Lockstep Investing Performance Update: December 2023

The Portfolio’s Performance for December 2023

December was another solid month for The Portfolio, with a gain of +7.6%, capping off a fantastic year with a total return of +25.7% for 2023.

The Portfolio is up +10.2% since its inception in February 2022. While this performance might seem mediocre, we are incredibly proud given that:

  1. We launched The Portfolio at close to the worst possible time – we always said our timing is shocking – as the stock market declined shortly after The Portfolio began.
  2. We continue to track ahead of our long-term goal of outperforming the major US indices, having beaten the S&P 500, up +5.5%, the Nasdaq Composite, +5.7%, and the Dow Jones Industrial Average( DJIA), up +8.6%, over the same period.

(Disclaimer: Past performance is no guarantee of future results)


Drivers of Performance

2024 and Beyond

Instead of writing about our top performers and losers for 2023, as usual, we thought it more beneficial to briefly discuss the current positioning of a few of our top investments in The Portfolio as we head into 2024.


Seritage Growth Properties (SRG)

SRG faced challenges in 2023, being one of our poorer performers due to higher interest rates affecting its asset sales. Despite this, commendable progress has been made liquidating properties and reducing debt from $1.6 billion in mid-2022 to $360 million.

With signs pointing to potential rate cuts in 2024, possibly boosting SRG’s property prices, we believe SRG common stock could be valued between $12 to $15 per share, well above the current price of $9.40.


Innoviva (INVA)

INVA had a decent 2023, yet we see greater potential ahead.

With FDA approval for XACDURO and anticipation for Zoliflodacin approval in 2024, INVA is transitioning from a royalty business to a robust pharmaceutical company. Revenue should grow strongly as this happens, but it will take time, probably years, for INVA to reach its full potential. We’re happy to remain shareholders as this happens.


St Joe Company (JOE)

JOE had an excellent 2023, making it into our top 5 performing investments for 2023; however, we believe the best is yet to come.

JOE is sitting on vast amounts of land in some of the fastest-growing counties in Florida, the fastest-growing state by population in the US. JOE is monetising this asset through development and leasing. While initial growth is promising, the company is in its early stages, having monetised only 2% of its land. As with most of our investments, it will take years for JOE to reach its full potential, but we are prepared to wait.


Customers Bancorp (CUBI)

CUBI was surprisingly our top-performing investment in 2023.

This regional bank’s share price plummeted in March 2023 to below $10 per share when the Silicon Valley Bank (SVB) and other regional banks collapsed. The market was concerned there would be a run on CUBI’s deposits, too, forcing the bank to sell assets it didn’t want to. Our research gave us confidence that CUBI was not in the same basket as SVB and its peers, and when the chairman and CEO bought shares during the share price collapse, we took advantage and bought shares ourselves. Since then, the share price has recovered to around $55 per share, adding almost 7% of performance to The Portfolio.

While CUBI is not overvalued, as the valuation aligns closer to fair value and represents a significant portion of the portfolio, we intend to reduce our exposure.


Intel Corp (INTC)

INTC was another surprising top performer for The Portfolio in 2023, which gives us great delight as we have written consistently on why we prefer this undervalued semiconductor business vs its very expensive competitor, Nvidia (NVDA).

While INTC’s share price only appreciated +90% in 2023 vs NVDA’s astounding +229% gain, INTC is still undervalued based on management’s forecasts as the company continues on its cost-cutting initiative. NVDA appears grossly overvalued, in our opinion, meaning that everything has to go perfectly for the company to justify the current share price. As such INTC’s risk/reward profile is more appealing to us.



Closing Thoughts

While we are likely to reduce some of our positions given the exceptional November and December performance as valuations have increased, we remain very excited about The Portfolio and its potential.

As discussed above, most of our investments will likely take several years to realise their true potential, but as long-term shareholders, we are happy to wait.

We want to thank you again for putting your trust in us in 2023, and we look forward to our journey together in 2024.


Share Article


Install Lockstep App

Join Our Community

Sign up for our Daily Newsletter, Investing Insights, and Monthly Performance Updates.

Enable Notifications OK No thanks