April Investing Decissions, WillO2028

Investment Analysis Clubs Saul’s Investing Discussions
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I wasn’t going to post my portfolio Summary this month because Ive been so busy; but, more than 5 years now is habit difficult to put down. I don’t go through the companies much. I won’t be giving any sage advice.
Even if I’m only looking for confirmation of choices this month! Stan Druckenmiller is not the worst place to look. His hedge fund generated 30% returns for 30 straight years. I do feel some of what he had to say is worthy of posting here.

Some of his advice includes:

  1. Focus on the future.

“Never, ever invest in the present. It doesn’t matter what a company’s earning, what they have earned… you have to visualize the situation 18 months from now, and whatever that is, that’s where the price will be.”

2)Know where to participate.

“The mistake I’d say 98% of money managers and individuals make is they feel like they got to be playing in a bunch of stuff. And if you really see it, put all your eggs in one basket and then watch that basket very carefully."

  1. Don’t be afraid to bet big.

“If there’s one thing I’ve learned from him (George Soros), it’s that when you’re right, and you know something, you really feel it, you can’t have enough.”

Also, Smorgasboard’s distills Saul’s advice we’ll, IMO
I suspect all of us have had the experience of selling out too early and then never being able to get back in, or just not getting in because we couldn’t see the growth through the current metrics and valuations.

April was about flat for my portfolio. I remember being up just a little; but, I forgot to take a snapshot of the portfolio on the last day🤨

Since the time I began to try to follow Saul’s advice and listen to the contributions from everyone here:

Year % Change
2018 +38.9%
2019 +32.9%
2020 +203%
2021 +46.8%
2022 (-)58.55%
2023 +66.27%
2024 Month to Date Year to Date
January (-)4.31% (-)4.31%
February 16.32% 11.3%
March (-)3.37% 7.55%
April ~ 1% **~**8.5%

Bolding is of where I sold, so that I could add elsewhere.

**~**4/30/24 3/31/24 2/29/24 1/31/24 12/29/23 11/30 10/31/23 9/30/23 8/31/23 7/31/23 6/30/23 5/31/23
Tesla 40.88% 35.38% 34.35% 31.93% 33.61% 34.84% 33.35% 31.46% 31.63% 35.02% 33.69% 33.11%
Nvidia 27.82% 28.41% 24.04% 21.75% 16.75% 13.58% 14.26% 6.84%
Pure Storage 6.07% 13.68% 12.80% 11.31% 9.65% 8.7% 10.64% 10.08% 8.97%
Snowflake 21.97% 18.29% 13.73% 14.11% 18.84% 19.07% 20.3% 19.21% 14.95% 20.01% 15.99% 16.03%
Cloudflare 3.26% 4.26% 13.77% 12.85% 12.95% 12.88% 12.59% 12.58% 17.93% 19.26% 19.80% 33.8%
Samsara’s 0% 1.32% 8.06% 8.82% 10.93% 8.87% 9.69% 8.38%
Crowdstrike 0% 5.26% 9.98% 14.11% 13.34%
Zscaler 0% 4.89%
Monday 0% 8.15% 7.89% 14.26% 16.16%
Datadog 0%
MongoDB
Cash 0% 0% 0% 3.7% 2.42%

The following is not investment advice, it’s just my own way of thinking about what I’ve learned here and from Saul’s Knowledge Base.

4/16/24

What I did: I sold 29% of my ~14% position in Pure Storage to buy 12.5% more Tesla, bringing Tesla to ~38.5% of my portfolio.

Why I did it:

I’m convinced that Tesla is making the transition from an Auto Company to an AI/Robotics company (higher Gross Margins on work already done) and Mr. Market isn’t modeling this in🤩, maybe it won’t until it hits their P&L (although as of 4/29, share price is up >30%). There’s just too many moving parts for me to report exactly why I believe this and summarize it easily. I just don’t have time to do both right now. (I did end up posting a very lengthy explaination Tesla Q1 2024 Earnings Call - #8 by buynholdisdead here a couple days later).

What I did:

I sold 40% of the now ~10% position in Pure Storage to buy ~22% more Snowflake.

Why I did it:

I believe the Snowflake general releases coming this summer are going to be “must have” functionality needed by every Enterprise, in order to realize the productivity gains they are clamoring to get out of AI- why the largest Enterprises are buying so many GPUs.

Re: Nvidia

My assumptions are that with 70% GM and 5 years of continued domination underpinning their moat and expansion of software sales (eg Morpheus, GROOT, etc) an EPS/sales of 80 is likely, leading to a share price increase of at least 324%, over the next five years!

Feel free to argue why I’m wrong; but, I may not respond due to being so busy lately. I do appreciate other here putting in so much time. I hope there isn’t any feelings that I’m being rude in any way.

Best,

Jason

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I honestly don’t understand how so many people can bet big on Tesla when it is run by such an erratic individual who, in the last two years at least, has gone out of his way to undermine shareholder value. The fate of Tesla is more inextricably linked to its CEO than any other company out there. He has destroyed his auto brand with his toxic behavior and I can’t see how anyone can trust that he won’t do the same to FSD, batteries, space X, neuralink, etc… Remember, Nick Tesla himself died penniless because of his mercurial nature. I value the stewardship of great leaders like Jensen Huang, Jeff Green, and Howard Kurtz. It seems to me that those betting heavily on Tesla’s future are overlooking a lot of serious flaws in its leadership. Just my opinion, but I worry for all our friends on this board who are entrusting so much of their money to such a wild card personality who doesn’t seem to want to focus his runaway ego on the success of his companies. Just my two cents.

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Jason, I get this is the opportunity you see. But when will this opportunity be material, in your opinion? I don’t see any of Tesla’s alleged new businesses being able to scratch the financials surface when you compare it to 1.85 million cars sold in 2023, at least not in many years.
When I see you putting 40% on this bet, I feel this is gambling. Respectfully.

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I believe it is – and not because of anything about Tesla, but because it’s 40%! Let’s not make it about the company, but rather the portfolio strategy. I won’t quibble with @WillO2028’s choices (he’s mentioned many times he has a high risk tolerance, and that he understands what he’s doing) – or those of others who have made even more extreme allocations. We’re all free agents.

But I wouldn’t recommend this strategy to others. See my other post: A 15% allocation is a whole lot - #17 by PaulWBryant

Bear

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So, not about Tesla, I understand and appreciate the words of wisdom here regarding portfolio allocation. This issue has been on my mind a lot. I believe XMFRob and others, over the years, were asked to not post their portfolios here due to ‘extreme’ % in just a few companies.

About Elon Musk, what I’ve discovered:
Like everyone else, I don’t understand Elon Musk’s tendency to make statements that appear to me to be careless musings of a madman. However, every time I chase down a story about what he’s said that was seemingly inexplicable and there have been many, I either found that his statement was quickly remedied by his apology and actions or was more often completely falsely reported in the first place. Why he’s so careless? I can only imagine that genius is actually closely associated with madness. I recommend if you’re going to invest in Tesla, follow his actions, not so much what he’s been reported to have said, even if it turns out that he did actually say it.

I’ll just add, Charlie Munger only ever personally held three positions, two companies and a lot of Apartment Buildings. I do wish I felt more confident about investing into additional companies.

Best

Jason

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In 5 years, do you expect Nvidia to be a $7.5T company? How do you justify the largest company in the world (it likely will be) having a EPS/sales of 80.

I’m not sure if you meant P/E, because it’s impossible for EPS to be 80 times sales…

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Yes and yes. I believe the case for Trillion being the new Billion, because of information theory and the law of increasing returns, for those few companies enabling the rest to benefit in the age of AI, is wel substantiated. And, a PE of 80 for Nvidia is what I meant to write; but, little matter when taking into consideration my repeated arguements against trying to base investing on valuations😆.

Luckily I’m likely less frustrated with those who continue to follow the law of diminishing returns and or the law of large numbers than they are likely frustrated with me.

Again, I’m really trying to not be rude here. I totally understand if this sounds flip to some.

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I’ll definitely take the under on NVidia becoming a 7.5T company in 5 years :slightly_smiling_face: Not frustrated at all, we can all have our views, that’s what makes a market.

On having a P/E of 80, maybe I’ll offer some pushback for you to consider. What does P/E represent? Without any growth, that’s the number of years it’ll take for an owner of a company to make back their investment (assume the stock market was closed and the only way to make your money back was through earnings). Obviously, growth is an imp factor and companies that are in the fast growth mode can have very high multiples. But, pie in the sky stuff never pans out as we saw the last couple of years.

Further, this only works for companies that are smaller and the focus of this board is to identify world beating companies at an early stage. Law of large numbers eventually catch up.

Nvidia making $95B in earnings in 2029 and expecting the market to pay 80 times that doesn’t sound feasible. Where’s the money going to come from, do you have any thoughts on that? They will be 25% of US GDP!

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The recent earthquake in Taiwan was another reminder not to gamble with ~70% of your Portfolio in 2 cyclical stocks. If the earthquake epicenter had been a little closer to semi production, it could have taken out most of the world’s leading edge semi production.

No one can predict the future, the next Black Swan, etc. so why Gamble with your retirement with a couple of cyclicals?

I can’t understand why anyone would want to own a large position in Tesla right now, much less 41%, a cyclical that is getting destroyed in a high interest rate environment just because they might crush it in 2027-2030 with Optimus. As folks have pointed out, Optimus has a couple prototypes, it’s not a business yet. This board is about trying to follow the numbers, not gambling.

There are quite a few growth stocks firing on all cylinders right now, TMDX, ASPN, NU, and APP are a few that come to mind.

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FoolishJeff, again I appreciate your concern. I do believe we’re talking pst each other here. I’m not trying to follow the numbers. And it’s not gambling to ignore macro and focus on company execution, despite the macro - there in lies the opportunity.

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