CMF_BigECat Quarterly Update

Definitely not trying to match Saul’s reports, but here is my year end summary.
As I had previously said, I am trying to follow in Saul’s and Bear’s lead of summarizing my results. I am hoping it gives me a little accountability and perhaps an insight or two that I wouldn’t have had otherwise.

Before I start, I should note a couple of things. First, unlike Saul and Bear, my portfolio is made up of over 50 holdings. I know this makes it difficult to follow them all closely, but it does a couple of good things for me as well. One, with such a large portfolio, I am at a fairly low risk of seriously under performing the market as long as I buy good companies and since I use TMF for most of my selections, I feel comfortable there. Secondly, most of my larger positions have gotten there because they started as a small position and the gains have driven their move up the list. I like this philosophy of letting the winners run and really allowing the company performance pick my winners.

Overall, my performance for the year is +10.65%, which measures well versus the S&P, but lags the R2000 by a bit. I don’t mind this too much as my portfolio is (I feel) lower risk both because of the companies I own and because the portfolio is a little more than 10% cash and short term bonds.
Just for background, I will say that I am just a few short years away from retirement, and that these represent about a 1/3 of my net worth. With a defined retirement plan as well as a diversified 401K outside of the assets described here.

One final point, I will list here my biggest holdings, anything over 1.5% of the portfolio…. In total they roll up to a little over 50% of the total…

So here goes, here are both the top 10 and also happen to be any holding more than 2% along with the percentage from last quarter…

Ticker	  Q3      Yr End ‘16
AAPL  	 6.7%	     6.5%
BRK.B 	 5.4	     5.7
PRAA 	 3.9	     4.5
NSAM	 4.0	     4.5
TFSL	 4.1	     4.1
NFLX	 3.3	     3.7
ATVI	 3.8	     3.4
INBK	 2.0	     2.6
FII	<1.5	     2.3
CTRE	 2.3	     2.2

So of this top 10, there has been some shuffling among them as you can see from the percentage changes, but only two names changed. FII moved in because I added to it after a downgrade and what I felt was a price overreaction. FII is a mutual fund company that specializes in money market funds among others. Their earnings have increased lately due to reductions in voluntarily withdrawn costs when rates were very low. This, along with increasing rates creates a built in earnings growth path I like. They also pay a nice dividend and have almost no capital costs and so have very nice cash flow even at these interest rate levels.

INBK moved up into the 10 ten because of price increase during the quarter along with many of the other financial banks. They had been discussed on this board regularly but not for a while. I still like them.

Both KMI and LGIH fell out of the top 10. LGIH due to stock price drop only. Again, everyone here is familiar and I still like them. KMI dropped because I sold some shares, but truthfully, I did so only because of a tax loss benefit. I have since added almost an equal amount in ’19 LEAPs (after 30 days), which I plan on making a part of diagonal options going forward. KMI seems like a very safe play on energy. Their free cash flow is very large now that they cut their dividends back and the Presidential change should only help them going forward.

I did add to ATVI in the quarter due to price drop, and sold a little NFLX due to price and not wanting this high volatility stock to become too big a piece of my portfolio. I have been doing this periodically for quite a while as I move the capital into new ideas.

I also added to NSAM as well… Actually, NSAM here represents my holdings in both NSAM and CLNY, which are in the process of merging in a 3 way deal with NRF. The combination should unlock value as I explained in my 3Q summary. It has been moving up nicely all quarter and I expect it to continue.

Less than 2% holdings….

Ticker     Q3        Yr End ‘16
SKX	  <2.0	        1.7%
CGNX	  <1.5	        1.7
GOOGL	  <2.0	        1.7
KMI	   2.4	        1.7
PAYX	  <1.5	        1.6
LGIH	   2.1	        1.5
CHUY	  <1.5	        1.5

Here is a list of the remaining stocks above 1.5%… obviously there are many in the roughly 1% class…. Of these, I added to GOOGL and CHUY during the quarter. CHUY because of a sold put that expired with the shares put to me. The price is now back over what I paid and I cannot decide to let it run, or sell a covered call. I think they have a long runway and will either just own or use it’s volatility to try to increase my returns.

CGNX saw a marked increase this quarter. This is a stock that is a multi-bagger for me and has slowly climbed my list. It sells vision systems used in manufacturing and seems to be benefiting from the smart factory themes in play now. It has always seemed a little overvalued, so I never add, but I love these type of niche technology companies that are very steadily growing and it just keeps on moving up the list…. PAYX is similar type of slow growth company and is another nice play on interest rates rising.

I guess that is enough for now…
I really am trying to better manage my overall portfolio now. Deleting stocks that I no long have faith in, adding to those I do, but I think I will always be starting new, small positions to find the ones I like longer term. My biggest questions now are whether:
Does APPL still deserves to be so large here. The price has moved up recently and I can’t get my head around whether they are a long term cash cow or will have a tough time due to their size.
Should I take advantage of the recent price run-up in PRAA. The collection business in the US has taken a beating over the last few years. The new promises of reduced regulation could release a ton of pent-up demand, hence the price run-up. The question is whether the business model will still work or whether this is a chance to get out. In terms of value the company is still very cheap, if the business can be maintained and grown both inside and outside the US….
As always, I am interested in everyone’s thoughts/ advice / questions……

Owner of every stock mentioned in this post……


As I had previously said, I am trying to follow in Saul’s and Bear’s lead of summarizing my results. I am hoping it gives me a little accountability and perhaps an insight or two that I wouldn’t have had otherwise.

Thanks Randy, it’s always interesting to see how someone else is doing it. I can always learn from it. For instance Cognex. I was in it sometime in the past and got out because it seemed stalled out and overpriced, but you stayed in and now it’s up in the $60 range. Astounding to me. But you had a lot of guts to stay with it when it went from $51.50 in April of 2015 to $28.50 in Jan of 2016. I guess that’s the advantage of having over fifty positions. When one that’s just at 1% totally tanks you can just ignore it and don’t feel the need to act on it, while with positions at 5% to 10% of your portfolio you feel compelled to pay attention to them. (I also noticed your PRAA. I got out of that as it not only stalled out, it didn’t seem to have any prospects for the future. You say that now it seems to be up due to the possibility of reduced regulation will help it out. I don’t know what to say to that.) And I definitely wish I had stayed with INBK like you did (but I guess my BOFI and SBNY gave me some of the same ride.) But it is fascinating to see what you did and how it worked out. Thanks again for posting it.


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Thanks Saul,
Working a ~50 hour work week limits how much time I can spend on all of this, hence the much less active trading and willingness to hang in there. And in truth I don’t know that the lack of trading hurts me.

My position in PRAA is actually one I have held for years and am in at about $13 / share. As I said, this is one where I am questioning my position. When it was at $23, I would sell because it was worth more dead than alive, but now I am wondering if the potential is worth the cost of hanging on…

I do think I have done a better job of getting out of stocks that have not worked out or have just changed. For me the balance is to not over react, but also to not just hope things will improve. It is easy to say, I think they will bounce back next quarter…

Long PRAA (but reconsidering) and CGNX

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