Model Portfolio Update

The total return of the model portfolio is 82.1%, a slight increase from the previous update. As pointed out in the last update, Trump’s threats are ongoing and the tariff deferrals are only temporary, so trade policy risk appears to have been postponed rather than completely removed. That said, the market impact of President Trump’s comments themselves has diminished.

Several portfolio managers in the US and Europe argue that M6 (Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia) has become a "crowded trade" and that, unless they deliver meaningfully better earnings, it will be difficult to justify the elevated valuation premiums. Excluding Apple, the M6 names are still growing as beneficiaries of AI, but it is true that their growth rates have peaked and are decelerating. Apple, however, is clearly falling behind in AI development, and its share price has been slow to recover.

The reason I use the term M6 instead of the more commonly used M7 is that Tesla (TSLA), by any metric, does not really belong in the same group as the companies above. It is more appropriate to view Tesla as an automaker with a software edge compared with traditional car manufacturers. The fully autonomous driving service and humanoid robots that Tesla’s die-hard shareholders are so fond of are things we should revisit if and when they are actually launched.

We added to the model portfolio a stock for which I had explained in detail, in the previous update, why it was on our watch list. The share price has risen about 10% in just a few days, but this is a company where you have to tolerate volatility commensurate with the high expected return, so it does not have a major impact on long-term performance. I will explain the reasons for the inclusion decision in more detail below.