Quick 2019 year end review.
Hi all, it was an amazingly successful year for me. Up about 36%. The Nasdaq was too, but… 36%? holy smoke! Of course, others have done much better, but 36%? If someone had offered me 20% at the start of the year I would have jumped at it. I probably would have seriously considered 10%.
My approach is a little different to many here, although we have a number of the same stocks. The first piece of information is that although I have invested in stocks for quite a while, I haven’t paid that much attention. So I’m learning about myself in the stock market, my reactions when things go south (and north), and what I can bring to the game.
One of the biggest challenges I have which is not often mentioned on this board is my emotions. You all seem so rational! When I look back at my mistakes of the year, they were mostly emotion-based mistakes. And they were costly.
My approach is a mix of a Saul and a TomE approach, tempered by my “I’m learning” status. One of the things I like about TomE’s approach is his concept of protected value, used to deal with the emotion of downturns. My cash % is about 10% of my protected value (the protected value is less than the current portfolio value, so cash is tending to increase).
Stocks I own (in % order)
AAPL, GOOG, GH, AMZN, TTD, AYX, ESTC, SFIX, CRWD, FB, OKTA, SKX, MSFT, ZS, MDB, ULTA, SBUX, CMG, WORK, ENPH.
Things I have done right
- Realised that I’m not Saul - I don’t have his experience, temperament, confidence or ability. I’m in the learner category, and thats ok.
- Work out a manner of investing that works for me (managing emotion in particular) - TomE’s protected value works well for this.
- Looked at my mistakes and attempted to understand them.
- Made my own decisions - ESTC, SKX (trading range), SFIX, AAPL, WORK. Not buying DDOG (yet). Not everything has worked out, but they were my decisions so I own them.
- Kept stock percentages low - I’m learning, so I’m not (and shouldn’t be) confident about having 10%+ in a single stock.
- Realised that this is a long term game. The point is to make significant returns over a long period, not X% in a year.
- Actually enjoyed learning about some of these companies. Not all of them
- Kept a list of my errors!
Errors I have made:
- Fear of missing out purchases at high prices (GH, MDB, NTNX).
- Not buying back into a stock that’s heading up - anchoring. Eg: Z, CMG, SBUX, etc.
- Buying before a trend has stopped (fighting the tape?) - eg: ESTC
- Not selling on bad news, eg: NTNX.
- Turnarounds - NVDA, BBBY, GME, GH, NTNX, ENPH etc. There were opportunities to be had after these stocks hit lows if one was confident enough. Probably of all of these, NVDA was the ‘best’ candidate in my opinion, given a growing market, and a ‘one-off’ crypto issue.
- Not following up on stocks after drops = eg: ENPH. NTNX. NVDA. related to 5. This is a mental “head-in-the-sand” after I sold out, I stopped evaluating them, only to look back and see them head upwards.
Things to do in 2020
- Make sure my stock allocations reflect my confidence (understanding) of a particular stock.
2.Increase my understanding of my stocks and watchlists - try to streamline this process - not much changes in general in a month or a quarter. Some kind of triage/checklist? - Watch for trading ranges.
- Focus on stocks I enjoy, conference calls where management seem legit (contrast NTNX and SKX).
- Relax and be patient. No FOMO, stocks will drop at some point.
- Be more confident (have done the work to be more confident!).
Thank you all, especially Saul and TomE, for the lessons!
Greg