Anirban's portfolio sells

Investment Analysis Clubs Saul’s Investing Discussions
#12

some comments…

  1. I 100% back the desire to learn and experiment the way one wants and that is the correct way as well. It is important to learn on one’s own what works for them and what does not. Insight and emotion are important components of investing. People often say one needs to get rid of emotions to do well and I am not sure I agree with that. It is very much part and parcel of who one really is and can be.

I don’t think Anirban is playing a roulette here - unrecoverable risks. His results can be anywhere but they are unlikely to be devastating relative to the market. So his experimentation is safe from that perspective.

  1. There are certain things one cannot learn fast enough because many kinds of information are not additive. Investing is an evolutionary journey. I am so much different myself than what I was a decade ago and I am sure that is again going to be the case 10 years down the road.

  2. I don’t think I have personally analyzed even half the stocks with rigor in last 10 years that Anirban has done in just last year. So hats off to him. I think he is off to the races. 2015 may or may not be his best year but I am convinced that he is all set for an awesome 2025 timeframe with his methodical approach. I like to throw curve balls his way just like others throw it my way. I learnt the most from such exercise.

  3. Indian markets are pretty sophisticated despite one Satyam in distant past and a few Harshad Mehtas along the way. All those past hiccups have made the market far more mature and less fragile. Indian has the second largest number of firms listed after the US. It is also far more sophisticated than many other nations especially China as investors have freedom to short stocks. Shorting brings a lot of stability and health to the markets. Indian markets have healthy liquidity as is evidenced by barely a dozen Indian firms having to trade abroad unlike China. HDB is a conservative exceptionally run bank with 20-30% growth for more than a decade now. It is a company that pays pittance to its management who get paid like government servants. HDB is a kind of firm where one can put 100% of the portfolio. There will be all kinds of volatility but the risk of permanent capital destruction is pretty low. We followed HDB with great intensity during the days of Global Gains newsletters. Those boards are now public so anyone can see the past analysis and progress.

Anurag

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#13

Is anyone maintaining a public spreadsheet on Saul’s existing picks with their relative allocations going forward? I would myself like to see the ability of being able to jump successfully. I can maintain one for the board. Saul shared his picks so far but not the relative capital allocation. If he agrees to share that info, we can all witness the magic in action and maybe enrich ourselves too.

anurag

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#14

If you follow this strategy, I can say with high conviction that you will not be successful in the long run. I cannot say this a 100%, but very few people do this successfully. Saul is one of them. You cannot predict how your stocks will behave. There are always periods when stocks perform really badly and then suddenly they will turn. INFN is an example. TSLA is the other way round. So your approach above will essentially mean, you buy TSLA, ride the stock from 30 to 290 and then jump into INFN just before it starts going up.

What you are talking about is market timing. There’s no element of analysis/thinking it it, right? If you think INFN has significantly better prospects than TSLA going forward, then selling TSLA and buying INFN is absolutely the right thing to do.

If you read my portfolio review, for each one I sold there is a good deal of doubt regarding the potential going forward. TCS, I have soured on, after seeing how Kindel and company have been performing. I like the concept, I like Elfa, but I don’t like how they are running, and I can’t see them being a market beater. Since I also know that Q4 is their big quarter and the stock has been sold off, I bought a few calls as a play on Q4. I think the decision is sound, based on what one can gather by following the earnings releases.

The same story for INVN. Do I think they are over sold? Yes. Do I really believe in their ability to be a market beating investment? No, because I did listen to the conference call, and I looked at what happened with their deal with Apple, and I also looked at what else is out there with respect to competition. But I also realise that MEMS can play a big role in wearables and hence the stock replacement strategy. It reduces exposure, while allowing for upside.

With CLNE, it doesn’t really matter at all. It’s a tiny exposure and I still have calls for the upside punt. It was always speculative and will continue to be so for a while.

Let’s finally look at MTH. That stock came via a buy write for playing around with covered calls. It’s a stock I have owned for a while, and it’s been a good covered call candidate. I have written 7 calls so far, and I have been wanting it called away and it never does. I just replaced it with a leap and now I will continue with a diagonal type strategy. This is purely for fun.

Anirban

#15

HDB is a kind of firm where one can put 100% of the portfolio.

I have to disagree with this statement because in most case I think it’s crazy to put 100% in any one investment (even cash), no matter what it is. It is puzzling to me that you can have 100-150 stocks and then but 23% into a single one.

Chris

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#16

If you think INFN has significantly better prospects than TSLA going forward, then selling TSLA and buying INFN is absolutely the right thing to do.

I can give you much better or rather interesting language for this.

We had an extremely popular and influential advisor by the name Bill Mann who founded PayDirt, Global Gains and Fool Funds. He was also the lead advisor for HG for a few years and those days were eclectic. We used to have a 10-20% pop in seconds after a new rec was released. Then the whole show collapsed and while it was collapsing, he left all TMF newsletters to found the Fund.

He used to say: “Every day, every one of my stocks is at sale, for the right price”. The logic is mesmerizing. Isn’t it? This is how he justified many of his sells at market peak in 2006 and he turned out to be right. But that was also a period where every sell would make the investor appear to be a genius. His mojo soon left him as his high convictions picks collapses one after the other and then later he sold firms like CMG and GWR and countless others on this logic only to see them gallop away to multibaggers. He even bought back CMG after missing more than a double in FoolX portfolio with an editorial admitting his mistake but the sells have continued. After 5 years, all FoolFunds perform sub par to SPY and only marginally better than the arbitrarily chosen indices. I occasionally send him jibes by posting on his Question authority. My latest was: "how is it your portfolios are out of cash at market peal when you justified holding high cash levels during 2009-10? " Of course, I never get responded back. But I digress. The problem is with false precision. There is no way of knowing precisely whether or not a company is overvalued since DCF analysis assumes a certain path in the future which is usually highly volatile and this creates false precision. He has been an abject failure so far. Today the Fool Funds perform exactly as TMF used to critique mutual funds a decade ago. The team has more of the folks that think like Bill Mann today - DCF based false precision. Now this can be done right. And some folks have shown it indeed. We have Jim Mueller’s rising star portfolio that is climbing in strength all the time, we have IV whose picks actually thrash the market with this methodology and then we have MFO where we see 90% accuracy based on careful analysis. But all these folks are exceptional individuals with amazing skill and insight. I will give TMF credit for tinkering constantly and be filling to fail to get these gems out there over time.

So yes, you are technically right that jumping to a better opportunity should lead to good results. The problem occurs in determining if the opportunity is actually a better one. The uncertainty of the future leads to rather unpredictable results. That is why I really want to track Saul going forward with reasonably precise spreadsheet so that we can all learn this remarkably useful skill. If anyone is actually that good or becomes that good who can do the flipping with > 60% precision, that person will become one of the leading investors in the world (rate of return wise) in 20 years. And probably quite rich. With results like Saul and for that long, I can only imagine him to be living in a mansion with butlers. I am sure he is modest enough to not let such vanity consume him.

Anurag

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#17

I have to disagree with this statement because in most case I think it’s crazy to put 100% in any one investment (even cash), no matter what it is. It is puzzling to me that you can have 100-150 stocks and then but 23% into a single one.

Well, think carefully about what you wrote.

a) those in the US with 100% cash have not done too badly especially in this low inflation environment for a at least 2 decades now. In general, it never happens. Such individuals usually have mortgages that gives them sizable leverage.

b) There are many firms where a 100% investment will not be devastating: BRK, COST, HDB, PEP etc. Each of these firms are actually so diversified effectively that they constitute a proxy to the national or international economy.

c) Jim Mueller (TMFTortoise)- one of the most astute investors and analysts has, I think, > 30% in NFLX and he does not recommend anyone else doing that. I can keep going on this way. And these are all very successful investors with long track records. And I say this despite being the one who has had 250+ stocks in his portfolio for 5+ years now. I rarely sell. Just collect the best in class firms from TMF world.

Anurag

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#18

It is puzzling to me that you can have 100-150 stocks and then but 23% into a single one.

I agree with you on this, Chris. It would not be the way I would choose to run my own portfolio. However I recall hearing that Peter Lynch used to have hundreds of stocks in his Fidelity Magellan fund, but there were only a handful that did the heavy lifting. So he might have 10% in Walmart, and then tiny fractions of a percent in numerous other issues.

Obviously he had a staff. That would be much more difficult for the individual investor.

Jeb

#19

Well, think carefully about what you wrote.

I think about risk carefully all the time.

a) those in the US with 100% cash have not done too badly especially in this low inflation environment for a at least 2 decades now. In general, it never happens. Such individuals usually have mortgages that gives them sizable leverage.

I wasn’t talking about what happened but about exposure to what might happen. There have been times (example: Germany during the 1920s) where holding all cash would have wiped you out.

b) There are many firms where a 100% investment will not be devastating: BRK, COST, HDB, PEP etc. Each of these firms are actually so diversified effectively that they constitute a proxy to the national or international economy.

Maybe, but as you said yourself one does not know what the future holds. BRK is a collection of many companies but for the others you don’t know what will happen. Everyone has heard of Enron, Worldcom, Lehman Brothers, and many other 100% losses. It can happen so why risk it by putting all your eggs in one basket.

Anurag, I don’t really think you would advise someone to put 100% in one company so why would you say it’s ok to put 100% in HDB? There are people on here would have considered going all-in on a single investment (sweet adeline did this recently). Why encourage them?

Chris

#20

Well, think carefully about what you wrote.

I think about risk carefully all the time.

a) those in the US with 100% cash have not done too badly especially in this low inflation environment for a at least 2 decades now. In general, it never happens. Such individuals usually have mortgages that gives them sizable leverage.

I wasn’t talking about what happened but about exposure to what might happen. There have been times (example: Germany during the 1920s) where holding all cash would have wiped you out.

b) There are many firms where a 100% investment will not be devastating: BRK, COST, HDB, PEP etc. Each of these firms are actually so diversified effectively that they constitute a proxy to the national or international economy.

Maybe, but as you said yourself one does not know what the future holds. BRK is a collection of many companies but for the others you don’t know what will happen. Everyone has heard of Enron, Worldcom, Lehman Brothers, and many other 100% losses. It can happen so why risk it by putting all your eggs in one basket.

Anurag, I don’t really think you would advise someone to put 100% in one company so why would you say it’s ok to put 100% in HDB? There are people on here would have considered going all-in on a single investment (sweet adeline did this recently). Why encourage them?

Chris

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#21

There have been times (example: Germany during the 1920s) where holding all cash would have wiped you out.

And in 1929 in the US, the equities would have wiped one out. The 10 sigma risk spares no one under any circumstance. One can only think in terms of fragility to events and not probability of the risk (Learnt from Taleb). One does not have to be blind to circumstances. If the inflation is high, moving into inflation protected bonds or very safe blue chips would help. If inflation is low, then cash can’t hurt. With sudden events, no one is really safe.

If BRK or COST crash as businesses then almost entire US market will tank.

BRK is a collection of many companies but for the others you don’t know what will happen.

Not really. COST represents the entire US consumer market across 100s of industries. The management culture they have is eclectic and the kind that is CEO independent. As best as they come indeed. PEP is present in 100+ countries and has 100+ products in food and beverages. It is a proxy to global consumer spending. HDB funds every segment of Indian economy and the eclectic CEO independent management they have ensures that Bank performs superbly at all times. There is a reason why HDB has always been more than 3x expensive on P/B as compared to almost any bank out there. The supremely low risk is that reason. It is the same reason why COST trades way more expensive than WMT despite WMT having much better business operations for decades. Check for yourself what happened during 2008 crash. COST was among those firms that crashed relatively less. It was one of those rare islands of safety where everyone withdrew. So there are firms like those around.

Anurag, I don’t really think you would advise someone to put 100% in one company so why would you say it’s ok to put 100% in HDB? There are people on here would have considered going all-in on a single investment (sweet adeline did this recently). Why encourage them?

If it is firms like the ones I mentioned, then I really have no objection. Those folks only need time diversification or dollar cost averaging across multiple years to reduce risk.

Everyone has heard of Enron, Worldcom, Lehman Brothers, and many other 100% losses.

Very few firms are like those and you would be well served in reviewing the above failures. None of these firms had great management or business transparency and both of these are needed for any investment to be worth long term. There are better examples though. For example, Kodak or General Motors. These firms were great at various points of time but not very diversified. But since the business was largely transparent they gave investors decades to exit safely as they witnesses slow but persistent declines over decades. For any firm, one has to watch out periodically for any sustained changes in the business and that is true even for the firms I listed.

Of course, if one does not have time or inclination to study or understand anything at any level high repute low cost mutual funds or broad market index or target retirement funds are always reasonable options. But for those who can study deep and hard, barely a handful investments can do pretty well.

Anurag

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#22

This particular thread makes me feel that you are not making conscious decisions yourself, but are using Groupthink cloud your judgment on making buy and sell decisions.

Vish, you are portraying “GroupThink” as a bad thing, but it actually is a good thing to some extent. It means getting ideas from others and using this information after making your own decisions. Groupthink is every single MF recommendation. It’s an idea you get. YOU decide whether or not to act on it. Every single stock in my portfolio I got from somewhere else. Several from anirban in fact. I even got AMAVF originally from an article on Seeking Alpha a couple of years ago. I added to my INBK after listening to anirban. I sell things after getting information from various sources that makes me feel that my original decision is no longer valid. EVERY single stock I’ve ever owned (except perhaps Apple), I learned about from some recommendation somewhere, From Groupthink. I then evaluated and decided if I was interested in it. And if I was, and only if I MYSELF was, I bought it.

I don’t jump in and out of stocks. For instance, I’m well into my third year in BOFI, my biggest position and over 15% of my portfolio now, and starting my third year in CELG. my third biggest and 13%. I’m finishing my second year in Synaptics. I’m in my third year in Wabtec. This isn’t the pattern of someone who jumps in and out. I buy a stock to hold forever. If the thesis changes though I’m willing to reevaluate my position. I don’t feel that just because I once decided to buy it (under different circumstances) I’m required to stay with a mistake forever. I hope that I helped a lot of people to get out of WPRT for instance, and save whatever cash they had left. It was at $32. It closed yesterday at $2.31. The defenders said just what you say, essentially that you shouldn’t change your decision once you’ve made it.

There are some companies that are less successful, and will continue to be less successful, than others. I’m always glad to learn more about my stocks from other people (and don’t think of it as Groupthink).

Saul

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#23

From my perspective as a beginner who’s trying to figure it out, it makes the most sense to me to have 4-6 winning, high conviction stocks at most (ok maybe 8 at the most but even that small number seems difficult for me to follow full time)that are followed religiously as opposed to 50 positions with some winners and some risky picks that have the potential to break out.

With so many positions spread out it seems impossible to be right on most of them and the losers ball and chain the portfolio earnings.

And the winning, high conviction stocks I follow at the first sign of the story changing or bad news I will sell out and take the profit while continuing to monitor, fortunately I haven’t had to do that yet.

Going all in on SWKS a month ago was probably very dumb on my part and I should trim the position back regardless of them being the winningest of winners right now.

Sweetadeline

#24

Hi Adeline, You seem to be making good calls right now, but as you get a larger amount of capital, you’ll realize, “Whoa, I don’t want to risk all this on one stock!” But it sounds like you are having a lot of fun now!

Good luck!

Saul

2 Likes
#25

I don’t jump in and out of stocks. For instance, I’m well into my third year in BOFI, my biggest position and over 15% of my portfolio now, and starting my third year in CELG. my third biggest and 13%. I’m finishing my second year in Synaptics.

Saul,

I wasnt suggesting you jump in and out of stocks, but you sell more quickly than others. You have a really good process and it works really well for you.

I dont think Groupthink is such a bad thing if you understand what you are investing in and believe in the investment. However, asking you what a good investment is right now and then blindly ploughing money in there is definitely not a good groupthink.

When TMF recommends stocks and people buy, it is also groupthink. However when you read the rec, if you understand the market and then invest, your results will be much better.

I do understand that you generate ideas from fellow Fools and then invest, however let me ask you one thing. The stocks that you have held for longer in your portfolio, are they your own picks or were they also recommendations via other Fools. Also have you ever thought why you sell out sooner on some of the stocks, why do you do that sooner than others and how have these stocks performed after you sell. You made a comment earlier that you only need to worry about stocks you own, not ones you dont. So I believe you havent looked back, but maybe you should.

The reason I say that is, if you (i am thinking about myself here) invest purely because others have said so, I have tended to sell a lot sooner than I would like. In other cases, where I truly believe in the story, I have kept those much longer and have had really good results.

As you can see from my portfolio composition, HDB is disproportionately long. That is my longest held stock. At least 13 years so far. I like LTBH because David Gardner has made his fortune by holding stocks like AMZN, SBUX, NFLX, AAPL etc. for a very long period. That is in my mind the only way to build sustainable wealth. At least that is how I look at it.

I should not be saying these things to you, who in my mind is an extremely successful investor and has done really well over the long run.

I just wanted to shed some light on my thinking.

Vish

4 Likes
#26

An off-topic diversion…

And in 1929 in the US, [holding all] equities would have wiped one out.

That got me wondering… was it that bad? Or stated another way, if an investor then was not using any leverage, was diversified in equities, and did not sell, what would they have had left at the bottom of the slide? I went looking for a simple answer. Most sources only mentioned the Dow index, but I eventually found something referencing the “S&P Composite”*, which I hope had a broader base than the Dow. That showed the loss was about -54%.

Of course that falls far short of the full picture of the crash, in particular because it does not show the impact of investing on margin, which so many were doing at that time. It was margin that magnified the fall, wiping so many people out. But those following conservative (no debt, diversified) investing rules but concentrated in equities, and who just held on, could have at the bottom still had about 45% of what they started with. Terrible, but not exactly wiped out.

(All of which is quite irrelevant and off-topic to the subject at hand, if only because the current topic concerns the viability of a single company while my example is of an index.)

*(http://www.ritholtz.com/blog/2011/08/swing-charts-of-sp-1929…)

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#27

This particular thread makes me feel that you are not making conscious decisions yourself, but are using Groupthink cloud your judgment on making buy and sell decisions.
Vish - I’m not sure why you are directing this at Anirban (who I am sure can answer for himself not that he should have to); but I honestly can’t think of anyone on this board besides possibly Saul and Denny who invests as much in research and independent thought as Anirban. Whilst Groupthink if you are contrarian may seem risky, Anirban is one of the last people on this board you should even think about addressing this to.
Ant

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#28

I dont think Groupthink is such a bad thing if you understand what you are investing in and believe in the investment.

And, it depends a lot on the group. If one just follows the market news and that is the group, then is necessarily going to be behind the curve. If one has a group like this, then the quality of information and the timeliness of that information is likely to prove more useful … especially since there are few issues where this group has a simple consensus, so one is constantly being reminded of the other side.

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#29

That got me wondering… was it that bad?

Yep. In the great depression, 90% of the stock value was lost by 1932 when market bottomed. Banks collapsed without FDIC protection and countless lost all their cash as well - invested or not. Any individual stocks investors might have faced 100% loss with large number of bankruptcies among publicly traded firms. That coupled with massive unemployment and deflation was nasty for sure. That was also an era of no social security or medicare. So unless one had cash in earthen pot, they most likely suffered real bad.

Events like that spare few.

Anurag

#30

Whilst Groupthink if you are contrarian may seem risky, Anirban is one of the last people on this board you should even think about addressing this to.

Why dont you let Anirban make that call? You dont know what exchanges me and Anirban have on these boards.

Vish

1 Like
#31

You seem to be making good calls right now, but as you get a larger amount of capital, you’ll realize, “Whoa, I don’t want to risk all this on one stock!” But it sounds like you are having a lot of fun now!

Hey, thanks for the reply Saul, I appreciate it.

The more assets you have the more you have to lose and I think that’s both a blessing and a curse, but mainly a blessing :slight_smile: All of the people here are more savvy investors with a wealth more experience and capital than I have (my portfolio is a shade under 52k), but being reckless by others standards (I knew SWKS was a winner and had zero apprehension the stock would depreciate when I bought them, otherwise I would not have been so bold) allows me to tread where most won’t go and I feel like that gives me a tangible advantage.

Sweetadeline