76% One Yr Growth of a 'Lazy' Saul-type

Investment Analysis Clubs Saul’s Investing Discussions
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This is a report of the year-end results of a low-effort ‘lazy’ test portfolio I constructed on the 6th of January 2017 and reported in post no. 23990 dated 8th January. As I stated in that post,

“I have chosen the top eleven stocks Saul currently has in his portfolio since I cannot choose better ones myself. However, as the intention is not to mimic Saul’s portfolio I have assigned equal weight to these stocks. This is intended to be a LTBH portfolio except that a stop loss limit of 10% will be imposed on all the stocks to limit the downside. Additionally, if the ‘story changes’ substantially a stock will be liquidated no matter what the price is at the time. Hopefully such events will be few, if any, during the year. The proceeds of such liquidation will be divided equally between the three top performing stocks to buy additional shares. At the end of the year the performance will be compared with that of S&P 500 Growth ETF, VOOG or IVW.”

The test portfolio grew by 67.5% at the end of trading on 5th January 2018 if all stocks were treated as LTBH.

However, using the minimal changes proposed above, which had involved four occasions of stock replacement (described below) the growth was 75.9%.

For comparison, I worked out the percentage growth of a few popular ETFs during the test period and, included their growth in the calendar year 2016 in brackets:

FDN (83.60 – 114.01) 36.4% (11.7%)
VOOG (110.43 – 141.23) 27.9% (8.0%)
IVW (123.08 – 157.48) 28.0% (7.8%)

IJS, which grew by 32% in the 2016 calendar year managed 12.0% during the test period.

My two favorite technology ETFs, ARKK and ARKW, grew by 84.9% and 83.2% respectively during the year ending 5th January, 2018. These two do have some exposure to the Chinese market (6% and 12% respectively) and about 6% to Bitcoin Investment.

The Portfolio without any changes:


Ticker # of Shares Pur. Price($) Purchase Cost($) Current Value($)     Gain(%)
AMZN             13          796.00                   10,348		15,979	          54.4
ANET              99          101.28                   10,027		23,400         133.8
BOFI              347             28.85                  10,011		10,441	            4.3
HUBS           190             52.60                     9,994		17,195           72.1
LGIH            337             29.63                     9,985		26,094         161.3
PAYC            211             47.49                   10,020		17,699           76.6
SBNY             66           150.50                     9,933		  9,343            -5.9
SHOP            213             46.90                    9,990		23,554          135.8
SPLK            178              56.17                    9,998		15,643            56.4
SSNI             764              13.09                   10,001	12,443            24.2
UBNT           174              57.37                     9,982		12,914            29.4

Total                                            $110,289             $184,705   67.5%<

The portfolio after four changes as proposed:


Ticker # of Shares  Cur.Value($)
AMZN             16           19,666
ANET            184           43,566
HUBS            190           17,195
LGIH             398           30,817
PAYC             261          21,893
SHOP            374           41,357
SPLK             222          19,509
Total 		           $194,003
__Gain (194,003/110,289 -1.00)*100 = 75.9%.__

The four occasions when the price of a stock went at least 10% below the purchase price and remained there for 5 consecutive trading days (- this delay was used to eliminate short term market reactions) were:

(1) February 18 - Sold 174 UBNT. Bought 24 ANET, 47 SHOP and 44 SPLK.
(2) March 10 - Sold 764 SSNI. Bought 23 ANET, 50 PAYC and 44 SHOP.
(3) August 4 - Sold 347 BOFI. Bought 3 AMAZ, 22 ANET and 40 SHOP.
(4) November 5 - Sold 66 SBNY. Bought 16 ANET, 61 LGIH and 30 SHOP.

I will be the first to admit that no firm conclusion can be drawn from a single year’s performance, particularly because this test portfolio happens to consist only of Saul-type growth stocks which did extraordinarily well in 2017. I intend to retain this portfolio and monitor its performance in 2018. I also would like to conduct a similar exercise with a fresh selection of some 20 stocks which had experienced consistent high growth over the last 12 months, expect good revenue growth going forward, have low debt ratio and a few other criteria that can easily be accommodated in a Stock Screener program like that by FinViz or Fidelity. I will change the selling criterion to 10% drop from ‘the current price’ or ‘the purchase price’ whichever is greater. This way I can capture the gain (if any) a stock might have acquired at the time of the sale.

Wishing you all great investment success in 2018.

alphab

26 Likes
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I am sorry I clicked the ‘submit’ button before properly formatting the tables. For some reasons I could not make pre and /pre method work for the tables. However the numbers are correct if not properly aligned.

Cheers.
alpha

1 Like
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For some reasons I could not make pre and /pre method work for the tables. However the numbers are correct if not properly aligned.

 worked but the input was not right, there were some tabs that should have been replaced by spaces and the spacing was uneven. One has to use a monospaced font like currier and find/replace to get rid of all the tabs to get it right.

```

**Ticker  Shares    Price    Amount   Current    Gain**
AMZN        13   796.00    10,348    15,979    54.4
ANET        99   101.28    10,027    23,400   133.8
BOFI       347    28.85    10,011    10,441     4.3
HUBS       190    52.60     9,994    17,195    72.1
LGIH       337    29.63     9,985    26,094   161.3
PAYC       211    47.49    10,020    17,699    76.6
SBNY        66   150.50     9,933     9,343    -5.9
SHOP       213    46.90     9,990    23,554   135.8
SPLK       178    56.17     9,998    15,643    56.4
SSNI       764    13.09    10,001    12,443    24.2
UBNT       174    57.37     9,982    12,914    29.4

Total                    $110,289  $184,705    67.5%

```

A very interesting exercise! Until now I've been reluctant to use stop loss orders but seeing the damage a steeply falling stock can have on a portfolio, specially on a concentrated one, I think I'll experiment with it. My previous broker had an order type that (followed) automatically adjusted the stop loss to the newest high price. My current broker does not. Maybe once a week is enough to do it manually. Another alternative is software that could send a warning email.

Denny Schlesinger
2 Likes
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Thanks Denny for your comments on the usefulness of the exercise.

I wish there was a way to save a ‘preview’ if unsatisfactory for further work later rather than either to cancel it or edit it immediately.

I now realize I should have actually used a ‘table’ format for creating the tables rather than prepare them as individual rows and columns (as I originally did a year ago) which led to the problem. Btw, how did you correct my post starting with the ‘final version’ as posted? I would love to learn.

Regards.
alpha

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alpha:

TMF website is prehistoric by modern standards but since I too develop websites I know how difficult it is to bring them up to date specially when they have so much accumulated data. I’ve developed some procedures to make the experience better. I’ll share them with you by answering your questions. I use a Mac and on Windoze it might work differently or not at all.

I wish there was a way to save a ‘preview’ if unsatisfactory for further work later rather than either to cancel it or edit it immediately.

There is. First, use the “Preview Message” instead of the “Submit Message” button. This gives you the opportunity to review and edit the text. Before hitting the “Preview Message” button I drag and drop the message on the desktop in case the browser or TMF website should blow up.

I now realize I should have actually used a ‘table’ format for creating the tables rather than prepare them as individual rows and columns (as I originally did a year ago) which led to the problem.

Table format formats the whole post and it does not insert line breaks creating new problems. I use the tried and true space separated rows and columns inside a 

 tag.


Btw, how did you correct my post starting with the ‘final version’ as posted? I would love to learn.


Quite simple. Copy and paste into a text editor, NOT a word processor. I use BBEdit which my developer’s workhorse but there are plenty others. BBEdit lets you see the invisible characters like space and tab. Here is what your text looks like, the dots are spaces and the triangles tabs:


http://softwaretimes.com/pics/alpha.png


Edit, pretty it up, post it! LOL


I did a follow up post at the NPI board (with a link to this thread)


Stop loss orders


http://discussion.fool.com/stop-loss-orders-32943503.aspx


Denny Schlesinger
2 Likes
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Thanks Denny. I will use this info. when I write posts in the future.

Best.
alpha

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So is the stop loss order of 10% reset at the end of every day?

I’m actually really surprised you still had 7 stocks left! I had a quick look at SHOP because I’m sure it had a 10% drop, but its biggest loss occurred over 5/6 days at the start of October.

I just re-read your post and you did say the stop loss is from the purchase price. Interesting and fun exercise despite no conclusion being drawn from it. And hopefully no-one tries to copy it!
I see you plan to change the selling criteria for 2018. These are very volatile stocks so let’s see if the portfolio has anything left by 2019, or if it had to sell everything!

Happy investing 2018,
Ben

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So is the stop loss order of 10% reset at the end of every day?

A stop loss must be a limit order and you specify if it’s for the day or “GTC” Good 'Til Cancelled.

Ben, you should read up on stop loss orders before you try them, it can get quite tricky picking the right stop. It’s not cookie cutter stuff. And it’s not Saul board stuff either so I’m going to stop here.

:wink:

Denny Schlesinger

1 Like
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Thanks Denny. I’m aware of how they work though :slight_smile: I abhor them because you really can get burned, especially with the rather volatile stocks we have here. I know they can be useful but to me you’re just putting a big target on your back for others to take advantage of. I was just asking in reference to Alpha’s test portfolio.

He set the stop-loss at 10% below his purchase price but he’s looking at doing a theoretical moving stop-loss for 2018 where I assume he resets it at 10% below the close of the day, each day. As a test, I wonder how many stocks he would’ve had left in 2017, and what his % gains would have been if he did that vs the 75.9% gains the theoretical portfolio had. If the result is as I believe (ytd gains being far less), it’s a good lesson for people to learn - growth stocks are volatile and selling in a panic can seriously harm your portfolio.

2 Likes
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Thanks Denny. I’m aware of how they work though :slight_smile:

Ben,

Sorry I misunderstood, it sounded like a newbie question. :frowning:

I agree that stop loss orders are a trader’s tool. My old stock broker used to use “mental” stop loss orders, not actual orders. Watching a stock drop by 50% and taking a year or two to recover is rather painful and growth destroying. So is losing good stocks on minor corrections. Telling the two apart is the art of the successful growth investor!

Denny Schlesinger

3 Likes
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Watching a stock drop by 50% and taking a year or two to recover is rather painful and growth destroying. So is losing good stocks on minor corrections. Telling the two apart is the art of the successful growth investor!

Very well put, Denny. I don’t need to remember the exact wording since I go through the exact emotion too often!

A.J.

1 Like