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For anyone thinking about investing in individual stocks, outperforming the S&P 500 that's what it's about. Otherwise, investors could simply buy a fund that tracks the index.
It's not easy to do, but the four largest investments in my stocks and Shares ISA are all above average as 2024 comes to a close. And that gives me a lot to think about.
Actions I have
The biggest stock in my portfolio is citi group (NYSE: C). The share price has been rising as investors anticipate lighter banking regulations as a result of the US election outcome.
Games workshopIt's my biggest action in the UK. Despite making a discretionary product in a difficult environment, sales have been growing strongly and the stock has responded accordingly.
The third is amazonwhich has also been on the move since early November. The growth of its cloud computing and online advertising divisions is also helping to boost the share price.
Finally, there is Berkshire Hathaway. Warren Buffett may not think the stock is undervalued right now, but that hasn't stopped investors from purchasing his investment vehicle for their own portfolios.
The S&P 500 is up 28% since the beginning of the year. But so far, Citigroup (34%), Games Workshop (+45%), amazon (+46%) and Berkshire Hathaway (29%) have done better.
That puts me in a position where I have to consider a difficult question. Should you stick with them while they're doing well or try to redeploy the cash to other opportunities?
citi group
The most interesting example is Citigroup. I bought the shares when Jane Fraser took over as CEO with the idea that there was clear room for improvement that the share price didn't reflect.
I think the recovery plan is progressing reasonably well. Its plan is to sell some of its international retail operations to focus on its core areas of competence.
My opinion of the company has not changed. But the shares are now 40% more expensive than when I bought them, so it's worth considering whether future growth is already priced in.
I didn't expect the stock to do well this year; my view was long-term based on the outcome of Citigroup's restructuring of its business in a few years. So this has been a surprise.
With a price-to-book (P/B) ratio of 0.7, Citigroup shares trade at a discount to other major U.S. banks. But they are roughly at the same level as their average multiple over the past 10 years.
I'm reasonably sure I wouldn't buy at current prices and since the investment equation looks less attractive, I'm thinking about selling. The problem, however, is finding something else to buy.
Overcoming
Outperforming the S&P 500 is not easy. And I'm not sure if my overall portfolio is ahead this year. Strong gains in some stocks have been offset to some extent by others – Diageo being an example. That stock is down 17% since January, providing a major drag on overall returns.
Ultimately, performance in one year doesn't really matter: it's the long-term result that counts. And this is what I'm considering when I decide what to do with my investments.
