A Beacon of Grumpy Light in a Pastel World

I responded with a comment to the recent POD about selling AMBA, and on reflection was so impressed with the level of grouchiness that I achieved in that response that I decided I needed to preserve it somewhere – a place where my kids could read it and marvel at the extent to which their father has become an avatar – no, the heck with false modesty; let me just say it outright – the exemplar of all that it means to be a curmudgeon.

So here it is – prompted by a bit of bragging by the Poster of the Day (who is a good guy, but bragging is bragging) about his ten baggers:

Good post!

That said, I cannot help but point out that the (IMO misleading) MF preoccupation with “baggers” seems strangely inconsistent with the (IMO correct) advice to avoid price anchoring.

A bagger is defined by reference to your historical purchase price – a reference that is the very hallmark of price anchoring.

If you are holding a stock that is a ten bagger over a 10-year period, just as an example, well done! That was a compounded annual return of about 26% over those 10 years. Which is good!

Suppose I told you that the same investment would be a 20-bagger in another 10 years – would you celebrate? Of course you would – everyone in MF land would – there would be congralatory posts about the 20-bagger, etc. But you only would have earned about a seven percent compounded return over those 10 years! Over that 2nd ten year period, you did not have a 10-bagger; you had a 2-bagger.

I am quite sure that the MF team is smart enough to understand this – so I can only conclude that the persistence of the “bagger” terminology is yet another unholy deal with the marketing devil, where the “education” part of the MF mission statement is subordinated to the marketing mission.

In this sense, the “bagger” terminology is the MF equivalent of a parent’s use of “Santa Claus” with his or her child – it keeps the child (customer) happy (and well-behaved - “you better watch out, you better not cry”) at the cost of an apparently harmless departure from factual accuracy.

You can decide for yourself how you feel about being viewed in this way by the MF team. I guess I would prefer accuracy and a bit more respect for my intelligence, but heck, I even felt that way about Santa Claus by the time I was five or so. So probably I am just a grouch, who differs from most on the red pill versus blue pill issue.




Hi Rich, Agree with you fully. The following is an excerpt from the Knowledgebase (post #9286).

I pay no attention to 2-baggers, 5-baggers, 10-baggers or whatever in individual stocks, nor do I count them. This is relevant because this way it never crosses my mind to think anything like “This stock is slowing down, but it’s a 9-bagger. Maybe I should hold it for another year to try for another 10-bagger.” Going from a 9-bagger to a 10-bagger is only an 11% gain. If I’m no longer in love with the stock, I should be able to put the money into a new stock that will be up 30% in a year, and it will never even cross my mind that I missed having a 10-bagger. Here’s another way to think about it: If you have an 80-bagger on a stock that grows to an 85-bagger it sounds exciting, but it’s only a 6% gain on your money. If you take the same money and put it into a new stock where you just get a tiny little 2-bagger, you’ve made a 100% gain on the same money. Which is why I don’t pay attention to trying to get multiple baggers. If they happen fine, but it’s not my focus.

If you were to put a small amount of money in every stock listed on the market, you would eventually pick up every 10-bagger, even every 100-bagger, that occurred. You’d be able to brag “I have fifty 10-baggers now, and three 100-baggers!” But so what? You’d just be doing as well as the markets as a whole, by definition, as you’d be investing in the whole market. And since you just invested about a hundredth of one percent in each stock, your 10-baggers would be meaningless, and even your 100-baggers would only move your totals 1%. So again, anyone can pick up lots of 10-baggers by just investing in hundreds of stocks, more if your hundreds of stocks are MF picks certainly, but the multi-baggers are irrelevant. What matters is how your total portfolio has done. If you have ten 10-baggers in 25 stocks, that’s darn good. If you have ten 10-baggers in 500 stocks, so what? I pay attention to how my total portfolio is doing. My goal, and my entire focus, is on averaging 30% to 35% per year on my portfolio. As I pointed out above, having a multibagger on my whole portfolio is what counts, not on individual stocks.


I’m in complete agreement with you and Saul, but FYI I’m pretty sure it was Peter Lynch who popularized the notion of the ten-bagger. Here’s what he says in One Up on Wall Street:

In Wall Street parlance a “tenbagger” is a stock in which you’ve made ten times your money. I suspect this highly technical term has been borrowed from baseball, which only goes up to a fourbagger, or home run. In my business a fourbagger is nice, but a tenbagger is the fiscal equivalent of two home runs and a double. If you’ve ever had a tenbagger in the stock market, you know how appealing it can be.

I developed a passion for making ten times my money early in my investing career. The first stock I ever bought, Flying Tiger Airlines, turned out to be a multibagger that put me through graduate school. In the last decade the occasional five-and tenbagger, and the rarer twentybagger, has helped my fund outgain the competition— and I own 1,400 stocks. In a small portfolio even one of these remarkable performers can transform a lost cause into a profitable one. It’s amazing how this works.



I agree with all the points made in this thread. For the novice investor though, it serves a purpose. It gives you something to think about when considering selling a perfectly good stock just because it’s gone up 50%.


Just my thoughts on the “Baggers is the answer” to the “Following Baggers is a waste of time” discussion that seems to come back here and on other boards every so often.

In my view, this is just like most things in life. The answer almost always lies in the grey area in the middle. I also read Peter Lynch’s book a long time ago and he clearly loved to discuss and seemed to coin the phrase “10 Bagger”. It is like most popular phrases that catch the public’s imagination, an easy way to describe a subject that is obviously a little more complex. For example, when I am with friends or at a party and the conversation turns to the stock markets and investing, I will admit to sometimes telling someone that I do my own investing, for the most part. Usually it dies there, sometimes the other person has an interest and a lively conversation will ensue. Every once in a while the conversation will turn to successes. People usually don’t want to talk about failures, and maybe after I have had a couple I might mention that I bought NFLX a few years back. If the person shows recognition and further interest (and I’m feeling good, ie I’m not driving home), I will say, yes, that has been my best, it is close to a 40 bagger by now…

My point is that I don’t say, I have averaged 38.5% annually over the years or something more precise, the bagger comment is an easy way of saying how the stock performed.

More importantly, it is a way to explain a thought process. I think Peter Lynch liked the term because it helped him explain his philosophy: buy growth companies, never sell and watch as the ones that do great become bigger and bigger portions of the portfolio over time without you having to figure out which ones will be the big winners. Add to your winners, let the losers become almost irrelevant and do so in a tax efficient manner.

It’s a philosophy that works. It’s one that TMF espouses. It’s a good one. It is a very good one for those of us who don’t have the time to constantly monitor and massage thier portfolio, but want to be involved in the selection process and believe that there are driving forces in the mutual fund industry that does not allow them to follow a similar thought process (at least most funds, I am sure there are exceptions).

Now, there are other philosophies that also work. Warren Buffet’s is well known so I won’t go into that here. Closer to home, you have David and Tom’s, similar but different, strategies. There are also a few good ones within the ranks of TMF. John Sargeant’s comes to mind, where he owns growth companies that he likes long term and augments the returns with selling puts of companies that he is happy to add to his portfolio and covered calls on the ones that is willing to reduce. And there are many others I could discuss, TMF1000, 2001Cobra (a still evolving strategy) and many others…

And of course, there is Saul’s… and since this is his board and has quite a following, I will preface my remarks by saying that please read my message with the intent that it was intended. If it appears that I am saying somehow that Saul is not both a great investor and has what appears to be a fairly unique and powerful strategy, read it again because I would not disagree with either of those statements. I will also say that he (like me, in some ways) clearly loves this investing game and wants to share his knowledge and discuss the strategies of the game with others. He shares very freely. And for FREE, which is saying something as well because in my opinion, he certainly knows more, and has a better view of investing than the vast majority of people who get paid significant sums to do so. (Just to be clear, I am like Saul in my love of the investment game, not so much in my abilities in that game).

So… I think Saul’s philosophy is unique because he is buried in the grey area of investing. He is both short and long term in thinking (hang on Saul, don’t disagree yet!!)

Long term: buys only based on where the company is going longer term. Doesn’t seem to pay much attention to “catalysts” or “stories”. Wants a company growing earnings faster on a percentage basis than the PE ratio. Wants to see this in facts, ie recent past earnings. More than that, his requirement is to see no reason for the growth to stop. What is interesting is he seems to make his own earnings predictions based on the recent past earnings. I think a major tenant of his philosophy is that the markets take a while to figure out when a company has made a turn for the better and underestimate earnings growth. As long as the growth remains and the PE doesnt get too high, Saul remains and to add to his investment.

Short term: As soon as, and I mean, as soon as the growth comes into question, Saul is gone. He has no qualms about jumping out at the first sign of trouble. I have only been following here for less than a year and I can give multiple examples. What’s just as important, as soon as he is comfortable that the sign of trouble is gone, he is back in or adding back. He has no interest in the price he bought when he sold. He has no interest in how long he has held, the only thing that matters is whether there is any reason to believe that the story is still in tact. In my mind, this is very important to understand. I am not just talking about a less than stellar earnings report. Many times the 1 year PEG is the same as when he bought it. This is short term thinking (I know, everyone take a breath). This is not a bad thing, just the way Saul manages his portfolio. It is what makes him unique…

It is also why I say that to call his process simple is also, just like the “bagger” discussion, a simplification. Saul doesn’t like the bagger term (in my opinion) because it doesn’t match his investment style. That doesn’t make either his strategy or the LTBH strategy wrong. Saul thinks his strategy is simple because he is great at it, and to him it probably is. To most everyone else, it clearly is not. For those that disagree, let me ask you a couple questions:

How many sold a bit of their position in CRTO recently on the APPL news (if you owned it). How many bought it back a short while later after you decided the news wasn’t critical.

How about SNCR, if you own it. Did you sell out on the takeover rumour? Did you buy back when it looked like the price was holding?..

More importantly, when SWKS has an issue, will you hang on or sell out. That is the key question to both owning a rapidly growing company and to Saul’s strategy.

I don’t mention these for rebuttals of these particular trades, I mention them because Saul has his incredible long term record exactly because he has the ability to make gut decisions without any worries about being wrong, whether it is the ability to see that the recent AMBA fall is not a problem and staying put(as far as we know at the present) or it is getting out of PFIE because they were hiring salesmen into a slowdown and thereby avoiding a major selloff.

In my opinion, it is the very quick gut decisions that has allowed him to dominate the market. And also what makes it not simple…

Having said that, Saul has much to teach and I have been a very willing student. Things like:

selling positions that no longer meet your strategy. To not worry about where the price of the stock you sold goes.

That earnings really are important (duh??!!) and don’t make excuses for poor earnings because there are plenty of companies that have them.

That you don’t have to buy every stock and it really doesn’t matter if a stock you didn’t buy goes up (that may be one of the most important to me… not sure how many times I have kicked myself to see a stock I don’t own go up and feel bad…) and many more…

In the end, I am very appreciative of the board, I think it is making me a better investor. I am reducing my overall portfolio count, but I would be very happy to get a few more 10 baggers in my accounts!!

Long CRTO, SNCR, NFLX, and probably still too many other stocks…


Thanks Randy, that was a wonderful, thought provoking, and interesting discussion. I’m glad you are finding the board useful, and have assimilated some of what I think are very important points: you don’t have to buy every stock and it really doesn’t matter if a stock you didn’t buy goes up etc.

Investing is fun, isn’t it! (Most of the time anyway).



Your post, number 10127 dated 6/28 is rather stale . . . So I’m catching up after vacation. I’m retired so I’ve got time to devote to investing activities (it really is labor intensive). But I decided to really take a vacation and not follow everything as closely as I usually do, which translates to I did not faithfully read every post to this board for about 3 weeks.

Anyway, because today is July 10, I assume most folks (including you) will not see this post (I’ll mail it to you so it will be hard for you to miss). I just wanted to tell you that I used that “save it” button for the BoardKeep database. I don’t use that button very often. If I save too much stuff, I’ll never refer back to it.

Thanks for a really thought provoking post. It’s got actionable content. That’s one of my primary criterion for keeping a board post.