24-year-old debutant puts 47% of portfolio in Santander

24-year-old debuts in stocks with 47% in Santander

Does it make sense to start buying banks and airlines when markets are crashing and the world is locked down? A 24-year-old investor explained why he decided to enter the market now and which stocks he chose. He trades via DeGiro, claims he doesn't need the capital—"not for my daily life, nor even for my future"—and allocated it as trinc: 47% in Santander, 21% in Shell, 17% in American Airlines, and 15% in Disney. The reaction he received was hardly applause.

His reasons outline a method many have since questioned. He wanted a "safe" Spanish stock and hesitated between Santander and Inditex; he chose the bank "because it had fallen a bit more." He wanted an oil company but ruled out Repsol as "too uncertain." He wanted an airline because they were "at rock bottom." And he wanted Disney as a safety anchor. His entry prices: Santander at 2.40 first, then 2.15 (average 2.31), Shell at 14.35, American Airlines at 14, and Disney at 100.

The portfolio: nearly half the capital in one bank

The weights speak for themselves. Almost half the money is in a single financial entity, with the rest split among an oil major, an airline, and an entertainment firm. The author admits he rushed: he bought Santander at 2.40 and, seeing it drop, re-entered at 2.15 to average down. His stated target is 3.50. With Shell he breathes easier: he bought at 14.35 and it traded at 16.50, his only position in the green. Disney, bought at 100, remains flat. And American Airlines, at 14, hurts the most.

What stands out is the reasoning behind each entry: not business analysis, but a price that has dropped significantly. "It was at half its value, normally trading at 25/30," he says of the airline. That logic—what once was worth more will eventually return—is exactly what critics pointed out. Many responses agreed on an unflattering label: entering in the middle of a bull trap.

Why is buying Santander shares so controversial?

Because its recent history is that of a stock that distributes dilution. The most repeated argument concerns the capital increases chained over the last fifteen years: each one multiplies outstanding shares and dilutes existing holders. The harshest verdict suggests it is the bank "that has likely caused the most losses to its millions of investors." There is also a recurring request: look at the two-decade history and volume of issued shares before calling two euros a bargain.

The author defends himself: the stock never fell below three euros in twenty years, so there should be room to recover 3.50. The rebuttal comes with a cliché but effective example. General Motors didn't disappear in 2008; its shareholders almost completely did. A falling stock doesn't bring a floor beneath it.

What happens if American Airlines receives $12 billion in state aid?

That money probably won't come free. The investor celebrated news of a $12 billion bailout for the airline, convinced it would suffice for a rebound and allow selling with minimized losses. The most widespread response is that the market already priced this in and the reaction was cold.

The bailout, it is argued, could come as 0% loans—the best scenario for shareholders—or as a dilutive capital increase, or as a restructuring à la General Motors, where old shareholders are nearly wiped out. A technical detail doesn't help either: US airlines were about to lose the lows set during the mid-March crash, and his had already lost them.

How to value a company before buying

Here comes the useful part. Asked how to analyze a stock, advice is ordered: check the P/E ratio, which shows how many times annual earnings fit into the share price; verify dividend sustainability—if paid in bad times from cash or debt—and review profitability ratios like ROE, ROA, or operating margin. The central warning: always compare within the same sector, because bank ratios aren't read the same way as utility ratios.

With those metrics, concrete proposals appear: Iberdrola in the Spanish market and First Solar across the Atlantic for energy seekers; and IAG, with the doubt of a possible capital increase looming. The conversation's summary fits in one line: before buying, know why you're buying and what you'll do if the premise fails.

Index to S&P 500 or pick individual stocks?

If there's no method, the alternative gaining weight is index investing. The proposed allocation is stark: put 85% of the portfolio into an index—the S&P 500 or a global index—and leave the rest to test luck with specific names, assuming potential loss. Markets highlighted include the DAX and AEX, while judgment on the Ibex is harsh: the local market doesn't stand out for its trend.

For those wanting to touch stocks, the list is conservative: Coca-Cola, aiming to enter near $40, and pharmaceuticals. Gold is mentioned as a refuge, with the caveat that physical gold is inconvenient to buy and store.

In the end, this portfolio isn't a disaster: it's a diagnosis. Banks, oil companies, and airlines bought in the worst quarter possible, with the conviction that time works in their favor. Those recommending 85% in indices and ignoring it for years are probably not wrong. What's missing in the initial message is a criterion for selling.