Like many investors, I’ve seen some big gains in my ISA and pension this year due to the surge in S&P 500 tech stocks. Alphabet’s up 70%, Nvidia’s up 35%, Uber’s gained 50%, Lam Research has jumped 120%… I’ve had lots of winners and made quite a bit of money.
While this is obviously great, I’m a little concerned about current valuations (which are relatively high) and the potential for a sharp pullback in this area of the market. As a result, I’ve been making a few moves in my portfolio to protect my wealth.
Selling some holdings
One thing I’ve done recently is trim a few holdings that have surged. For example, last month I sold a few Alphabet shares at $326.
I still love this tech company – it remains one of my largest holdings. But the position had become very large in my portfolio so I decided to lock in some profits.
I also recently sold an AI fund I owned in my Self-Invested Personal Pension (SIPP). I’m a big believer in the AI theme but this fund was increasing my exposure to names like Nvidia and Alphabet (and my risk levels).
So I locked in profits here and offloaded it completely. This freed up quite a bit of cash.
Diversifying into other sectors
As for what I’m doing with all the spare cash I have now, there are a few things. Some of it I’ve put into other areas of the market. For example, I recently bought a healthcare exchange-traded fund (ETF).
In the short term, healthcare could provide me with some protection if tech stocks experience a wobble. Meanwhile, in the long run, the sector has plenty of potential due to the ageing population and innovations such as robotic surgery and weight-loss drugs.
Investing in cash funds
I’ve also put some money into cash (money market) funds within my ISA and SIPP. These are paying 4%+ with basically no risk meaning that I can generate some income while I wait for better investment opportunities to emerge.
Looking for undervalued stocks that haven’t run
Finally, I’m looking for stocks that haven’t run hard this year and still offer value. These kinds of stocks could translate into more potential next year.
One stock that’s starting to look very interesting to me is Rightmove (LSE: RMV). It’s had a bad year, falling almost 20%.
The main reason for the weakness is that the company recently said it’s going to spend more money on AI solutions and that this will hit profits in the short term. Fear of disruption from new AI tools is also a factor behind the drop.
At current levels, I see quite a bit of value on offer. Right now, the stock’s trading on a forward-looking price-to-earnings (P/E) ratio of just 16.6 which is a very low valuation for a highly profitable internet company with a huge (80%+) market share.
Given the low valuation, I think the stock’s worth a closer look. But it’s not the only opportunity I see in the market right now.
