At this time of the year, I always spend time reviewing my investment portfolio. I like to make sure it’s still aligned with my goals and risk tolerance. Today, I’m going to provide a sneak peak into my portfolio. Here’s a look at my five largest stock holdings as we head towards 2023.
Long-term potential
At present, my largest holding is Alphabet (NASDAQ: GOOG), the owner of Google and YouTube.
Alphabet shares didn’t perform well in 2022. Like most other tech stocks, it fell as interest rates rose and investors moved away from growth stocks. There could be further weakness ahead.
I remain very confident about the long-term story here though. In the years ahead, I expect Alphabet to generate growth from digital advertising, cloud computing, digital healthcare (it owns Fitbit), artificial intelligence (AI), and self-driving cars. Overall, I see the stock as a good fit for a long-term investor like myself.
Right now, Alphabet trades on a price-to-earnings (P/E) ratio of less than 20. That valuation seems very reasonable to me. So I’m comfortable having it as my top holding.
Growth and defence
My second largest holding going into 2023 is smartphone maker Apple.
I think it offers a nice mix of growth and defence. On the growth side, the company is moving into new markets such as electronic payments and digital healthcare.
Meanwhile, on the defensive side, the company has a rock-solid balance sheet and high brand loyalty.
I’m not expecting big gains from Apple in 2023 because the valuation looks quite full at the moment. But in the long term, I expect the company to deliver solid returns.
High-growth industries
Coming in at third place is Microsoft. Like Apple, I think Microsoft offers a good mix of growth and defence.
This is a company that operates in a number of high-growth industries, including cloud computing, video gaming, and AI. At the same time it has defensive attributes. Businesses are not going to stop using Office just because the economy is weak.
If technology stocks remain out of favour in 2023, Microsoft could underperform in the near term.
This is a long-term hold for me though, so I’m not too fussed about short-term performance.
Inflation hedge
My fourth-largest holding is Mastercard. It operates one of the largest payment systems in the world.
I see Mastercard as a good hedge against inflation. It takes a cut of every transaction on its network. So as prices go up, so do its revenues.
It may also be a good hedge against the recession. Right now, consumers are strapped for cash and doing a lot of their spending on credit cards.
Mastercard is quite an expensive stock. This adds risk. I’m comfortable with the valuation however, given the company’s market position and growth potential.
Dividend champion
Finally, my fifth-largest holding is FTSE 100 legend Diageo. It’s the owner of a number of premium spirits brands including Tanqueray, Baileys, and Bulleit.
I like having Diageo as a top holding as it’s relatively defensive in nature, thanks to its stable revenues and dividend track record (20+ years of consecutive growth). So it balances out my portfolio, which is skewed towards growth stocks.
It’s another stock that isn’t particularly cheap. But I think it warrants a premium valuation, given its competitive advantages.
