Overall:

Year-to-date:

All of the adds made this morning are responses to ongoing multiple contraction for companies that I view as fundamentally healthy and thriving:

I've also decided to exit Starbucks for now. It's staying at the top of my watchlist, and I'm very interested in reentering in the future. I continue to think Brian Niccol is a superstar and this company is on a great path. This is not PayPal. He is actually turning this ship around.

At the same time, it really feels like they're getting rewarded for a lot of the expected recovery already. The company trades at a forward earnings multiple of 38x. Estimates have largely stabilized but are still slightly falling.

At its current price and based on analyst estimates, if it grows as expected over the next 2.5 fiscal years, that will merely get it back to its 10-year 27x P/E mean. That's without the price rising during that lengthy period. So it needs to grow for a while just to get back to its normal valuation. I still think there's upside to forward estimates, but a lot of it does feel priced in.

Simply put, this name is expensive. It's always a bad sign when I'm forcing myself to get a little creative on modeling assumptions to make the multiple fair, and that's what was beginning to happen for Starbucks.

It hasn't really sold off much. Everything else in the portfolio has. That means, on a relative basis, its risk/reward compared to other holdings (all else equal) is worsening. The world is extremely confident that Niccol is going to fix the business, and they should be. But if the world is also going to reward that fix ahead of it actually happening, it feels prudent for me to take chips off the table. It feels wise to lean more heavily into the healthy companies most hated by markets and to leave more room if things get worse before they get better.

Furthermore, enterprise software names are less economically cyclical than consumer discretionary. Starbucks is reliant on customers feeling good enough to spend more money instead of making coffee at home. I view enterprise software as more resilient and durable if unemployment rate continues to rise compared to Starbucks. Giant companies will routinely keep spending on software contracts that helps them cut costs and create new revenue opportunities, even as macro deteriorates. It's less likely that a Starbucks fan who suddenly feels worse about the economy will still go to the store and pay extra for a drink. Cava and ONON are in a similar spot compared to Starbucks, but they both have so much store growth and brand awareness runway left. For those reasons, they're able to buffer cyclicality across macro swings better than a mature blue-chip brand like Starbucks can.

My portfolio is not a bunch of positions considered in a vacuum. All of these management decisions are taken together. Risk/reward in many other parts of the portfolio keeps improving. That's motivating me to slowly shift investment dollars there.

*the order of the names in these lists below is meaningless.

My holdings that are performing & compellingly priced where I'd accumulate into modest multiple contraction:

My holdings that are performing & expensive where I'd accumulate into meaningful multiple contraction:

Watch List:

"If you were starting a portfolio today, what would it look like?"

Please note that I made a 9% add to my Zscaler stake shortly after sending this update. To avoid inbox inundation, I added that to the list of transactions and included a second view of the most recent portfolio holdings right after the one below.

Pre-Zscaler add:

Post-Zscaler add: