Bear's Portfolio at the end of November

PaulWBryant · November 30, 2016, 5:19pm

Previous Month Summaries

Portfolio Performance


This Month
My Portfolio            - 0.46%
S&P                        3.42%
Nasdaq                    2.59%
Russell 2000           11.06%

YTD
My Portfolio          - 16.89% 
S&P                        7.58%
Nasdaq                    6.32%
Russell 2000           16.86%

With results like these, one might think that I’m likely to get tired of posting each month. It doesn’t look great, but I’m actually just happy this month wasn’t much worse. Four business days into the month I was actually at -6% for November, and at my lowest point for the year, almost -22%.

So another way to look at things is that I’m up ~6% since then! How did it happen? Well, I got raked over the coals during earnings season, AGAIN, even though it was somewhat mitigated since I sold large amounts of several companies before they reported. But doesn’t that say something about my confidence level in these companies, at least in the short term? I’m finally catching on: I have to avoid stocks that are simply “too difficult.”

I wrote about that this morning. The post was (supposed to be) called: “It’s so cheap” is not an investing thesis. You can see it here: http://discussion.fool.com/quotit39s-so-cheapquot-is-not-an-inve… But the upshot is simple. Valuation is only one piece of the puzzle. I was treating it like the holy grail! It illuminates the market’s expectations – it’s worth understanding what those are. They may not be (read: basically never are) as crazy as they may seem at first.

Changes this month, and why I made them

Sales:

SEDG - Luckily I sold a lot before earnings came out. Then I sold the rest. Per guidance for next quarter, demand growth has finally gone negative. For how long is a mystery, so I don’t really know how to value them anymore. “Too difficult.”

SUNW - Very similar story to SEDG, just on a smaller scale. Luckily I sold a lot before earnings came out. Then I sold the rest. “Too difficult.”

SSNI - http://discussion.fool.com/why-i-sold-out-of-ssni-32479890.aspx “Too difficult.”

MITK - http://discussion.fool.com/why-i-sold-out-of-mitk-32483551.aspx

FIT - Didn’t need a whole post to explain this one: they (finally) changed their tune about margins. I should say they finally admitted they don’t have any. Sales guidance disappoints too. I have no faith left in management.

SPLK - http://discussion.fool.com/speedy-while-i-have-no-idea-what-grow…

WSM - Took profits. This was more of a value play that a long term investment. Up more than 15% in a month, I’m happy to take the money and run.

Trims:

TWTR - Sold some to raise funds.

SKX - Just trimmed a little around $23. Figured if it should fall near $20 again, I’ll buy some back. Just wanted to leave myself a little room to buy…position was getting a little too big. And it’s still my third largest holding.

AMN - Sold some to raise funds. Thought about selling out as three quarters of flat revenue has me uninspired, but on the CC they said organic rev is up double digits. Gonna be one to watch, but I’m going to take it slow.

Buys:

AMZN - A post-election buy. At about $730/share, I couldn’t resist. Added more around $750.

FB - A post-election buy. At about $115/share, I couldn’t resist.

LGIH - http://discussion.fool.com/quotwith-a-solid-start-to-the-fourth-…

SSW - http://discussion.fool.com/ssw-32463070.aspx

SQ - http://discussion.fool.com/why-i-bought-sq-today-32489270.aspx

Adds:

SHOP - Probably won’t get many more chances to buy under $40. But if I do, I will add to this already way oversized position.

PAYC - Great month to add.

XPO - Glad I got another chance to add some in the low $30’s early this month. Shares are worth 37% more at the end of November than they were at the beginning of the month.

HUBS - Added around $51.

YELP - Added on dips. Love the growth and the future.

Other, and Watchlist

The only stock in my portfolio that I didn’t touch this month was PERI. And it’s just a tiny watch and see position. Here’s some other stuff I’m watching:

HDP - Bert wrote about this one. Its growth is great, it’s far cheaper than HUBS, SHOP, etc., but I think I know why: They’re BURNING CASH. Losses are huge compared to these others. I’m just keeping it on the radar until they show that they’re at least moving toward being cash flow positive.

SNCR - Saul’s had this for a while. I’ve just never been interested in the company. As he’s increased his position, my interest has been increased too. The stock is still very reasonably priced, and the company has been doing better than expected.

VEEV - as a short! I don’t think I would actually short anything, but this company is now at a P/S well more pricey than even SHOP, while growth is nowhere near SHOP’s. It looks insane…so hmm…is the market saying revenue growth and or EPS will accelerate?

That’s really about it. There are a couple of stocks Bert has written about that I glance at a little, but nothing else I’m really following. I’d sooner add to the stocks I already own than buy anything else I’ve seen. Which is a good feeling.

My Current Allocations

The two new columns are:

position rank last month, and
whether I added or subtracted


Shopify	        20.6%	2	+
Paycom	        11.6%	5	+
Skechers	11.3%	1	-
Amazon	        10.6%		NEW
XPO Logistics	9.4%	7	+
Hubspot	        6.9%	11	+
Yelp	        6.6%	15	+
Square	        5.9%		NEW
LGI Homes	4.3%		NEW
Facebook	4.2%		NEW
Seaspan	        3.2%		NEW
Twitter	        2.9%	8	-
AMN Health	1.8%	9	-
Perion	        0.8%	16

Random Thoughts and Conclusions

I say this every month, but I’m feeling much better about my holdings than I did last month. I cleared out some things in the “too difficult” category and I’m in companies I think are hitting on all cylinders. I just don’t see what’s stopping my portfolio going forward. And that scares me to death.

But I think if I’ve learned anything this year, it’s: bet on the sure thing. Or at least: don’t bet on the long shot. Don’t invest because you feel like the market is wrong on a stock (GPRO, SEDG, INFN, RUBI). Buy reasonably priced companies that are knocking it out of the park quarter after quarter with a model that is sustainable and dare I say…predictable (SHOP, PAYC, YELP, HUBS).

It is scary to feel confident. I don’t want to be disappointed again. But it feels good that it’s no longer “Me against the market.” Frankly I don’t like those odds.

I would love to hear your thoughts!

My best to all,
Bear

xenotedvr1 · November 30, 2016, 5:55pm

Bear,

After reading your posts today, sounds like you had some sort of epiphany, or at least looking at things differently. Great you can do that, and really great to be able to share for all. I thought of an experiment you might want to try.

Take a copy of your portfolio today and track it for a year not making any changes. Don’t touch it and in a year or so see what it looks like vs your actual portfolio at that time. I’m not saying I think one way or the other will be better, but might be interesting to see the results.

Another thing you may want to try is to build a small-medium size cash position. This can help so don’t have to sell something to make a purchase. I know a lot of us try to stay 100% invested, but you could use a couple "steady dividend payers or ETFs to use as your cash position if that is more palatable. At least you get some dividend $ while the “cash” is sitting there.

Maybe a good idea to try for a while if happy with current portfolio.
I am doing something similar, but won’t go into details here as it gets away from your topic.

Good Luck and Thanks for Sharing,
Kevin

PaulWBryant · November 30, 2016, 6:17pm

Take a copy of your portfolio today and track it for a year not making any changes. Don’t touch it and in a year or so see what it looks like vs your actual portfolio at that time. I’m not saying I think one way or the other will be better, but might be interesting to see the results.

Kevin,

I thought this a cool idea, so I looked back at April, which is the first month I had handy. If I still had the positions I had then, in the exact same # of shares, they would be worth 14.7% less today. Sounds like I was right to sell. However, I am down ~12% since the end of April anyway, so some of the stuff I traded into wasn’t a whole lot better!

Thanks,
Bear

xenotedvr1 · November 30, 2016, 6:28pm

Bear,

I hear you. Now that you are at higher comfort/confidence level with where portfolio is today. hopefully results will look a lot better come April or next October.

Kevin

StelWestrunX · December 1, 2016, 9:06am

I would love to hear your thoughts!

taking you at your word, some general suggestions entire in the realm of for what it is worth (so worth a fwiw):

*read Saul’s knowledge base summaries again. There’s a ton of very good stuff there and it is worth several reads

*for those of us who are a bit older (pre-Saul), read a ‘foundational’ book. What you find with many investors over the years is, unlike Saul’s stuff above, they don’t have a coherent method of both picking stocks and putting together a portfolio in a manner which can achieve success.

So I’ll mention two books here which form the core of my knowledge base:

Peter Lynch, One Up On Wall Street
Peter Lynch, Beating the Street

why these? Two reasons: 1) Lynch was incredibly successful, so as with Saul it is a practitioner speaking (both head of a fund at Fidelity and Head of Research before that), and 2) the books are written in english.

English in terms of you can apply it, but you have to read the books to apply them.

–

Using his technique, you divide every stock into one of several categories, including fast growers, stalwarts, slow growers, cyclicals, asset plays and turnarounds. Each category results in different questions, and using the information from Beating you can also pick up key factors applicable to many different industries.

Obviously just reading books like this or reading Saul’s knowledge guides won’t make you a great investor, but surely it will increase the odds. And that’s often reason enough to spend a few hours with a good book or two.

–

final comment

I have to avoid stocks that are simply “too difficult.”

been doing this for a 25 years now and for my limited brain your portfolio is off the charts difficult. Not “bad”, just incredibly difficult.

Here’s a simple question. If we think that earnings and assets but especially earnings (though in today’s world you can also go with free cash flow) drive valuations higher, exactly what is each one of your portfolio companies doing to make earnings go higher?

What, for example, is the plan? As PL says, usually it involves these choices:

1 - reduce costs
2 - raise prices
3 - expand into new markets
4 - sell more of its product in the old markets
5 - revitalize, close, or otherwise dispose of a losing operation

Once you get the plan down, you can then check with the company periodically to see how they are doing.

–

a lot of this is just to put the information you do collect into some sort of coherent order. There’s a lot of things to think about, but if you think about the most important stuff first, it will increase the odds of success…

War Eagle!

StelWestrunX · December 1, 2016, 9:17am

final thing

considering what you own and did own, and this is an opinion only, it seems illogical to worry overly much what’s happening short-term - less than a year or even two.

You’ve got a lot of speculative names there (speculative in terms of valuation, lack of profits, or simply volatile industries - as you know already) but most with really, really strong balance sheets so the valuations are going to be based on things perhaps other than earnings. In other words, your stuff is going to be extraordinary volatile, both up and down, especially measured over quarters vs. years.

Whether this leads to long-term success is up to you (your portfolio would absolutely kill me which is my problem but every investor must know their own risk tolerance) but clearly there won’t be a smooth ride there - my guess is you will experience huge highs and lows, hopefully more highs

just one guy’s opinion…