The Citrindex

CitriniResearch’s Core Thematic Portfolio

To view the current allocation of the Core Portfolio (as of 02/10/2024)

Changes to the model portfolio’s allocations (whether basket weight or individual additions/deletions) are always announced in real-time via the CitriniResearch chat. The spreadsheet is updated to reflect these changes monthly and is current as of the date above.

For Attribution Analysis YTD (as-of 02-04-2024)

On the first of every second month of the quarter, we publish an attribution report on the individual security level that shows how we’ve done based on the contribution of every individual position in the model portfolio.

“How do I use this?”

CitriniResearch publishes our “core thematic portfolio” comprised of positions in our baskets, with sizing based on our current views. This is affectionately dubbed the “Citrindex” by readers. This portfolio serves to inform subscribers as to our current relative thematic outlook, our dynamically adjusted baskets and our general market positioning.

Our model’s strategy incorporates active management that over/underweights themes, considers factor exposures, hedges certain risks and dynamically adjusts the holdings of baskets based on how trends progress.

This might mean that our list of holdings can look somewhat intimidating - it should not be.

You can view our portfolio management strategy as being diversified on a security level but concentrated at the thematic level. We don’t want to incur large swings in PnL because of the idiosyncracies of any single stock but, rather, position for continued thematic impact across the market & real world.

As long as we manage to keep a sharp edge on thematic trends, we believe this strategy can durably outperform the benchmark with less risk.

What does that mean in practice?

Consider someone who’s entire exposure is five SPDR S&P 500 Sector ETFs. In their portfolio they own, at varying weights, XLP, XLY, XLF, XLU and XLK.

Is that an intimidating book? Of course not. They have 5 positions.

In reality, they have exposure to hundreds of securities. They won’t do as well as if they’d owned the best performers in each ETF individually, but they’ll also experience significantly less volatility. This is because they’ll be less exposed to the risk of a single company and more to the risk of an entire sector/factor.

Our approach is the same - the only difference is that we decide what is in the “ETFs” and build them ourselves based off thematic exposure. Instead of the portfolio example described above, we try to outperform by isolating themes rather than sectors. These can be themes in the market (e.g. SMID-cap relative performance) or in the real world (e.g. second order impacts from demand for GLP-1 drugs).

An Example: Say we are bullish on a new theme, “Theme A”. We publish our research on Theme A as a primer, which includes a long-only basket designed to go up if Theme A continues to proliferate. Let’s say this basket could contain 100 stocks, but we have whittled it down to 50 that we believe are good companies and have significant potential to gain based on our thematic expectations.

In our model portfolio, we initiate a 10% portfolio weight position in our basket for Theme A Basket. Assuming equal weighting, we end up with 50 positions each at 0.20% portfolio weight.

The way we think about it, however, is as one position: Long Theme A. The fact that it is currently comprised of 50 components is immaterial (and can change as the theme progresses - our AI basket initially had 121 stocks and is now only 32).

How to Utilize the Citrindex:

This is a question we get asked quite often, and the answer is always the same - it is up to you.

There is no denying that replicating this model portfolio can be labor intensive. Many have had luck cutting the work involved down using Fidelity and InteractiveBroker’s basket trader features. For us and our priorities, the time and effort is worth it. If it isn’t for you, you can hopefully derive value by monitoring the Citrindex’s dynamic thematic exposures to inform your own view.

The Citrindex does not include short term trades, although we do comment on ST trading opportunities in our subscriber chat. It is meant to be an actively managed portfolio of core thematic positions with modest turnover and a longer holding period on high conviction plays. It is solely an equity portfolio but utilizes our macro view to inform hedging (sometimes with treasuries and sometimes with indices/options).

Our Citrindex spreadsheet is updated roughly once per month. However, any adjustments made are announced in real-time as they are made through the substack chat. If you wish to be informed as to them, make sure your settings allow email or push notifications for new chat threads!

Articles:

Below are the articles which describe in further detail how we view thematic portfolio management, the various adjustments to our model and additions/deletions of positions in the core portfolio since inception on May 30th 2023.

Below are the articles which describe all the various adjustments and additions/deletions of positions in the core portfolio since inception on May 31 2023, in chronological order