Q2 2026: Portfolio Update + Investable Universe

Although positive, my portfolio’s performance significantly trailed the S&P 500 once again during Q2. Over the past year, the deficit is massive: an 8% decline for my portfolio versus a 21% increase for the S&P 500:

While I’m hopeful performance will improve, it’s unlikely to over the near-term if the current market dynamic remains in place—long AI infrastructure and short software and payments. To be fair, my skepticism for the durability of the AI buildout has been completely wrong, and may continue to be so for the foreseeable future. It’s cost me, but my opinion on the topic has not changed, so I have no interest in reversing course and chasing stocks with either elevated earnings, multiples or both. And, in fact, for the exposure I do have—KLA and Arista Networks—I have been trimming into strength.

I had the distinct honor of owning two of the worst performing stocks in the S&P 500 during Q2: Intuit and Zoetis. While one deserved it, the other almost certainly did not:

• Over the past several months, Zoetis has consistently failed to anticipate near-term challenges to its business from bad publicity (side effects from its osteoarthritis pain medication for dogs), competitive launches in key categories (parasiticides and dermatology), and economic weakness (a decline in vet visits and price sensitivity). As a result, since inching organic revenue guidance up after last year’s Q2 results, Zoetis has cut its outlook in two of the three quarterly reports since then, causing the stock to decline by approximately half with the multiple falling from 22.5x to less than 11x. While the company’s current outlook for 2-5% organic revenue growth in 2026 seems respectable, I don’t believe the market has much confidence in their ability to achieve it, especially given their recent track record and the ramp full-year guidance implies given Q1’s flat performance. Despite my lack of confidence in management, I believe Zoetis’ future is brighter than what the current stock price implies, prompting me to hold on to my shares.

• Even though Intuit’s estimates have moved modestly higher over the past year, the stock is down nearly two-thirds with the multiple collapsing from 35x to nearly 10x on an adjusted EPS basis. After teetering on the edge, TurboTax’s hiccup this past tax season—7% growth instead of the 8% forecasted, which, to be fair, they usually exceed—pushed Intuit firmly into the AI loser penalty box, which can be difficult to escape. While Intuit is one of my favorite long-term ideas, I’m under no illusion about the pickle it’s in: if TurboTax guidance for the upcoming tax season is favorable, the market won’t believe it, demanding proof which won’t come until May of 2027; or, if guidance is not good, and Intuit plans to be more aggressive to win back price sensitive low-end filers, the stock will get punished immediately, without potential for redemption until May of 2028. Heads I lose, tails you win.

During the quarter, I swapped my position in MSCI plus some cash for a more sizable starter position in Mastercard, which I believe is the best business in payments and fintech (link). At the time of the swap, MSCI was trading at 31x versus 24.5x for Mastercard, a gap I did not believe was justified. Together, Visa and Mastercard make up 17% of my portfolio. Historically, Mastercard has traded at about a 4-point spread over Visa on a NTM P/E basis. Based on the way I model the companies, I believe a 4-point premium is warranted given Mastercard’s superior long-term earnings growth due to its higher structural growth rate—more exposure to higher-growth value-added services and rest of world payments markets—and margin expansion potential—even though Visa processes two-thirds more volume across its network, Mastercard has more employees. Currently, Mastercard trades at only a 1-point premium, making Mastercard relatively more attractive than Visa, in my opinion.

Please note, this is the stock portfolio I actively manage for capital appreciation, which complements my investments in equity and bond index funds, high-yield dividend and dividend growth stocks, money market accounts, and certificates of deposit.

I impose no constraints on myself when assembling the portfolio. My primary goal is to find high-quality companies selling at reasonable prices. I maintain a shopping list of about 50 companies as portfolio candidates. One of my objectives is to consolidate positions. In Q2, I exited two positions and initiated one new position, resulting in 18 holdings total, down one from Q1. Reasons for exiting include favorable valuations, positions that are too small, or better opportunities elsewhere. My goal is for 15-20 portfolio companies.

Purchases during the quarter:

And sales:

I sold Otis Worldwide but still maintain a position in the stock in my dividend portfolio. As previously mentioned, I sold MSCI to fund a position in Mastercard as I believed Mastercard represented a superior alternative.

Below is a full list of my portfolio holdings as of June 30, 2026:

This is the group of companies I look at outside of payments and fintech. All of the payments and fintech names I follow are fair game for inclusion in my portfolio.

Last week, I named my top picks for payments and fintech during H2 (link): Adyen, Broadridge Financial and Intuit.

Outside of that, very little excites me at the moment. A couple of names I’m looking more closely at are Netflix, Domino’s Pizza—which I recently bought for my dividend portfolio, and Boston Scientific.

As of July 13, 2026, I held long positions in the following stocks:

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Disclaimer: This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.