My ISA/Self-Invested Personal Pension (SIPP) portfolio has had a great run recently. Right now, it’s at record highs.
Is it time to lock in some profits? Let’s discuss.
My portfolio and strategy
Before we discuss any potential selling activity, I want to provide some insight into my portfolio, strategy, and risk tolerance. This will help provide more context.
I’m a long-term investor. My time horizon is 15 years plus. My risk tolerance when it comes to individual investments is quite high too. Overall however, it’s a bit lower – I’m targeting an asset allocation of about 70% stocks and funds and 30% bonds, money market funds, and cash (right now, it’s standing at about 72%/28%).
In terms of funds, my largest holdings are currently a Vanguard global tracker, a Legal & General large-cap global tracker, the Blue Whale Growth fund, Scottish Mortgage Investment Trust, and a healthcare ETF. In terms of stocks, my 10-largest holdings are:
- Nvidia
- Microsoft
- Amazon
- Alphabet
- Apple
- Snowflake
- Uber
- CrowdStrike
- Visa
- Mastercard
Should I sell now?
If I’m honest, I’d like to have a little more cash on the sidelines right now. I wouldn’t mind taking the low-risk part of my portfolio up to 35% temporarily.
The reason is I expect a decent stock market pullback at some point in the next year. And I’d like to be able to put 5% of my capital to work at lower prices without overextending my stocks/funds allocation.
So I’ll probably trim my equity exposure a little. But I don’t think I’ll trim my Big Tech stocks as most of them look pretty cheap today (especially Nvidia).
But something like Snowflake – up 200% since mid-April – might be in line for a haircut. Taking some profits here could be smart.
What I’d buy in a market pullback
If we do see a decent pullback, some stocks I’ll be looking to buy include:
- Rolls-Royce (LSE: RR.)
- SpaceX
- Palantir
- Marvell Technology
- CrowdStrike
I already own all of these stocks. But I’d be keen to buy more.
Zooming in on Rolls-Royce, I recently started a very small position here, but I’d love to buy more shares at cheaper prices.
If we were to see the share price fall to say, 1,000p-1,200p, I’d be an aggressive buyer. Because taking a five-year view, I see a lot of potential here.
Not only is there potential for revenue growth from data centre power systems, defence engines, and nuclear energy systems, but there’s also potential for profit growth due to the ongoing efficiency drive from CEO Tufan Erginbilgiç. Note that share prices tend to follow profits.
Valuation-wise, a share price ranging 1,000p-1,200p would translate to a price-to-earnings (P/E) ratio in the low 20s. That strikes me as good value given the long-term growth potential here.
Of course, there are no guarantees that Rolls-Royce’s profits will rise in the years ahead. Given that the company generates a lot of its revenue from aircraft engine servicing, a near-term risk is high oil prices and moves by airlines to conserve costs.
At 1,000-1,200p however, I think the risk/reward proposition would be compelling. While the shares could be worth considering today, buying at lower levels could result in far more attractive returns.
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Edward Sheldon owns shares in Nvidia, Microsoft, Amazon, Alphabet, Apple, Snowflake, Uber, CrowdStrike, Visa, Mastercard, Rolls-Royce, SpaceX, Palantir , Marvell Technology, CrowdStrike, the Blue Whale Growth fund, and Scottish Mortgage Investment Trust.
