Kofi announced results today which were not only growing at a great rate in almost all measures, but the rate of growth was accelerating.
Saul
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I bought more, incredible growth
I added to what was already my biggest position, which was already oversize, which is against my principles usually. But when they are able to accelerate growth instead of seeing it slowing gradually, and it’s growing at 40 or 50% on most metrics and is selling at a PE of 20, I just felt it was time to add.
Saul
For FAQ’s and Knowledgebase
please go to Post #4020
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I added to what was already my biggest position, which was already oversize
Out of curiosity, Saul, how aggressive do you tend to be with trimming your largest positions as they appreciate? And I don’t mean because you need some cash to invest in something else, but purely from a portfolio management perspective. Put another way, if you have a 10% position today in an undervalued company (I know you’ve said 10% - 12% is your max) and it begins steadily appreciating, how big will you let it grow before you start trimming even though you think further appreciation is very likely?
Thanks!
Neil
Out of curiosity, Saul, how aggressive do you tend to be with trimming your largest positions as they appreciate? And I don’t mean because you need some cash to invest in something else, but purely from a portfolio management perspective. Put another way, if you have a 10% position today in an undervalued company (I know you’ve said 10% - 12% is your max) and it begins steadily appreciating, how big will you let it grow before you start trimming even though you think further appreciation is very likely?
Good question Neil. Here’s the convoluted answer.
As my number of positions has shrunk down to 14, my maximum has naturally had to increase. Now, you may ask, how come I’m down to 14 positions since I usually have 20-28. Well, in a booming market, if I have some extra cash, my own stocks are usually fully valued, so I look around for other companies that I’m not familiar with, or new recommendations, or old recommendations. However, in the ridiculous market we’ve had this year, most of my great companies are undervalued, so when I have extra cash, I tend to plow it back into my tried and true, and not worry about looking for something new, unfamiliar, and untried (by me).
Well Monday, my Bofi, which is my biggest, had gotten up to 14%, which I thought was really too much, so I sold it (at $77) down to 13.4%. (It had gotten so big because I had added at $71, $69, $67, $66, and $65 on the way down.) Then today, I bought back half of what I sold yesterday at $74.50. I wasn’t doing it as a trade to make a couple of dollars, but because the accelerating growth made what was a great story, an even greater story.
As far as how far would I let it grow, that would depend probably on my conviction in the company, and how totally secure I felt with it. And how extended it is. For instance, I when I look at my log graph of trailing earnings on BOFI I see a nice steady line growing at almost a 45 degree angle, and actually curving up slightly (accelerating). At $4.18 trailing earnings, and the $74.50 price I bought at, it’s at a 17.8 PE!!! and growing this quarter at 41% and growing four quarters trailing earnings at 37% over trailing earnings of $3.05 a year ago. However if a stock like Avignon, or PFIE, took off, I probably wouldn’t probably wouldn’t let them get above 10%, because they are inherently not as consistently reliable as BOFI. Not their fault. It’s just their nature. Those are two extremes, I grant you, but it gives you an idea. Then if I start trimming something, and I look for a place to put my money, I probably wouldn’t add more to BOFI now, because it really is a big part of my portfolio. For instance, it’s 7 times as big as my INBK and 6 times my SCTY and AEYE, and almost three times as big as SZYM, etc.
Hope that helps.
Saul
For FAQ’s and Knowledgebase
please go to Post #4020
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re BOFI- you don’t see many companies with that kind of growth rate selling at such a reasonable P/E in a bull market.
Which makes me think I may be missing something. But not bad enough to make me sell. In fact I bought a little more today too.
Small caps have been out of favor this year. I wouldn’t worry about today’s price movement. The results were great. As Buffett has often said, in the short term the market is a voting machine, but in the long term it is a weighing machine. If BOFI keeps putting up results like this, the weighing machine will eventually take over and we’ll all be very happy investors.
Don
Look, 8 months ago, the price was $106 and the trailing earnings at the time were $3.26, for a PE of 32.5.
Now it’s growing even slightly faster and has a trailing PE of 17.8, just about half as big.
Ridiculous.
Saul
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I also added today. If it down some more, I will purchase more.
Wayne