with the cost average of stocks placed at their December 31st, 2022 values.
- To increase exposure to markets outside of the United States.
The Fidelity500 Mutual Fund exists in nearly every sample portfolio. This fund is the cheapest asset tracking the S&P 500. If you do not have access to this asset, you can replace this choice with IVV or VOO, which sport low 0.03% expense ratios.
Benchmarks
The portfolios are designed to be compared and contrasted with more popular benchmark funds. Of course, you’re welcome to make your comparisons. The comparison benchmarks are:
- The S&P 500 (FXAIX)
- The Dow Jones Industrial Average (DIA)
- The Nasdaq 100 Index (QQQ)
- The ARK Innovation Fund (ARKK)
- Robinhood’s Recommend Portfolio Blend
- Betterment’s Recommend Portfolio Blend
- Fidelity’s ZERO Large Cap Index Fund (FNILX)
- Vanguard’s Closed Prime Cap Admiral Fund (VPMAX)
Now without further ado, let’s dive right into the fun.
The Plebdicies
The 60/40 Plebdex
The 60/40 is a time-tested portfolio used by many for decades. The portfolio seeks to diversify between Stocks and Bonds. My example in the table below attempts to mimic a “growth” sampling of this portfolio. Long-term treasuries (SPTL) have incredible short/medium-term upward mobility with relatively low downward risk, giving it the power to outperform in 2023 as the United States dips out of inflation.
Portfolio
| Ticker | Weight | Expense |
|---|---|---|
| FXAIX | 30% | 0.01% |
| FENY | 10% | 0.08% |
| VEA | 10% | 0.05% |
| VWO | 10% | 0.08% |
| SPTL | 25% | 0.06% |
| SPLB | 10% | 0.05% |
| AGG | 5% | 0.03% |
Analysis
40% U.S. Stocks:
- S&P 500 (FXAIX)
- Energy Stocks (FENY)
20% Foreign Stocks:
- Foreign Developed Markets (VEA)
- Foreign Emerging Markets (VWO)
40% Bonds:
- Long-term U.S. Treasuries (SPTL)
- Long-term U.S. Corporate Debt (SPLB)
- U.S. Aggregate Bond Index (AGG)
Here’s what I like about this portfolio:
- Bond diversification lowers downside risk
- Yields a 2.82% dividend
- Overweight Energy
- Foreign Stock Exposure
Here’s what I don’t like about this portfolio:
- If growth stocks come into favor and inflation rapidly declines (unexpected), bond holdings like AGG will underperform. You may replace this holding with a heavier weighting toward the S&P.
The weighting toward long-term treasuries (SPTL), high-grade-corporate debt (SPLB), energy (FENY), and foreign stock (VEA, VWO) may give this portfolio the strength to power a strong return through 2023 and beyond, all while sporting a healthy dividend. Value stocks, energy stocks, and high-quality debt are inflation-hardened holdings with a bright outlook ahead.
The Value Plebdex
The Value Plebdex is my spin on a healthy value oriented-tilt. The Vanguard Value Index (VTV) powers this fund. The fund is more heavily weighted toward Financial, Healthcare, and Energy stocks. Warren Buffett’s Berkshire Hathaway is VTV‘s largest holding.
Portfolio
| Ticker | Weight | Expense |
|---|---|---|
| VTV | 35% | 0.04% |
| FXIAX | 20% | 0.01% |
| VEA | 10% | 0.05% |
| VWO | 10% | 0.08% |
| SPTL | 15% | 0.06% |
| COMB | 5% | 0.25% |
| URNM | 5% | 0.83% |
Analysis
55% U.S. Stocks:
- U.S. Large Cap Value Stocks (VTV)
- S&P 500 (FXAIX)
20% Foreign Stocks:
- Foreign Developed Markets (VEA)
- Foreign Emerging Markets (VWO)
15% Bonds:
- Long-term U.S. Treasuries (SPTL)
10% Commodities:
- Basket of Commodities (COMB)
- Uranium and Uranium Mining Companies (URNM)
Here’s what I like about this portfolio:
- Yields a 2.47% dividend
- Heavily weighted toward stocks that have healthy balance sheets and cash flows
- Foreign Stock Exposure – foreign stocks are discounted significantly relative to their U.S. counterparts.
- Commodities Exposure
- Addition of Uranium holdings as the world renews its faith in Nuclear Fission Energy as a transition to long-term Fusion.
Here’s what I don’t like about this portfolio:
- The Uranium ETFs fees are quite pricey.
- While Foreign stocks are undervalued, they have underperformed U.S. stocks in the past 20 years. My thesis centers around a change in this trend as more money flows back into value-oriented stock.
The weighting toward long-term treasuries (SPTL), value stock (VTV), foreign stock (VEA, VWO), and commodities (COMB, URNM) make this a stalwart portfolio ready to brave whatever storms may be on the horizon. This Plebdex is filled with numerous corporate household names with ironclad revenues and cash flows who continue to grow, a great portfolio to weather a higher inflationary environment.
The Mineral Bellwether Plebdex
The Mineral Bellwether Plebdex is an aggressive growth portfolio, balancing U.S. stock with physical commodities. Commodities, historically, are volatile assets; however, they’ve generally outperformed in inflationary environments. I expect these physical assets to have a rocky 2023, but who’s investing for the short term?
Portfolio
| Ticker | Weight | Expense |
|---|---|---|
| FXIAX | 40% | 0.01% |
| QQQ | 25% | 0.20% |
| XLE | 10% | 0.10% |
| LIT | 5% | 0.75% |
| GLD | 5% | 0.40% |
| SLV | 5% | 0.50% |
| COMB | 5% | 0.25% |
| URNM | 5% | 0.83% |
Analysis
75% U.S. Stocks:
- S&P 500 (FXAIX)
- The Nasdaq100 Index (QQQ)
- U.S. Energy Stocks (XLE)
25% Commodities:
- Basket of Commodities (COMB)
- Gold (GLD)
- Silver (SLV)
- Lithium oriented miners (LIT)
- Uranium and Uranium Mining Companies (URNM)
Here’s what I like about this portfolio:
- Risk-on demeanor that could heavily outperform if growth stocks return to favor with Wall Street.
- Commodities exposure can provide safety during inflation and recessions
Here’s what I don’t like about this portfolio:
- The commodity ETF fees are expensive relative to the stock holdings.
- No foreign stock exposure
While the cost of the commodity ETFs is unfortunate, this portfolio offsets that with higher possible returns should risky attitudes return to the market. Nominal ideal returns are slightly above the S&P 500.
The 2023 Aggressive Plebdex
This Plebdex is my spin on an aggressive growth-oriented portfolio, with weightings toward ETFs and individual stocks that I believe will outperform in 2023. The S&P 500 (FXIAX) remains this Plebdex’s largest holding.
Portfolio
| Ticker | Weight | Expense |
|---|---|---|
| FXIAX | 45% | 0.01% |
| VEA | 10% | 0.05% |
| VWO | 10% | 0.08% |
| KWEB | 10% | 0.69% |
| URNM | 5% | 0.83% |
| BTC | 5% | 0.00% |
| TSLA | 5% | 0.00% |
| GOOGL | 5% | 0.00% |
| CRWD | 5% | 0.00% |
Analysis
60% U.S. Stocks:
- S&P 500 (FXAIX)
- Tesla (TSLA) – thesis below
- Google (GOOGL) – thesis below
- CrowdStrike (CRWD) – thesis below
30% Foreign Stock:
- Foreign Developed Markets (VEA)
- Foreign Emerging Markets (VWO)
- Chinese Internet Companies (KWEB)
5% Commodities:
- Uranium and Uranium Mining Companies (URNM)
5% Cryptocurrency
- Bitcoin (BTC) – thesis below
Here’s what I like about this portfolio:
- Yields a 2.47% dividend
- Heavily weighted toward stocks that have great balance sheets, tremendous market opportunities, and relatively decent valuations
- Foreign Stock Exposure
- Commodities Exposure
- Addition of Uranium holdings as the world renews its faith in Nuclear Fission Energy
Here’s what I don’t like about this portfolio:
- The Uranium ETFs fees are quite pricey
- Chinese stocks come with their own set of risks
There are a few things to discuss in this portfolio. First, there are many opinions on these assets, and I’m merely adding mine – at the end of the day, no one truly knows what the sands of time may bring.
Thesis
Chinese Internet Stocks
Bottom Line Up Front: There are countless political, philosophical, and controversial reasons why one may choose not to invest in stocks based in China. If you have apprehension toward the investment, you’re more than welcome to move the KWEB allocation toward other holdings. I intend to write a short blog in the near future explaining the risks of investing in Chinese assets.
For the risks above, Chinese e-commerce and internet stocks fell tremendously out of favor. As a result, these asset prices are discounted to account for this high-risk environment. However, if you have the stomach for a bumpy ride, you may be well rewarded for holding these stocks.
Relative to U.S. stocks, Chinese stocks are deeply discounted to their earnings. The thesis for this investment centers around the following considerations:
- China’s reopening should vastly increase the earnings of companies based there. The current prices of some of KWEBs largest holdings, such as Alibaba, JD.com, and Baidu, relative to earnings, are half of some U.S. technology stocks with similar revenues and balance sheets.
- The growth in Chinese stock earnings could greatly outpace U.S. stock earnings growth, especially if a recession is in the mix at the middle of the year.
Google provides a fantastic opportunity among the larger tech mega-caps. Currently, it trades for 17 times (17x) this year’s earnings and around the same multiple for next year. Historically, Google has traded around the 23-30x multiple as investors are willing to pay more for its earnings growth.
Current earnings estimates for Google in 2023 average around $5.80 per share, ranging between $5.17-$6.24. If Google continues to trade 17x its earnings, Google could trade between $88 a share and $106 this year. However, markets are always forward-looking and trade in advance of this year’s earnings, which is why we often must look forward to 2024 earnings estimates.
2024 earnings estimates for Google are between $5.42-$7.45, with the average forecast calling for $6.65 per share. Therefore, if we give Google a lower-end Price/Earnings Multiple of 23x and forecast the average $6.65, Google could begin to trade around the $153 a share price toward year-end – 53% upside from the date of this writing.
These forecasts are merely estimates and could be revised downward or upward. Nevertheless, relative to its peers (Amazon and Apple), Google provides an attractive valuation and the potential for a stellar 2023 performance.
Crowdstrike
Crowdstrike is a rapidly growing company in the cybersecurity space. If individual stock picking is not for you, take a look at the CIBR/BUG ETFs to gain exposure to the cybersecurity sector.
Crowdstrike’s financials are fantastic with strong growth prospects even in the face of recession. Companies are not slashing their Cybersecurity budgets.
Recurring Revenue is growing at 50%; the company has $2 billion in cash-on-hand, fantastic free-cash-flow, and investing heavily in continued growth. So while this company has no material earnings per share (EPS) in the short-term, long-term, CrowdStrike will outperform common indices.
Bitcoin
Exposure to Cryptocurrency is a growing requirement in today’s investing schemes. However, the investment is a small (5%) portion of the overall portfolio. The thesis behind Bitcoin warrants a blog post on its own. For now, I recommend Bitcoin primarily for its decentralized nature, maximum coin float, and large capital backing.
Tesla
The last individual stock of the Aggressive Plebdex and another holding warranting its own future blog post is Tesla.
With forecasted sales growth ranging from 30-50%, operating cash flow growing at 100% y/y, $20 billion in cash-on-hand, little debt relative to peers, and scale in the EV industry, Tesla will likely be 2023’s best-performing asset.
The Aggressive Plebdex has the potential for tremendous returns (20%+) in 2023 and beyond.
Performance Metrics
| Index | YTD Performance |
|---|---|
| The S&P 500 | 6.11% |
| The Nasdaq | 11.26% |
| The Dow | 2.5% |
| Fidelity Zero Large Cap | 6.34% |
| Vanguard Primecap Admiral | 7.32% |
| Ark Innovation Fund | 29.29% |
| Robinhood Recommended | 6.81% |
| Betterment Core | 7.08% |
| 60/40 Plebdex | 6.72% |
| The Value Plebdex | 5.72% |
| The Mineral Plebdex | 7.78% |
| The Aggressive Plebdex | 12.38% |
Closing
Thank you for taking the time to read this article. Feel free to send any feedback you may have on the Plebdices. As always, I hope the post gave you insight into ideas you hadn’t necessarily been exposed to and I’m very much looking forward to continuing this tradition year after year. Happy investing, friends!
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