DB Bob's Bottom 9: #s 7-8 (DWSN,GEOS)

This is a great - although happenstance - pairing. Both DWSN and GEOS are in the same general business. Although I’m going to try and characterize the businesses, please realize I am no expert on the industry in general or the companies in particular. Oil + gas companies buy 3-D data regarding the land where they have drilling rights. These “maps” help them locate drilling rigs appropriately. DWSN fields crews with sensors and huge thumper trucks. The sensors are strategically placed and then the trucks pound the surface, sending shock waves through the ground (sometimes dynamite is used to initiate the shock waves). The waves propagate differently depending on what’s in the ground (i.e., rock, oil, gas, etc.). DWSN collects the data but, as I understand it, doesn’t own or process it. GEOS - at the risk of grossly oversimplifying their business; I’m sure I am - primarily makes the sensors, although they also make sensors for characterizing offshore oil fields. After the sensor data is collected, sophisticated software generates the 3-D maps.

What went wrong and what can I do to prevent recurrence?

First of all, I bought DWSN near a cyclical peak in 2005 (and GEOS just a few months later). I had little exposure to the energy sector and felt that “some” was appropriate. Bad timing got me off on the wrong foot.

I LOVED Denny’s point that cyclicals aren’t LTBH (long term buy hold) investments. It was a light bulb moment for me. Maybe it shouldn’t have been, but it was. Thanks, Denny! Since LTBH is my preferred investing method, maybe I should avoid cyclical industries, or at least de-emphasize them. They seem to require a bit more agility and ruthlessness than I possess. (Know thyself!)

I relied on a TMFer for my news about these companies. That isn’t a problem, per se, this guy is prolific and a knowledgeable industry insider. At the time, I was really too time-constrained to keep up with what he was posting. I think this last issue is one where I’ve begun to make strides. I have many boards marked as “favorites”, mostly for stocks I (or a family member) own or anticipate potentially owning. If one summed up the unread posts of my favorite boards on the day I retired, the count would have been about 90,000. That doesn’t mean I’ll read EVERY post. Sometimes I’ll only read some number of well-recommended posts before moving on to another board. But it was a ridiculous number. Through diligent reading in retirement and removal of some holdings and watch list stocks, I’m 70% of the way towards being caught up (despite adding Saul’s “prolific” board late in '15). As I recently read the historical DWSN and GEOS posts, I can see how trouble brewed while I wasn’t paying close enough attention. This is still unfinished business for me, as I need to continue getting caught up and also try to rein in my portfolio to a size that aligns better with the time I have for such research. Sadly, I find that I still have difficulty saying no to “shiny new objects”. I bought two new positions this morning - of course I can’t say what they were yet, but I think I’m being sufficiently vague if I reveal that both stocks have received at least one mention on this message board since its inception. That narrows it down to some several hundred stocks, I guess. I recall that I wanted to own fewer companies by year-end '16 than I did at year-end '15. I’m pretty sure I failed at that. One of the side projects I’ve mentioned will likely expand my list rather than contract it (I’ll be happy to discuss it at a future date - it’s an interesting project - but it’s too half-baked right now). In any case, maybe I just need to shoot for fewer companies at year-end '18 than year-end '17. And keep catching up on my reading!

My last point - and this is an important one - is that I was mostly focused on gaining industry exposure and (especially in DSWN’s case) I paid insufficient attention to how these companies made money throughout the oil commodity cycle. One clever observer noted - and I wish I had read that post in a timely fashion - that, in good times, DWSN spends excess cash upgrading its equipment to keep it competitive, leaving little to nothing for shareholders. In bad times, DWSN hoards cash to keep itself alive, leaving little to nothing for shareholders. Remind me how I’m supposed to win here… Know how your company makes money and exactly how you will profit from that as a shareholder.

DWSN is in a taxable account, so I’ll likely want to wait to recognize the loss until it’s advantageous for tax purposes. GEOS is in an IRA and probably will be gone before year-end '17, likely sooner. I caught up on both my DWSN and GEOS reading not that long ago… When I retired ('13), the oldest unread post on both boards was 2007, Ouch!

Thanks and best wishes,
TMFDatabaseBob (long: DWSN, GEOS)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth


You hit the nail on the head. I don’t know how many companies you own a piece of, but it doesn’t really matter. If you can’t stay on top of your investments (the ones you own and the ones you’re contemplating) you are in over your head.

I find this to be my greatest failing as an investor. I spread my interests too broad and my ability to pay attention to all of them is spread to thin. My biggest failing (barring the big failings I’m not aware of) is that by the time I learn of impacts to companies I own it’s old news. I’m always asking, “what happened” rather than anticipating likely outcomes.

I started reading this board because Saul’s approach seemed to be 1) very successful, and 2) not too difficult to master. Excepting for a few years, Saul has been successful. While he has detractors who post to this board occasionally, I wonder how many of them don’t actually envy his performance and would not gladly exchange their own investing record for his. So number 1, I think, is an accurate observation.

Number 2 on the other hand, is not so simple as it seems. I intend to write a post in the future about what I’ve learned since following this board, so I won’t dwell on it now, but Saul’s method is not as simple as it seems. And at least for me, requires an investment of time, that despite my best intentions, I do not seem capable of executing in practice.

I do not have a solution. I’ve started trading options (Saul does not trade options for a variety of good reasons). I’ve decided that if someone will pay me to buy a stock I would like to own for waiting a month or so, why not sell a cash-covered put? Conversely, if someone is willing to pay me above market to buy an issue I own, why not sell a call? I only buy options I’ve previously sold if I can take a 50% profit. The jury’s out on this method. I really don’t know if this will prove more profitable or not. There is an opportunity cost with options that I don’t quite know how to calculate. So I know I am flying partially blind with this approach.

I still admire what Saul does, but he’s been at it for 30 years or more. I believe he’s totally candid, he hasn’t hidden anything. But he’s refined his methods, he’s honed his intuition, he’s able to do things in a short amount of time that takes a novice much longer. These are just a few things that make emulating his methods more difficult than they might seem initially.


I’ve started trading options (Saul does not trade options for a variety of good reasons). I’ve decided that if someone will pay me to buy a stock I would like to own for waiting a month or so, why not sell a cash-covered put?.

Everyone here agrees that Saul has done a remarkable job growing his portfolio fro the past 30 years or so. It is a remarkable achievement and many here are trying to duplicate the growth in their personal portfolios. The problem appears to be everyone IMHO wants to know everything about everything and is willing to buy anything even if they don’t have the knowledge in all those those areas. They appear to be willing to buy bits and pieces of a multitude of stocks to a point where they can’t watch all of them. The small bits and pieces (1%-2% each) will never make you the money you want. Saul has about 15 companies in his portfolio. By definition that means he has placed real money (30 years of exponential growth less expenses deducted over the years) on his portfolio stocks Saul has about 15 securities in his portfolio, not because there is a shortage of stocks to buy—It is because I think he feels that about 15 stocks is a reasonable amount of securities to make a lot of money in a reasonable time frame.

I run a focused portfolio and I’m happy with it. I have to believe that Saul probably is also.

Good luck and Happy New Year to all



I agree, I limit all my activity to less than 20 positions (including options). Currently I am at 17 positions (2 of them are tiny, speculative positions, together they make up less than 2% of my portfolio). I have plenty on my table trying to watch what’s going on with them.