It’s been 13 months since Saul created this board. Prior to that, I occasionally saw his posts on the Rule Breakers Tesla board, and of course on the infamous WPRT thread on Stock Advisor (which ultimately convinced me to get out of that stock). But I didn’t start paying close attention to Saul’s approach until this board was created.
It’s been an educational year. Saul has been very gracious sharing his thoughts, strategies, philosophy, and moves in his own portfolio. And, of course, it’s attracted a whole community of investors with a large pool of knowledge, wisdom, and experience. There’s no doubt that this board has refined my own investing approach in various ways.
I spent a good part of the time trying to unpick Saul’s clearly effective approach, looking for the secret sauce. That’s one reason I started doing the FAQ – to pull everything together in one place and make it easy to review in a sitting. But while there are a lot of little gems that certainly stand on their own, I’ve come to the conclusion that there is no silver bullet: Saul’s strategy works as a coherent whole, and that’s been a very important realization for me.
I traditionally have not invested in very small companies. They tend to be riskier, and I don’t just mean from a volatility/beta standpoint (I don’t really mind volatility so much). Small companies usually have a limited history, greener management, and can show quick early growth despite a lack of competitive advantage simply because they are so small. Eventually, though, a durable competitive advantage and solid management is needed to maintain growth – and that’s when a lot of companies stumble and find themselves unable to replicate their early success.
I think one of the most controversial aspects of Saul’s approach is his relatively quick trading in and out of companies (at least for those of us who are more used to traditional buy-and-hold), but the more experience I get with Saul’s overall approach, the more I’ve come to conclude that it’s an intrinsic part of his success. Let me first say that I absolutely believe Saul 100% when he says he buys a company with the intent of holding onto it for the long term. That makes sense: he sees a young company with promise and a history of great growth. Why wouldn’t you want to hold onto it for the long term? Saul’s not a trader. But the reality is that, statistically speaking, most of these small companies will ultimately begin to struggle as they grow, and things will only go downhill from there: and within that context, recognizing early signs of trouble and moving capital to another promising company makes perfect sense. These aren’t large, proven companies with wide moats going through a temporary rough patch; many will never meaningfully recover once they begin to struggle.
We’re all aware that there are many different investing styles and many ways to succeed in the market. Saul’s historical performance attests to his success with investing in these small companies; I’m not sure that it would work as well with larger, more established companies, but that isn’t really important: it works well in the niche he’s chosen. I think the important question is whether Saul’s style is compatible with one’s own style and temperament. Personally, I feel more comfortable investing in companies with solid competitive advantages that are likely to compound over time. I like to get to the know them over a period of years, be able to confidently identify when they’re being misjudged by the market, and then take advantage of that to further benefit my portfolio. That’s me. But I think that approach would prove dangerous for these small companies, as most are just too fragile (which is also a great reason be very careful with options around these companies, another frequent source of questions around Saul’s investment style).
Successful investment strategies are more than a few key bullet points, even though we might tend think of them that way (Buffet buys great companies at a fair price and holds them forever – easy peasy). As with so many other things in life, they are more subtle and encompassing than that, which is why we’re not all Buffets. Trying to mix and match what we perceive as the “best” points between multiple strategies may not necessarily lead to a coherent, successful whole. I’ve been lucky to evolve an investing style over time that works for me and my temperament. Studying and following along with some of Saul’s investments over the past year has helped me continue to refine that style, sometimes by realizing what it’s not rather than what it is 
It’s been very educational and generated some important insights for me.
So thank you again, Saul, for being so generous. I’ve come to realize that your style isn’t a good fit for me, but you and others here have nevertheless helped me to improve as an investor. I hope the next 13 months proves to be just as educational
Neil