Beating the Market

Back last September I suggested a portfolio of $25,000 that would beat the market over 5 years (post 21799).

I haven’t posted an update for a while - I’ve been rather busy moving from Wales to set up a new home in Spain.

I’m not proposing to give monthly updates on this - it would become repetitive. But now seems a good time to review progress.

The portfolio I proposed was as follows:

Type   Stock                   Symbol  Start Value  Value at     (%)

Core   Adobe Systems.          ADBE         962.19   1,161.46   20.71%
Core   Amazon                  AMZN       2,405.50   2,654.12   10.34%
Core   Broadridge Fin. Serv.   BR         1,024.50   1,015.38   -0.89%
Core   Casey’s General Stores  CASY       1,054.89   1,012.38   -4.03%
Core   Walt Disney             DIS        1,017.17   1,254.78   23.36%
Core   Facebook                FB         1,018.96   1,115.15    9.44%
Core   Alphabet                GOOGL      1,619.64   1,680.38    3.75%
Core   Mastercard              MA         1,008.20   1,118.80   10.97%
Core   Middleby                MIDD       1,496.28   1,610.15    7.61%
Core   Markel                  MKL        1,845.04   1,923.64    4.26%
Core   Starbucks               SBUX         977.04   1,044.65    6.92%
Core   Transdigm               TDG        1,724.40   1,533.68  -11.06%
Core   Tesla Motors            TSLA       1,032.50   1,520.05   47.22%
Core   Under Armour            UA         1,019.20     500.73  -50.87%
Core   Visa                    V            985.80    1070.68    8.61%
Growth BOFI Holding            BOFI       1,006.65   1,111.95   10.46%
Growth Mitek Systems           MITK         994.48     886.58  -10.85%
Growth Universal Display       OLED       1,000.96   1,377.52   37.62%
Growth Shake Shack             SHAK         987.00     921.76   -6.61%
Growth Shopify                 SHOP         991.76   1,624.50   63.80%
Turn   Chipotle Mexican Grill  CMG          825.46     927.24   12.33%

Totals                                   24,997.52  27,065.58

Total Change              8.27%
S&P 500 Change            8.13%
Performance vs. S&P 500   0.14%

I didn’t have a great start. The portfolio trailed the S&P by 2.17% after one month and then 7.22% after two months, but it has gradually made ground from there to be just 0.14% ahead of the market as of the close last week.

This is a long term buy and hold portfolio. I have not made any sales or additions since inception and it is unlikely that I will do so in the foreseeable future unless something extraordinary happens.

The portfolio is ‘real money’ in the sense that I do hold all of the stocks in my own portfolio to at least the value shown. But my holdings are not in the same proportion as in the example portfolio. I have much heavier weightings for BOFI and TSLA, for example. In my own portfolio I trimmed CMG when Monty Moran left, but I have since added back most of what I trimmed.

I also hold a lot of stocks and some option positions that are not in the portfolio. (Mainly UK and European stocks, and some ETFs for international exposure - plus the odd old reminder of past mistakes)

I will post more on why I have chosen each of the stocks from time to time. But if you are curious about any of my picks, please feel free to fire away and I will answer as best I can.



UA 1,019.20 500.73 -50.87%

What happened to Under Armour? a 50% drop in 6 months. Wow.

I sold in 2015 because I thought it was overvalued. Maybe it’s to look at it again?


Correction: I sold 1/3 UA on Feb 11, 2014 for $108. I sold the rest for around $70 between Aug 25 and Sep 2, 2014. Have there been any stock splits since then?


I sold 1/3 UA on Feb 11, 2014 for $108. I sold the rest for around $70 between Aug 25 and Sep 2, 2014. Have there been any stock splits since then?

I looked up the splits there was a 2:1 split on 4/15/2014 and another 2:1 split on 6/20/2014.

That means my split adjusted sales in 2014 were $27 and $35. Today’s price is $17.60 or about 50% lower then my last sale in 2014. But the share price was also $35 in September 2016 so the stock basically went nowhere in 2 years and then recently dropped 50%. Need to look at how the business is performing…


Need to look at how the business is performing…


Yes, under Armour has stuttered - to say the least.

That’s what happens when you have a high growth business that suddenly hits the speed bumps.

The thesis for UA is that it can grow ten-fold before it becomes the size of Nike. Because it is investing heavily in growth it will also see a significant margin improvement by the time it reaches that stage (reducing the apparently high P/E).

The issue then becomes execution. Before the current headwinds, Kevin Plank had a strong record of success in growing the business aggressively. If he can get back to that trajectory things will improve quickly.

I once did a back-of-the-envelope calculation that would suggest that UA could be a ten-bagger within ten years - IF (and that’s a big IF) KP can hit his targets. Of course, if he fails the share price will remain in the doldrums and UA will be a loser.

So, it all comes down to how much faith you have in Plank.

Given his past record, I am inclined to be patient for the time being.

A more nimble investor might well have jumped ship before now - but I am not as quick as our host so I have to manage with a more sedate investment style (a totally unmodified LTBH, or as Buffett might say, idleness bordering on sloth).



If I had ever bought Tesla, and if it went up by almost 50% to a level where its market cap was up there with GM and Ford, I would sell it. While I’m not expecting Tesla to crash and burn, I don’t think its current price is sustainable. I suppose, though, if the Model 3 is reasonably successful (probably even without making a profit), the share price could go to $500. But I think Shopify is a much safer bet.

Why hold both Mastercard and Visa?

I’m not saying they’re right, but this is Citron Research’s very negative view of Transdigm:…

I think Citron has been right often enough to be taken seriously.

Of the stocks on your list, I’m holding Shopify, Facebook, and Under Armour. I’m thinking about Mastercard and Middleby. I’ve held Alphabet and Visa, and I probably should have held on to Alphabet. I wish I hadn’t been so contrarian to my contrarian impulses to buy Under Armour, because buying Nike was sufficient - and safer.

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Hi Ian.

I don’t recall if I mentioned this back in September… My portfolio contains most of the companies in your proposed portfolio. In the “core”, I don’t own ADBE, BR, or V, but both BR and V are on my Watch List. The only “growth” company we have in common is SHOP, and I do own CMG.

I wish you the best of luck for reasons both selfish and altruistic!

OK… Now I need to share a different thought. My role at The Motley Fool has changed, and I won’t have time to do quarterly deep dives on companies like CMG, INFN, PAYC, and SWKS – the kind I’ve posted here previously. This board (and TMF message boards in general) is (/are) near and dear to my heart, so I’ll try to remain a semi-regular participant here. But I may have fewer relevant things to say, which means I will say less. But if I have something important to say here, I’ll do my best to get it said in a timely way.

Thanks and best wishes,
TMFDatabaseBob (long: AMZN, CASY, CMG, DIS, FB, GOOG/L, INFN, MA, MIDD, MKL, PAYC, SBUX, SHOP, SWKS, TDG, TSLA, UA/A; BR and V are on my Watch List)
See my holdings here:
Peace on Earth


If I had ever bought Tesla, and if it went up by almost 50% to a level where its market cap was up there with GM and Ford, I would sell it.

This is a long term portfolio. I have no idea where TSLA will be in a few months time. The thesis is that Tesla has the opportunity to be a world-leading automaker with additional world-leading businesses in energy storage. It can also be to autos what Apple is to phones - making high gross-margins in an industry where conventional wisdom dictates that low-margins will prevail.

Why hold both Mastercard and Visa?

There is a relatively small allocation to each and I think of them as a unit.

Citron Research’s very negative view of Transdigm

This has become more of an issue since the election. Transdigm has followed the same business model for many years and has delivered fantastic returns to long term shareholders (Often compared to the methods discussed in ‘The Outsiders’, a book which should be required reading for any investor). Whereas I admit there is a little whiff of Valeant about the model, I am content to stick with a winning formula over the long term. In general, I resist being scared out of investments, as in the past I have done this only to realise later that I have let a winner slip out of my hands (I’m looking at you Netflix).

I wouldn’t be in a rush to dump Under Armour - if growth resumes it can make fantastic returns from here (emphasis on the if).



I don’t own ADBE, BR, or V, but both BR and V are on my Watch List

Adobe is a superb business that somehow manages to fly under the radar - maybe you should take a look.

BR is not really my sort of business, but I felt that I should have a little stability in the portfolio, as a ‘hedge against myself’ and my proclivity for growth. I was heavily influenced by the fact that BR was a pick in a paid service run by an investor that I greatly respect. I was heartened to note that since I originated the portfolio two of my stock picks have been added as long positions in that same paid service. But my joy was curtailed somewhat when another of my long stocks was picked as a short by the same paid service! Ah well.

I will miss your regular updates and wish you the best in your new endeavour. I do hope you find some time to revisit the boards when time allows.


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There are a bunch of “The Outsider” titles on Amazon Do you mean his one:

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success Hardcover – October 23, 2012
by William N. Thorndike (Author)


Denny Schlesinger

There are a bunch of “The Outsider” titles on Amazon Do you mean his one:

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success Hardcover – October 23, 2012
by William N. Thorndike (Author)

Yes, sorry Denny I should have been more explicit. I was being lazy and jotted down the title from memory.


Not to worry Ian! I just read a bit of the preface and it’s my kind of thinking:

The metric that the press usually focuses on is growth in revenues and profits. It’s the increase in a company’s per share value, however, not growth in sales or earnings or employees, that offers the ultimate barometer of a CEO’s greatness.

Not only of a CEO’s greatness but also of an investor’s returns. I started frequenting the BMW Method board in 2004 where Jim’s (BuildMWell’s) focus was very much on CAGR which in time became the central tenet of my investing strategy. The difficulty was how to put it into practice, I’m not going to go there. One of my fiercest critics kept on saying that what counts is growth in earnings, that historic charts were not reliable indicators. Earnings don’t mean much if they don’t push up the share price.

Denny Schlesinger


tesla continues to innovate
Consider the new glass roof on all Teslas. It sounds like a styling gimmick, and it is, But more importantly it is put on at the end of assembly, glued in place. Meaning that large hole can be used to let robots unto the car interior.Machines are less flexible than people and need space to work.
I suspect the next Tesla assembly plant past Freemont will be the one where robots take over, cars designed to be assembled by machines. WAy ahed of competition
Unlike the S ,the 3 was designed with easy manufacturing snd assembly as a main feature, something that will really pay off when volumes climb in 2018.


Thanks, Ian. That was helpful.