DB Bob's Bottom 9: #s 1-6

Investment Analysis Clubs Saul’s Investing Discussions
1

People seem to be tiring of this thread, so I’ll shorten the write-ups and reflections, and wrap it up quickly. Some of the themes are repeats of #s 7-9 anyway. But… Quickly… Before I start… If I’m talking about repeating themes, does that mean I’m making the same mistakes over and over again?

Well… Yes and no. If I make a mistake in '05 and again, in '06, I’m going to be gentle with myself about it. If I make the same mistake again in '15, less so. I talked about having bought two stocks yesterday. I am completely up-to-date with my reading on those stocks and don’t anticipate falling behind (beyond temporarily - I do like to take vacations). I have a pretty good sense of how they intend to grow their business and reward shareholders. So I don’t think I’m still making the same mistakes illustrated in previous posts. My picks from here on out won’t all be winners. But I hope I can look back at them a decade hence and say that I was employing good processes that periodically led to a bad outcome.

I’ll have to disagree with the group - at least for now - regarding diversification. I’m not comfortable with a very concentrated portfolio, and I’m not going there. Yet. I anticipate that my portfolio will be more concentrated by decade’s end than it is today, But I don’t think it’ll ever be as concentrated as some here advocate. I appreciate your intent to help and I intellectually understand the points you’re making. But I have to run with what works for me. My process continues to evolve, so I should “never say never”. But there’s a chasm between “my portfolio” and “concentrated”. It’ll take me a while to design a bridge. I’ll leave the rocket-powered motorcycle to Evel Kinevel! https://en.wikipedia.org/wiki/Evel_Knievel

INVN (2014) - I bought into the TMF hype with this one. I think that I failed to see two important things. The company was insisting on making a premium product with premium pricing, but the market wanted something cheaper and good-enough. Also, there was a CEO transition, and the incoming leader wasn’t nearly as good as the departing founder.

WFM (2013) - I’d like to think my choice of Whole Foods was bad outcome rather than bad process - many TMF analysts have been lower-ase-f fooled by this one. There’s a quote attributed to Buffett that when a great management team tries to manage a business in a lousy industry, it is usually the industry’s reputation that comes out unscathed. But Mackey & Co had dodged that bullet for decades.

NUAN (2009) - An investment in the leading voice-recognition software producer in 2009 SHOULD HAVE lead to profits today. However, the long-time CEO has made himself rich at shareholder expense and used acquisition to cobble together an unwieldy mess. That CEO is stepping down, and I’ll probably let this small position sit a while while I learn more about the incoming leaders.

DNR (2010) - These guys inject carbon dioxide into oil wells whose production has peaked to improve well output. It sounded like a smart idea to me, but I guess I didn’t really research the feasibility well enough. My timing was also bad, as it wasn’t too long before oil prices were in decline. This is in a taxable account waiting to shelter a capital gain.

GES (2010) - From now on (actually, from a few years ago on), I’ll stay away from fashion stocks. Honest! I will! See also: COH. This is also in a taxable account. (Excuse my political incorrectness, but…) Each year, I review the annual report. The color pages are easy on the eyes. The black and white pages are kind of the opposite.

MYRX (2007 + 2008) - Actually, I bought Myriad Genetics (MYGN), a company engaged in genetic testing that rates people’s proclivity towards serious subtypes or breast and prostate cancer (and some others). The company also had a biotech arm that - at one point - had a promising Alzheimer’s medicine. Myriad spun out the biotech arm to shareholders as MYRX. Over time, the drugs failed and not much is left of MYRX. It is still publicly-traded, but my shares are worth less than what my brokerage charges to make a trade (and I’m not using an expensive broker). Earlier this year, I sold my MYGN to make room for a company that I thought better represented the future of personalized medicine than MYGN did, but that’s a story for another day.

I hope you all have found at least some of this exercise helpful. There seem to have been a lot of posts in the threads I started, but the topics always seemed to veer off from the points I was trying to make. That’s OK. This is your board as much as it is mine, and you should take the threads where they best serve you.

Thanks, best wishes, and Happy New Year,
TMFDatabaseBob (long: DNR, GES, INVN, MYRX, NUAN, WFM)
Coverage Fool
See what a “Coverage Fool” does here: http://www.fool.com/community/community-team.aspx
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

34 Likes
2

DatabaseBob,
Thanks for sharing. I find your posts insightful–and the ones on your bottom stocks are no exception.
Gadesh.

3

Bob,
You seem to have vestiges of every stock you’ve bought good or bad. What’s it take to give up on a company for you? I thought when you share the stocks listed in your sign off signature that says you are long, that you are bullish for those particular companies. But since you say you on long on the worthless MYRX 4 cent per share stock, I now read that as just simply disclosure of whether you are short or long and not your opinion of the stock. Is that correct?
Have to admit, I’m a little jealous you can hold a stock that long. I’m much too impatient and will end up moving it out to another opportunity long before holding thru those kind of drops. I’ve learned over the last year that investing really is personal and not a recipe to be learned and followed. Our emotions play so much into how we trade. They always say you should not act on emotions, but we’re all human and emotion is just an indication of one’s risk tolerance.

Like TWLO - I was used as an example on this board of how one should not try to set a target price to buy at and should instead just take it now. The person then boasted how it was up 20% while I waited. It’s now down 30% and I got in below my target price. That person would have kicked themselves for not just getting in when they wanted to while I would have kicked myself for not waiting till the right buy point. Different strokes for different folks.

Thanks for the postings Bob.

3 Likes
4

F1Fun and Gadesh,

Thanks for your kind words.

“What’s it take to give up on a company for you?” Probably more than it should… Part of my underlying philosophy of investing is that trading in-and-out of companies is hazardous to one’s wealth. An oft-cited (though I’ve never seen a reference to it) Fidelity study indicates that the most successful accounts are those that don’t trade AT ALL (the people who own the accounts are deceased). I’m not THAT good at avoiding the trading button, but I do try to use it sparingly. I recognize that Saul trades his holdings quite successfully (usually not totally in or out, but adjusting weightings), and that I would probably need to improve that skill if I were to try to run my portfolio as a concentrated one. Developing such a skill would be part of the “bridge building” I described. That said…

“You seem to have vestiges of every stock you’ve bought good or bad.” I can understand your perspective, based on what I’ve written so far. That said, (if I’m counting correctly) I completely closed out 13 positions in 2016. So I can assure you that your observation isn’t true (unless your concept of “vestiges” includes spreadsheet entries indicating long-completed trades). As I briefly mentioned, coming into 2016, it was my intention to reduce the number of holdings in my portfolio. Early in the year, I was well on the way to doing so. Then, something came up that caused me to initiate a set of holdings that I otherwise would not have. That, combined with adding stocks I found attractive during the year, caused my 2016 year-end count to exceed last year’s. Come late February, once I’m past my earnings season responsibilities, maybe I can explore my 2016 sales on this board, if there’s interest.

As I also mentioned, I’m working on a project that will likely again increase the count of my holdings in 2017. The project is too half-baked right now for me to go into detail. Suffice to say that I’m working on a sector-diversified, purpose-built portfolio that would replace a portion of my family’s assets. The stocks chosen for this purpose have different characteristics (in some cases subtly, in others less so) than stocks I would choose for my own portfolio. So they will add to my total stock count, and I’ll need to figure out how to manage the burden of following even more companies. But, that aspect aside, the research I’ve done so far makes this half-baked idea look reasonably smart. If some amount of actual results confirm that the idea is a smart one, I’ll be more than happy to share the approach with this board.

So all of that is why I’ve revised my goal for having fewer companies at year-end '18 than year-end '17. Hopefully year-end '19 will have fewer still.

But getting myself down to twelve? I think I’d go crazy limiting myself to twelve tech companies, let alone keeping some exposure to other sectors!

Oh yes… I don’t want to forget your question about the disclosures in my signature. Those disclosures are a TMF requirement for me (and other TMFers and CMFers), and they are based on my holdings, not my opinion. On occasion, I’ll get cute and add commentary like: TMFDatabaseBob (long: GES, but maybe not for too much longer). I can understand why someone could infer bullishness from my long position, but the more appropriate inference to draw is that I’m long, and view the company as a hold or better (or draw no inference at all, except that the disclosure documents current ownership). With all of these stocks in my taxable account where I’ve talked about holding until I have a big gain to offset, I think most of the downside has already been taken out of these names - otherwise I might be more aggressive in selling.

I hope that helps.

Thanks and best wishes,
TMFDatabaseBob (long: GES; I think that was the only one I mentioned)
Coverage Fool
See what a “Coverage Fool” does here: http://www.fool.com/community/community-team.aspx
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

7 Likes