#44 - The 3 Portfolio Pillars

Author

Graham Schroeder
February 07, 2025

Your home base for investing, finance, personal growth.

This week big tech announced huge CapEx plans, Lululemon is quietly building a golf empire, and why you should consider building your portfolio with three types of equity pillars.

Over the last seven elections, this asset class has outpaced the S&P 500

Instead of trying to predict which party will win, and where to invest afterwards, why not invest in an ‘election-proof’ alternative asset? The sector is currently in a softer cycle, but over the last seven elections (1995-2023) blue-chip contemporary art has outpaced the S&P 500 by 64% even despite the recent dip, regardless of the victors, and we have conviction it will rebound to these levels long-term.

Now, thanks to Masterworks’ art investing platform, you can easily diversify into this asset class without needing millions or art expertise, alongside 65,000+ other art investors. From their 23 exits so far, Masterworks investors have realized representative annualized net returns like +17.6%, +17.8%, and +21.5% (among assets held longer than one year), even despite a recent dip in the art market.*

Past performance not indicative of future returns. Investing Involves Risk. See Important Disclosures at masterworks.com/cd.

Market Recap

  • Alphabet, Meta, and Microsoft to Spend $230 Billion in 2025

    • CapEx spending amongst all the major big tech stocks are about to run wild next year on data centers, GPUs, and high optic network fibers.

    • Despite optimism around AI growth, investors are beginning to question the long-term return on these expenses leading to a lot of scrutiny. It feels like every day the news is revolving around AI and we will never know if we are in a bubble until it pops.

    • The recent DeepSeek news is pushing U.S. tech firms to accelerate their AI investments to maintain leadership in the industry.

  • Lululemon Poised to Take Over Golf?

    • In January, Lululemon raised its fourth-quarter revenue forecast to $3.56 billion to $3.58 billion, up from the previous range of $3.475 billion to $3.51 billion.

    • The company is scheduled to announce its fourth-quarter earnings on March 20th. Investors are anticipating detailed insights into the company's performance during the holiday season and its future strategies.

    • PGA golfer Max Homa was announced as its newest brand ambassador last month. Homa, currently ranked 27th in the Official World Golf Ranking could help boost the companies golf presence with golf season on the horizon.

  • Trump's Sovereign Wealth Fund Faces Pros & Cons

    • President Trump signed an executive order to establish a U.S. sovereign wealth fund that would be managed by the Treasury and Commerce departments.

    • A positive benefit from a wealth fund could be to ensure long-term economic stability while protecting social services during downturns like Norway has used their Government Pension Fund Global (GPFG) for.

    • A negative is that the fund's creation raises questions particularly regarding the intertwining of private investments with political agendas, leading to concerns about transparency and potential conflicts of interest.

Freedom Fund Portfolio

 

  • Friday Freedom Fund Purchase:

    • 1 share of $GOOGL - Alphabet

      • I still believe of all the giant tech stocks in our country Google is the most under appreciated at these levels. Don’t focus so much on the fact that AI chat bots could replace their search function. Focus on the growing dominance of Youtube and Waymo’s potential opportunity to own the robotaxi wave in every major metropolitan city.

  • Portfolio Earnings:

    • $PLTR - Palantir Technologies - Q4 2024 Earnings

      • Total Revenue: $828M (36% YoY)

      • U.S. Revenue: $558M (+52% YoY)

      • U.S. Commercial Revenue: $214M (+64% YoY)

      • U.S. Government Revenue: $343M (+45% Y0Y)

      • Global Commercial Revenue: $372M (+31% Y0Y)

      • Global Government Revenue: $455M (+40% YoY)

      • Adjusted Free Cash Flow: $517M (63% margin)

      • GAAP Net Income: $79M

      • Palantir’s U.S. commercial revenue is accelerating faster than government revenue, signaling adoption of AI-driven solutions in private sectors.

    • $GOOGL - Alphabet - Q4 2024 Earnings

      • Revenue: $96.5 billion (+12% YoY)

      • Net Income: $26.5 billion (+28% YoY)

      • EPS Growth: 31% YOY ($2.15 vs. $1.64)

      • Google Cloud revenue grew 30% YOY, reaching $12.0 billion driven by AI and Generative AI solutions.

      • Introduced dividends for the first time, paying a total of $2.4 billion in Q4 2024 to shareholders.

      • YouTube added an annual revenue run rate of $40 billion. It remains the leader in streaming watch time and podcasts.

Freedom Fund Background: I created the Freedom Fund as a public brokerage account back in October of 2022 to share that anyone with a social security # and a bank account can begin their investing journey by investing a couple hundred dollars a week. Every week and month I post on X (@GrahamInvesting) public updates about the purchases, exits, dividends, and growth of the fund if you want to follow in real time. The biggest obstacle people have to investing is just getting started so I decided to start a new account at $0 to start from nothing with you.

The 3 Pillars of a Strong Portfolio

Did you know the three pillars to a strong portfolio was to be in your prime working years in the early 90s & early 2000s and just buy a sh*t ton of Apple, Microsoft, and Amazon?! Just kidding… But really depending on your phase of life the blue chip winners of our future may be forming right in front of our eyes today. That is why it is important to build a portfolio based on pillars of growth, value, and income. A breakdown of the three pillars of stock types:

  • Growth Stocks - High-Risk High-Reward Companies

    • Can be categorized as companies that are expected to have a high revenue and earnings rate. I would qualify any of these companies that are growing above a +15% revenue rate and a +20% EPS (earnings per share) rate.

    • Many of these companies will have a very high price-to-earnings (P/E) ratio and are typically investing profits heavily into R&D or the company. These companies don’t pay a dividend.

    • The pros of these companies is that they have a high potential to appreciate at rates higher than the market. The cons are the opposite and could have major negative swings depending on the overall market and investor sentiment.

    • Typically you want to invest in these companies if you have a long investing horizon. But once you have a portfolio built why not take some risks with a small % of your portfolio if you spot opportunities.

    • Right now in the public Freedom Fund I would consider the Palantir Technologies, Shopify, SoFi Technologies, and Google’s of the world to be growth positions.

  • Value Stocks - Established Companies On Discount

    • Typically categorized as companies that don’t meet the growth pillar anymore and tend to have lower P/E ratios, strong fundamentals, established winners in their respective industries. Considered the “Blue-Chip” stocks.

    • A lot of times these companies can still out pace the market in terms of appreciation but they have more steady returns and less risk. These companies can sometimes be under-valued depending on the cyclical nature of their industry they live in. And if you are patient it may take some time to realize gains but that can provide a lot of opportunity if you spot one that is under-valued.

    • These companies are ideal for those who want less volatility than growth stocks and are willing to hang on to them long term to build wealth and allow them to appreciate over time.

    • Currently in the Freedom Fund I would consider American Express, Cheniere Energy, Deere & Co., Waste Management, and Teradyne to be in this value category.

  • Dividend Stocks - Steady Income

    • A dividend stock is a company that pays a regular dividend, they are established, provide consistent earnings and have higher dividend yield payouts.

    • Many of these companies live in the utilities, real estate (REITs), consumer staples, and have been increasing their dividends for over 25 years (aka Dividend Aristocrats).

    • The benefits of dividend stocks are that they can be the anchor of your portfolio providing consistent income and resiliency in bear markets. However, they will tend to not give you great capital appreciation over time. If you are seeking cashflow, safer investments, and peace of mind these stocks are for you.

    • Currently in the Freedom Fund I really only have three main real estate investment trusts (REITs) that I hold and receive a monthly dividend payout from in Realty Income, Apple Hospitality REIT, and Modiv Industrial.

  • Disclaimer - If you are someone who is not passionate about following the markets, studying trends, and reading earnings reports you probably are better off sticking with the old reliable index funds and ETFs. Everyone should be building their base with these and it is usually a better route to go and you’ll likely beat most people in the long run who pick individual stocks. As long as America is the global power and our dollar is the global reserve currency the long term returns on index funds and ETFs will be hard to beat.

The message I want to send is that if you are looking to build a stock based portfolio outside of your typical retirement accounts that are going to be built on index funds and ETFs make sure you are building a diverse and well rounded portfolio that has the versatility of growth, value, and dividends. It will allow you to manage your risk across different market cycles. Dividend and value stocks may not feel appealing when the market is soaring and growth is going through the roof. But when the market shifts you will be glad you have some consistent income and strong consistent companies balancing out your portfolio.

I am not going to tell you what allocation % to build your stock portfolio with these different types of stocks. That is for you to decide based on your timeline, risk threshold, and strategy. The key is to make sure you are not over leveraged in one category than the other because you never know how the market is going to react based on variables that are completely out of your control. You can control your balance in the market. You cant control how the market will treat you.

The purpose of this newsletter is to encourage you and our other 85 Gazette subscribers to start and stay consistent with your personal, professional, and financial journey.

Thanks for investing your time reading this.

Disclaimer: Graham’s Gazette provides information and resources related to investing, financial topics, and personal growth for educational and entertainment purposes only. The content presented is not intended to be construed as financial advice. Readers are encouraged to conduct their own research and consult with qualified professionals before making any financial decisions. Graham’s Gazette and its creators do not assume any responsibility for the accuracy or completeness of the information provided nor do they guarantee any specific results from such use of information.