My Newly Updated Long-Term Portfolio

It’s a bold man who makes long-term forecasts these days with so much of the global economy turned upside down this year.  But nobody ever accused me of being cautious, retiring, or risk-averse. So here is my best shot at providing you with my best long-term investment ideas at the current time.

For new subscribers, the Mad Hedge Long Term Portfolio is a “buy and forget” portfolio of stocks and ETFs. If trading is not your thing and you don’t want to remain glued to a screen all day, these are the investments you can make. Then don’t touch them until you start drawing down your retirement funds at age 72. 

For some of you, that is not for another 50 years. For others, it was yesterday.

There is only one thing you need to do now, and that is to rebalance. Buy or sell what you need to reweight every position to its appropriate 5% or 10% weighting. Rebalancing is one of the only free lunches out there and always adds performance over time. You should follow the rules assiduously.

Sector Choices

Technology

It’s a bold move to underweight technology these days. But after a run for the ages, it is time for an underweight, and I am cutting them back from a 40% market weighting to only 20%.  Take profits now, and you will have the cash to buy them back after their ritual 50% selloff. There is no doubt that the industry will continue to grow for the rest of this decade. However, the stocks have run ahead of themselves, as they often do.

Banks

I am keeping my heavy weighting in banks at 20%. Interest rates are eventually going to fall, with a Fed cut just over the horizon, setting up a perfect storm in favor of bank earnings. Loan default rates are falling. Banks are overcapitalized, thanks to Dodd-Frank. So, keep heavy weightings in banks that will profit from a modestly growing economy. They are also a key part of my “barbell” trading portfolio.

Homebuilders

New homebuilders are among the best falling interest rates out there, which are among the best falling interest rate plays out there.  They will receive a tailwind from a structural shortage of 10 million homes.

International

Emerging markets do great when the US dollar falls. They are also among the cheapest stocks in the world. Some diversification away from the United States is warranted these days, and emerging markets are the highest beta way to accomplish this.

Bonds

With the government raising its debt ceiling by $5 trillion this year, a permanent pall is going to hang over the long-term bond markets, which have become the pariahs of the international investment community. Even if the Fed cuts interest rates, long bonds won’t catch a bid. Therefore, I am not allocating any resources to the bond market for the foreseeable future.

Foreign Exchange

Falling interest rates are death for any currency as they cut its yield advantage relative to other currencies.  I am keeping my foreign currency exposure unchanged, maintaining a long in the Euro (FXE). Eventually, the US dollar will become toast, and foreign currencies could be your next decade-long trade.

Precious Metals

As for precious metals, I’m keeping my 10% holding. Central banks have been accumulating gold for a decade and show no signs of slowing down. And gold production is falling and getting more expensive, driving prices up.

Energy

Energy is a bombed-out sector that is starting to attract some long-term investors. At some point, the OPEC price war will end, and the global economy will reaccelerate. Among the cheaper sectors out there, this is one of the better ones.

Commodities

The American grid has to triple in size to accommodate the current growth of Artificial intelligence. EV sales will recover at some point, sending demand for copper soaring.

Health Care

There is nothing like buying a bombed-out sector at a discount, and nothing meets that description better than UnitedHealthcare (UNH). The company has been targeted for fraud by the US government, and a senior executive was assassinated last year. Still, both Warren Buffett and I see the long-term potential to recover its dominant share in the market, and you certainly can’t argue with “cheap.”

To download the entire new portfolio in an Excel spreadsheet, please go to www.madhedgefundtrader.com, log in, go to “My Account”, then “Global Trading Dispatch”, click on the “Long Term Portfolio” button, then “Download.”

 

Stay healthy.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

 

At Pebble Beach with my 1926 Rolls Royce