An Observation for Investors

Investment Analysis Clubs Saul’s Investing Discussions
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So I began shifting my portfolio and tracking the performance of sold shares vs. new positions. I know Saul and other have preached of forgetting a position once we get out, but i wanted to learn where would have ended if I would have stayed the course. Prior to this “experiment” I would have guessed that some of these bets would pay off and others wouldn’t, but I was shocked to find that in every case the results were improved (and by a very large margin in some cases).

Thanks Martin for providing some concrete examples of what I was talking about.
Best,
Saul

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22

forgetting a position once we get out, Not sure he really means forget. Just stop thinking about how much you would have made if you had kept it, or price fixation.Sometimes it is hard to tell if the reason you sold it was valid though it sounded convincing at the time. Some short attacks are very well crafted but still spurious. For me I try (often not successfully) to regard a stock that I sold as a brand new candidate , one untainted by any previous connection.
Whatever you buy there is always a stock that will outperform it.

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23

At the risk of this thread wandering into OT territory, I wanted to step out of my normal lurking status and add my own story.

About 2.5 years ago I started wading into the waters of applying the methodologies discussed here. Prior to that point, I had tried a couple different approaches but was not able to find comfort or great success, and ultimately applied a standard Asset Allocation strategy of stocks/bonds devoid of holding individual stocks, re-balancing our holdings a couple times a year. As I got deeper into these waters, though, I found the comfort (and success) I was looking for, and eventually found myself at an impasse: about 50% of our holdings were in corporate 401(k)s that don’t allow individual stock selections and I’d committed everything else. That was Jan 2019. Since that time I’ve continued to apply the same approach to those holdings in parallel, so happen to have a great “A/B Test” situation.

The results?
Well, since Jan 2019 when I had approximately a 50/50 split, my traditional “Asset Allocation” holdings are +20.7%. That has slightly under-performed my “High Growth” holdings at +172.4%!! The month-to-month volatility has certainly been higher but seeing the cumulative growth over time has helped steel my nerves, and seeing the bottom-line dollar amounts at staggeringly-different levels when they were once equal is simply stunning.

Have to say, it has crossed my mind that we should leave our jobs so that we can roll our 401(k)s into IRAs…

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24

my traditional “Asset Allocation” holdings are up 20.7%. That has “slightly” under-performed my “High Growth” holdings at up 172.4%!! The month-to-month volatility has certainly been higher but seeing the cumulative growth over time has helped steel my nerves, and seeing the bottom-line dollar amounts at staggeringly-different levels when they were once equal, is simply stunning. Have to say, it has crossed my mind that we should leave our jobs so that we can roll our 401(k)s into IRAs…

Thanks to you too, vaking, for giving another concrete example of what I was talking about.

Saul

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25

Miklo,

Yeah, I have only been around for 7 months, but I have watched closely. It is impossible to time growth stocks. There is no way whatsoever that I can fathom.

CONCENTRATED VS SPREAD OUT AT HOME:

By the way, the few hundred dollars I convinced my 13yo and 9 yo kids to invest are up 98% vs 42% for me and 24% for the new Roth. It does help that I nailed the bottom of RDFN for them at 10.30 (my basis is 19.90) and got them one share each of SQ at 42.50 but it was not just timing. They only have half a dozen stocks and they are all doing really well, with DDOG crushing it without help from timing. So my wife is like, and why have WE not doubled OUR money? :slight_smile:

So that got me thinking a few weeks ago.

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26

Hi Guys,

This posts is inspiration for me. I have just turned 30 and I am vigorously learning to invest. My goal is to be able to enjoy and invest professional like Saul has done and provide a good life for my family. Even better, if i am able to become a professional hedge fund manager. But since everyone is revealing their portfolio. I feel like to share as well and please do comment to give advice:

I am up 125% YTD and my portfolio are consisted of:

Zoom video (ZM) - 35%
Twilio- 25%
Crowdstrike -10%
AYX- 10%
Datadog-5%
Shopify-5%
ESTC Elastic- 5%
MDB- 5%

I tend to scale into the stocks every month. So i scaled in at the March low which has worked out great for me. However, I am really bad in assigning percentage to the individual stock. If you guys can, please do give advise on the criterias you use to determine percentage allocation to an individual stock. Thanks.

Regards

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27

I think it was around October when I came across this board. Everything made sense but there were several factors to consider. Saul’s long term returns were phenomenal but he had switched methodology. His returns were still awesome but what if there was a sudden change in valuations for all SAAS companies? I was already on track for retirement. When they ran whatever the testing method is I had a 97% chance of not running out of money even if I never contributed again. I didn’t want to risk blowing up my future retirement when it wasn’t necessary. I decided I’d invest 20% of my portfolio with Saul’s methodology to goose my return figuring even if that portion went to zero I’d be fine. As of today’s close they are now 42.5% of my portfolio. I added some to it, but it has largely just been the over performance. I wish these companies had been around 21 years ago when I first started investing. Thanks Saul for opening my eyes.

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If I had held the companies I sold, that part of my portfolio would be down about 2.5%. During the same time, the companies I bought are up over 73% (and over 76% this year).

There are so many gems in this thread, thanks to all that contributed.

If sharing my: YTD progress, crisis era actions and longer term high growth investing comparisons (successes and learnings), then I’m happy if it can help.

Overall as of last night (an ATH), I am up 35% for the year and up 100% from the lows, having been down 30% at the nadir. Along the way I swapped out my 5% holding in the Ali Baba US listing over to the HK Exchange so if I add that back in then I would be over 40% and if I add back in the capital withdraws I have made then I would be more like 45%-50% up YTD and that doesn’t account for growth investing in my Asia portfolios with holdings such as Afterpay which is up 7x from the lows and 100% up from the start of the year.

Anyhow that’s the overview.

Some of the learnings from the growth investing story that relate to the observations and the journey fellow investors on here have discussed that I would highlight include:

1) Overall number of holdings
If I think back to when I first discovered Saul’s board (in my early 40s after decades of investing), I had over 100 individual stock holdings in my US portfolio. As I got serious about rationalising, this number came down to ~80. Now it is well below 40, (although to be honest my US portfolio contains high yield plays from my UK brokerage account that are there for income generation and tax optimisation reasons and separate to the purposes of this board).

2) High growth stock investing vs remainder of my US portfolio investing & concentration
A year into building a portfolio around a “Saul like” high growth approach to investing, I probably had about 25-40% of the value of my US portfolio in “Saul like” investing stocks. Now that stands at 80%. Back then I probably had most of my top 15 stocks ranging from 0.5% to 4-5% max in any one holding and most in the 0.5-2% range. Right now my top 10-15 holdings range from 2% to 20% and the majority between 5-10%.

3) CV-19 crisis era portfolio changes
During the crisis we have faced over the last few months, I took advantage of market and share price volatility to make changes to my holdings with 2 objectives in mind:
i) Exiting holdings I should have sold previously and had no business being in and needed to let go of
ii) Selling down positions that had held up versus their cohorts, (similar to Saul’s strategy during the GFC)
… and redistribute proceeds into higher conviction, beaten down plays where I didn’t have a position or had an under sized allocation.

Some were clear pair trades (between players/opportunities within the same space) and others were targeted separately in terms of both exits and entries.

If I look back at the transactions most have worked out and even where they haven’t I feel better about where that leaves me in terms of portfolio holdings as well as size of allocations.

Pair trades:

i) Exiting ZS at 63.5 and re-allocating into Crowdstrike at 48.19 producing a 110% gain. Whilst ZS has recovered amazingly well ~80% and as much as I like ZS, the growth rate it exhibits, the time and friction of client on-boarding and the relative valuation doesn’t compare with Crowdstrike so I’m happy with this even if I could have been almost as well off in ZS which has got ahead of itself and still leaving Crowdstrike relatively undervalued.

ii) Exiting Spotify at 120 and re-allocating into Roku at 80 producing a 60% gain. Again Spotify’s performance in the last few days has really made this a financially neutral outcome however I am happier about the holding in terms of unit economics and valuation even if I may need to re-consider Roku for profitability reasons going forwards.

iii) Exiting Tandem at 64 and re-allocating into Livongo at 60 producing a 15% gain (vs a 30% gain had I stayed in Tandem). Tandem’s growth had deteriorated so far so fast it no longer deserved to be held in the same light. I’m happy with Livongo for now even if I had been better off staying in Tandem.

Targeted Exits and Entries

I took the opportunity to:
let go of some long held positions that should have been cleared out years ago including: Community Health at 5.7 and CTrip at 33…

as well as exit some growth positions that I felt allowed an opportunity to switch out or top slice for higher conviction, higher growth and advantageous entry points elsewhere:

I exited: Pinterest at 20 (at stubbornly high price point without much progress since) and IQV at 163 (near all time high that has not been retaken), GSX at 38 (missing out on a 50% rebound) and Baozun at 34
and top sliced: MDB at 198 and 220 (ATHs) and Shopify at 690 and 780 (then highs)…

that allowed me to invest in:
Fastly at 40 (55% gain) - new entry
Cloudflare at 28 (28% gain) - new entry
Elastic at 60 (50% gain) - top up
AYX at 88 and 105 (82% + 52% gains) - top up
Datadog at 48 (80% gain) - top up
Zoom at 146 (65% gain) - top up

and elsewhere:
Afterpay at 14.65 (300% gain) - top up

This leaves me with my top 10 holdings with their % allocations as:
#1 Shopify (21%)
#2 TTD (9.3%)
#3 Crowdstrike (8%)
#4 Alteryx (7.5%)
#5 Zoom (5.8%)
#6 Datadog (5.5%)
#7 MongoDB (4.6%)
#8 Elastic (3.3%)
#9 Livongo (2.9%)
#10 Okta (2.8%)

FWIW if Ali Baba or Afterpay were counted they would be at 4.2% and 6.3% respectively taking #5 and #9 positions if residing in my US portfolio.

It has been a while since I have done a portfolio review so this might be of interest to some of the old timers, however hopefully I have shared some useful learning points, (of what to do and not to do).

Whilst I’ve definitely made progress in particular:
Looking at and letting the business numbers do the talking not the story
Focusing my portfolio and building up stake allocation
Avoiding price anchoring
Buying high and selling higher and not confusing price value for growth opportunity

…I still need to be much more nimble in cutting under performers.

Thanks for reading, good luck to all holders.
Ant

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29

Hi all,

I would like to chip in at this moment, because it fits the posts and because I was just authorized to post :slight_smile:

I have been reading this board after discovering it by chance, and I must say I was hooked from the start. It was mostly incomprehensible at first, with these unknown tickers, financial vocabulary thrown around as if it was basic English, and these reasonings that seemed so unhooked from what I knew to be sound investment principles. But I started to slowly digest the thinking, and I was ripe for the departure from common --average-- wisdom.

You see, I lost most of my meagre savings in 2008-09, and was not yet thirty. I accepted advice from people who didn’t know anything, including personal bankers, but since I was ignorant as well, it seemed pretty good advice at the time. The advice was : buy our actively managed funds, as they perform so good. It’s only 2% management fee, and 1.5% entry fee. I did miserably.

OK. Fast forward to 2013, where I started investing in ETFs. I did okay-ish (60% growth over 6 years, not too bad compared to my previous performance), but the market did all the lifting. I totally bought into the generally accepted view that one cannot beat the markets. But I kept trying a position here and there, with some small successes, which kept me exploring.

Then I discovered this board in mid-2019, and started investing…just before the August meltdown. Bad timing, especially because of my tendency to commit large proportions according to my conviction. However, not timing the market is one of the most important lessons here, so I kept selling the ETFs and growing the names discussed here. I kept the course because it made so much more sense to me: buying into high-growth, high margins, high NRR, subscription-based, low capital intensive, growing TAM, etc… companies is in fact safer than investing in automobile or refrigerator-making companies.

The suppression of many dividends for these supposedly safer companies is a case in point.

Finally, after a brilliant February 2020, March happened to be the god of war on our stocks as well, and while everyone was screaming “sell”, I reasoned like Saul: if everyone is screaming sell, being scared to death – even seasoned, hardened members of this board --, surely this must be the bottom. (BTW, this is now my golden nugget of wisdom.) So I held, and sunk my last dollars into known names. Namely, AYX, DDOG, CRWD, COUPA, LVGO, ZM. (In the same spirit, I kept investing in Zoom, because I believed then that the security fears were blown out of proportions, for seemingly nefarious purposes. I liked the bashing in fact, as it kept the price down.)

Since March 16th, I am up 147%. It is completely unbelievable. And YTD I am up 71%. Had I stayed in indexes, I would still be down by about 10% (I had a mix of SP500, EURO600, and small-caps).

The funny thing is, when I try to convince my friends, they laugh me off, and say “these companies of yours remind me of the 2000 Internet bubble”, and don’t want to discuss further. Nothing is further from the truth, as our companies transform the task of making millions into an art form.

So, to finish this lengthy post: thank you Saul, I kept the course on the best names, and I owe it to you. Thank you board members, for challenging each other, as from your discussions springs knowledge. I hope to one day reach the level where I can contribute as usefully as you.

Kind regards to all

Sedi

long AYX (17%), CRWD (26%), DDOG (26%), COUP (5%), LVGO (1.5%), ZM (25%)

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30

I appreciate everyone sharing here - this is a great thread! And Saul, very much appreciate your direct replies. Those two comments really help to sharpen how to think about this. Such a great lesson to learn and one that will help me and others for years to come. Thank you!

31

Thanks Ant for your write-up and post of what’s happening with your investing!

Welcome to the board, Sedibald, and congratulations on learning the lessons so well. :grinning:

Best to you both,

Saul

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32

More evidence:

I discovered this board in mid November 2018. I bought all in and adopted a more concentrated portfolio, never holding more than 12 positions. I never sold a thing during the COVID downturn. My CAGR since then to date is 69.91%

Current allocation:

SHOP 12.56%
DDOG 10.64%
FSLY 8.77%
TTD 8.47%
AYX 8.30%
OKTA 8.03%
ZM 7.98%
CRWD 7.38%
COUP 6.95%
LVGO 6.37%
CASH 14.63% (For upcoming down payment on retirement lake house)

Thanks to Saul and all contributors, I’m sold.

Kirk

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33

Some advice though sought here is - What % of portfolio is typically advisable for growth stocks. Is it 25%? If so, then are the remaining supplemented by more large cap - likes of (AMZN, APPLE, MSFT) and dividend payers (HD, LLY, ABBV, JNJ).

You won’t get that kind of advice here but ask yourself this question, “If growth is so great, why dilute – diversify – it with lesser stuff?”

Denny Schlesinger

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34

Sorry MASAR, but this is ETFs, 401Ks and portfolio management and is OT and will be deleted.
Saul

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35

RB,
My suggestion is to keep your growth portfolio size small enough that you don’t get bothered by market gyrations but large enough to keep your interest. There’s no magic number. After building your confidence in your high conviction portfolio, my suggestion is that if you feel good about it, go in for 100% growth stocks, or start working your way towards 100%. As for the rest of your money, do whatever gives you comfort. This board is focused on growth stocks, so we want all discussions focused that way. There are boatloads of value and dividend boards out there if your interested.

Take your time. Read the earnings press releases, and follow the comments on the board. You will find that you will understand why you bought something and how its doing. Some comments on this board you’ll agree with some you won’t. Scale your allocations to your opinions about the stocks.

In the end, if you loosely follow allocations of some of the investors on this board, you will end up with your own, unique portfolio that should crush the market.

Good luck.

bulwnkl

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36

Hi Saul, and the rest of this amazing board of contributors -
This is my first post. I have waited a long time to thank you and this thread contains allot of appreciation so I think today is the day. I will be brief.

Oct 2015 I moved from a passive Index Fund to Stock investing. I bought my first TMF membership at that time. 2015-2018 I became addicted to buying the latest recommendations. My position sizes were 1% to 3%. I had so many stocks they just mirrored the S&P. It took 2 years and many hours of study to get just past the S&P.

I stumbled across Saul’s board around 2017, and reviewed his concentrated portfolio, and thought “I couldn’t do that”. And kept buying the latest Fool rec. Then I would ignore the board for 6mo, and check back in. But I kept telling myself “I couldn’t do it”.

In 2019 I committed to concentrating my portfolio. I had one huge winner in my near 100 stocks. SHOP had grown to 15% of my total. I thought it was getting too hot so I sold 50% of SHOP bringing it to 7%. I distributed the funds into OKTA & AYX. SHOP is now back up to 10% of my portfolio. SHOP has outperformed but I have no regrets. I really like the way my portfolio is shaping up.

I continued to consolidate through 2019 while paying much closer attention to Saul and Co’s analysis on each company. Today, 12 company’s make up 75% of my portfolio. This is not as concentrated as most of you, but it is a big change from my previous 3-4 years.

DDOG 11.60%
AYX 10.83%
OKTA 10.01%
SHOP 10.08%
ZM 6.69%
TTD 6.20%
MDB 5.52%
MELI 3.68%
LVGO 3.69%
FSLY 3.07%
CRWD 2.31%
ZS 1.52%

In 2018 my total portfolio performance was -8%. In 2019 +35%. YTD 2020 (as of today) I’m +52%.

Each day this week I have been dropping the number of years to my retirement date… as my goal is getting closer with this incredible performance.

In the future I hope to contribute some real value to you with a stock analysis. Today is just to say thank you, thank you, thank you; I’m so grateful to you all, and I’m so very glad I bookmarked Saul’s site on my browser in 2017.

Best,
Russell

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37

Hi

35% allocation to a single stock seems a bit risky for concentration risk. Depend on the size of the portfolio, i would suggest 5 to 10 companies (unless you have million dollars of fund, you can increase the number of the companies).

For example, I am holding about 5 stocks and average about 20% per stock. If i have high conviction on the stock, i may deviate 20% rules and increase to 25-30% range for awhile. If i dont feel comfortable, i will sell down the stock to reduce the size of the portfolio.

Happy investing!

Chenge

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I can testify that your strategy works, and I couldn’t agree more. I think that most people, IF, and it’s a big IF, can desensitize themselves to fear, they follow your methods too. It isn’t rocket science.

My suggestion to those who have been to fearful to try, take a small amount, say 25% of your portfolio, and give this a try for a year. If you aren’t successful, it ain’t the end of the world. Whoever loves you with that 25% of your investments, will love you without that 25% of your investments.

My other suggestion would be to think of your gains as a margin of safety. The better you do, the more insulated you are… bilwnk

Whilst this could be a good starting approach, after investing for a few decades I’m not necessarily planning my portfolios in that kind of experimental way BUT I do use portfolio strategies in different places for different reasons, (opportunity landscape of the economy and the stock exchanges, availability of investor information, tax regimes and most importantly employing a companion strategy in order to produce high yielding income as an alternative to holding cash).

As a result in case it helps anyone short cut their thinking or starting approach, I can share the data on the performance of how a US based high growth stock portfolio compares with balanced and income portfolios over the years, (which feels robust enough to draw some conclusions from in terms of investing timeline and in terms of $ deployed and # of holdings).

It is also a look at tracking performance in a different way to how we typically look at our high growth investing portfolio which usually we review in terms of YTD % growth and % returns year by year. I haven’t quite made up my mind how much I want to get out of this measure, but anyhow - for what it’s worth… here goes.

As some may recall I hold a US high growth stock portfolio, a mixed growth and income portfolio in HK and a predominantly high yield dividend income portfolio in Singapore, (mostly via my SG brokerage account which is dividend and capital gains tax free).

I have kept a record of all purchases and sales over the years and whilst on occasions, (for instance when sailing around Indonesian islands), I failed to record year end stock prices to allow for calendar year % returns, I can share the performance measure of returns according to year of exit transaction. I have tabled below the average % RoI for all sales made per year of sale (irrespective of length of holding). I joined this board in 2016 and started employing a Saul like strategy in earnest from 2017.


**Portfolio  2016 2017 2018 2019 2020_YTD**
**US_(growth)**21%  44%  35%  55%  30%
**HK_(mixed)** 25%  33%  39%  -5%  81%
**SG_(yield)** 14%  13%  12%  17%  -25%

As it stands gains on the current holdings in my portfolios according to Yahoo are:
US - up 92%
HK - up 15%
SG - up 10%

Leaving aside the fact that this doesn’t tell the full story across exits and current holdings and doesn’t normalise for length of holding (IRR would be a better measure), differences in volatility between the markets nor considers dividends and that 2020 is work in progress given where we are at in the year and the repositioning activities during the CV-19 crisis; it clearly highlights that the high growth portfolio strategy produces consistently higher levels of absolute returns both in with regards to returns on completed transactions as well as gains within the total current value.

Anyhow - hope this was of interest and perhaps provides re-assurance for those just getting started. The purpose of this is not to take this conversation in a portfolio strategy off topic direction but to reinforce Saul’s high growth portfolio approach with some real world benchmarking performance data.

Ant

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39

The bigger the fund size, the higher allocation to each company. If you have 5m fund, assume you only invest in 5 companies and each company will be 1m on average. If something goes wrong, it will be painful.

Sorry, this discussion is really portfolio management, and will be deleted.
Saul

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40

Hockeystik and others, respectfully, Saul has repeatedly asked that this board is not for discussions on 401k, IRA, Portfolios or retirement plans. There are boards on TMF specifically for this! Please observe the rules.

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