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Portfolio Update - 4 February 2022

📢 Weekly Update 📢 Performance YTD -10.79% Return after 3 years (Cumulative): +98.96% Hi Everyone, The past few weeks have been a rollercoaster for all of us, especially with the different announcements from the FED and the different earnings released. January has been a difficult month for investors (including us). 2021 has been quite a profitable year, but the start of 2022 is a bit different than what we are used to. I am hopeful that we will get a decent return by the end of 2022 as the economy is slowly re-opening after those 2 terrible years. I believe that patience will be key to our success. it has been also a learning curve for new copiers and existing copiers, that gains can quickly be erased, but also that a rebound can quickly get us back on track. Volatility does not help the investors that we are to sleep at night, but it is also part of the game, we have to adapt to the different market conditions. 25 Jan | Microsoft Earnings: $2.48 per share, adjusted, vs. $2.31 per share as expected by analysts. Revenue: $51.73 billion, vs. $50.88 billion as expected by analysts. Revenue increased by 20% from a year earlier, according to a statement, compared with almost 22% growth in the previous quarter. Microsoft’s net income increased by 21% to $18.77 billion. Microsoft’s Intelligent Cloud segment, which contains the Azure public cloud, GitHub and server products such as Windows Server, generated $18.33 billion in revenue. That equals 25.5% growth, and is a bit higher than the $18.3 billion consensus among analysts. Revenue from Azure and other cloud services grew 46%, ending a streak of four quarters at or above the 50% mark. The expectation was 45% of Azure growth according to analysts. Revenue from the More Personal Computing segment, which includes Windows, advertising, devices and gaming, totalled $17.47 billion, that’s up 15.5%. “There are now more than 1.4 billion monthly active devices running Windows 10 or Windows 11,” Satya Nadella said. That compares with over 1.3 billion active Windows 10 devices as of April 2021. Microsoft has increased its revenues in every segment and is continuing its growth. To me Microsoft is a good stock to have especially during these difficult and volatile times. 26 Jan | Boeing Boeing's fourth-quarter results, reported early Wednesday, fell short of analyst expectations as the company just saw charges on its 787 Dreamliner and KC-46 programs. Boeing reported a loss of $7.69 per share as revenue fell 3% to $14.79 billion. The loss was largely due to Boeing taking a $3.5 billion pre-tax non-cash charge on the 787 Dreamliner program. The halt in deliveries amid discussions with regulators is "taking longer than previously expected," Boeing said in the earnings release. The company sees abnormal costs related to the 787 increasing to $2 billion, up from an estimate of $1 billion in Q3, with most of the cost incurred by the end of 2023. Commercial revenue rose to $4.8 billion, helped by rising 737 deliveries. However, due to the 787 delays, the figure is below the $5.58 billion analysts expected. Boeing recorded 79 orders in Q4, for a total of 479 net orders on the year. It delivered 99 commercial jets in the fourth quarter. It's been a year since the 737 Max has returned to service in the U.S. and Europe. But Chinese regulators, the first to ground the Max back in 2019, have been slow to recertify the aircraft. But on Jan. 9, a Hainan Airlines 737 Max flew from Taiyuan to Haikou, according to Chinese media reports. That would mark the first domestic Chinese 737 flight since the grounding in March 2019. Boeing said that it was ready to start deliveries to China as soon as the first quarter. Overall, carriers are eager to get their hands on more 737 Max jets. Alaskan Air, Southwest Airlines and Allegiant Air, owned by Allegiant Travel placed orders for the 737 Max aircraft during the quarter. "Omicron has paused the industry recovery, but it has not changed the outlook for the industry," CEO Dave Calhoun said during the Q4 call. Boeing expects international travel to pick up in the spring and summer. Free cash flow turned positive to $494 million from negative $4.27 billion in the year-ago quarter. The total company backlog was $377 billion at the end of the quarter. Looking ahead, it seems that Boeing Q1 is to be the year's weakest quarter for deliveries, revenue, earnings and cash flow, but we remain confident for the rest of the year for the company to get back on track. It is very important for us to understand that Boeing has been much impacted by the pandemic and that the reason of their loss over the past 2 years is not because of mismanagement. 27 Jan | Apple EPS: $2.10 vs. $1.89 estimated, up 25% year-over-year Revenue: $123.9 billion vs. $118.66 billion estimated, up 11% year-over-year iPhone revenue: $71.63 billion vs. $68.34 billion estimated, up 9% year-over-year Services revenue: $19.52 billion vs. $18.61 billion estimated, up 24% year-over-year Other Products revenue: $14.70 billion vs. $14.59 billion estimated, up 13% year-over-year Mac revenue: $10.85 billion vs. $9.52 billion estimated, up 25% year-over-year iPad revenue: $7.25 billion vs. $8.18 billion estimated, down 14% year-over-year “What we expect for the March quarter is solid year-over-year revenue growth,” Cook said. “And we expect supply constraints in the March quarter to be less than they were in the December quarter.” It was another strong showing for Apple in its most important quarter of the year which includes holiday sales. Every one of Apple’s product lines grew year-over-year from last year, except for iPad sales, despite management warnings from October that supply issues could hurt the company’s sales. Cook said that the company’s supply issues were improving. He said that in terms of supply challenges, the December quarter was worse than Apple’s September quarter, but that he is projecting the March quarter to improve. Cook said that Apple was proud of the 9% increase in iPhone sales. “That’s despite having supply constraints during the quarter,” Cook said. Services, which include iCloud, Apple Music, search licensing and App Store fees, continued growing strongly, rising 25% annually to $19.52 billion. Services is Apple’s most profitable business unit and its rise contributed to Apple’s higher-than-expected gross margin. Macs had the strongest growth of any of Apple’s hardware lines, growing 25% over last year to $10.85 billion. In October, Apple launched new MacBook Pro models starting at $1,999 that were well-received and featured a new Apple chip instead of an Intel chip. iPads were the most notable disappointment. Sales shrunk from last year, and missed analyst estimates, but it was likely because Apple could not make enough iPads and prioritized other devices. Cook attributed the iPad results to “significant” supply constraints. Overall, Apple have had an excellent quarter results very comparable to Microsoft. I am always impressed on how the organic growth of the different apple services has been such as iCloud or Apple Music. 1 Feb | LVMH LVMH, which owns brands spanning Hennessy cognac to cosmetics retailer Sephora, said on Thursday that its fourth-quarter sales growth accelerated. Louis Vuitton announced earnings per share of €11.18. Analysts anticipated EPS of €11.18 on revenue of €17.87B. LVMH reached 20.04 billion euros ($22.31 billion) overall, with growth led by the French group's biggest earners Louis Vuitton and Dior. The luxury labels propelled a 28% rise in sales of LVMH's largest division, fashion and leather goods, on a like-for-like basis, beating analyst expectations for 16% growth. Revenues for the business in the last three months of last year came in 51% above their 2019, pre-pandemic level. LVMH has done very well this quarter, and it is tempting for me to increase the exposure of the portfolio to this company. For time being I will wait to see how its peers has been doing as Hermes and Kering are due to release their earnings next week. 1 Feb | Alphabet (Google) Earnings per share (EPS): $30.69 vs $27.34 expected Revenue: $75.33 billion vs $72.17 billion expected YouTube advertising revenue: $8.63 billion vs. $8.87 billion expected Google Cloud revenue: $5.54 billion vs $5.47 billion expected Alphabet reported revenue growth of 32%, proving again that it was able to withstand the pressures from the pandemic and inflation. Google’s advertising revenue came in at $61.24 billion for the quarter, up 33% from $46.2 billion in the same period a year earlier. Philipp Schindler, Google’s chief business officer, said retail was the largest contributor to year-over-year ad growth. Media and finance spending was also significant. YouTube ad revenue was the only metric that fell short of analysts' expectations. The company has been trying to challenge TikTok with a service called Shorts. Alphabet CEO Sundar Pichai said the company has more than 15 billion daily active users, globally. That metric is unchanged from his last update in July 2021. The company’s cloud reported revenue growth of 45% to $5.54 billion. Operating loss in cloud came in at $890 million during the quarter, which narrowed from the $1.14 billion loss a year ago. However, it expanded from third quarter, when the unit lost $644 million. Alphabet’s backlog increased more than 70% to $51 billion, primarily consisting of the cloud business, Pichai said on the earnings call. He added that the company saw 65% year-over-year growth in the number of cloud deals worth over $1 billion. Revenue for the company’s Other Bets umbrella, which includes the self-driving car unit Waymo and life sciences unit Verily, came in at $181 million — down slightly from a year ago. Google’s other revenue segment, which includes hardware, Play Store, and non-advertising YouTube revenue, notched $8.16 billion in sales, up from $6.67 billion the year prior. Pichai said the company saw an “all-times sales record” for its Pixel smartphone despite supply chain constraints. Google added nearly 6,500 full-time employees to its headcount, CFO Ruth Porat said on the call. The total headcount sits at 156,500 full-time employees. Porat said the company expects that same pace of growth in future quarters. Alphabet shares started the year in a tailspin, dropping 6.6% in January as Wall Street sold out of tech stocks. However, with the after-hours gain, Alphabet has turned positive for the year. The company also announced a 20-for-1 stock split that will go into effect in July. In splitting its stock, Alphabet is following moves by Apple and Tesla in the last couple years. The split doesn’t change the fundamentals of the business. Rather, it will lower the price of each share, a move that companies often make when their stock trades in the thousands of dollars. Were the split to happen as of Tuesday’s close, the cost of each share would go from $2,752.88 to $137.64, and each existing holder would get 19 additional shares for every one they own. 2 Feb | Meta (Facebook) Facebook company reported disappointing earnings, gave weak guidance and said user growth has stagnated. - Earnings per share: $3.67 vs $3.84 expected by analysts - Revenue: $33.67 billion vs $33.4 billion expected by analysts - Daily Active Users (DAUs): 1.93 billion vs 1.95 billion expected by analysts - Monthly Active Users (MAUs): 2.91 billion vs 2.95 billion expected by analysts - Average Revenue per User (ARPU): $11.57 vs $11.38 expected by analysts Facebook also missed estimates with user numbers. The company, which was recently renamed Meta, issued disappointing guidance for the first quarter in addition to coming up short on its fourth-quarter profit and user numbers. Daily Active Users (DAUs) on Facebook were slightly down in the fourth quarter compared to the previous quarter, marking its first quarterly decline in DAUs on record. Facebook said revenue in the first quarter will be $27 billion to $29 billion, while analysts were expecting sales of $30.15 billion. That would mean 3% to 11% year-over-year growth. Facebook said it’s being hit by a combination of factors, including privacy changes to Apple’s iOS and macroeconomic challenges. It blamed the lower-than-expected growth in part on inflation and supply chain issues that are impacting advertisers’ budgets. There’s also a shift to products that don’t generate as much revenue as its core news feed. For example, people are spending more time on its Reels videos. “On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories,” Facebook said. Meta said its Family of Apps saw revenue of $32.79 billion with operating income of $15.89 billion in the fourth quarter. Its Reality Labs segment made $877 million in revenue in the quarter with an operating loss of $3.3 billion. For the fourth quarter, Facebook is proving to be an outlier among the top tech companies. Its results come a day after Alphabet cruised past estimates. Apple and Microsoft also topped estimates on profit and revenue. Despite a January stock slump across tech, the industry giants, other than Netflix, have delivered uplifting earnings reports, reminding investors of the power of their dominant businesses even in a challenging macro environment. To me, Facebook should not be held in our portfolio anymore. I have set up a take profit at $360, and those positions will close once the price has been reached. The price seems high, but it is done for nobody to make a loss and I also believe that Faceb.... Meta, will reach this price by 2022 Q3. Have a nice weekend. GSerdan 📊 Investment Activity 📊 New Investment: SPY - Open 430.65 Nvidia - Open 210.80 📅 Earnings Reports during the 2 weeks ahead 📅 09 Feb | Walt Disney 16 Feb | Nvidia 17 Feb | Airbus 17 Feb | Kering 18 Feb | Hermes International

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