DB Bob's Top Holdings

Happy New Year, everyone, and I want to echo thanks to this board’s participants and especially its founder and main contributor, Saul.

Warning! This is a long post. I hope people find benefit here, but I worry that some of my motive may be self-affirming.

Those of us with TMF and CMF in front of our handles are required to list our holdings in our profiles and keep the list up-to-date in very timely fashion. A list suffices, and many of us choose to order it alphabetically to help readers scan it. At one point last year (probably inspired by Saul), I decided to take it one step further. In a separate section, I list my top holdings in the order in which they rank in my portfolio. I just updated that list for year-end 2016 (I started with a monthly update, but switched to quarterly), and I thought I’d share my list here with a few words about each. Some are “Saul stocks” and some are not. My holdings have more of a “large-cap growth” emphasis than Saul’s (who appears to prefer smaller companies with less Wall street coverage). I think one important take-away is that “long term buy hold” really works! Of course, I make my share of “dog” picks, some of them quite flea-ridden. Those either get sold or never grow to become a top holding. Although there are exceptions, my typical M.O. is to buy a fixed dollar amount of each company, and then let the stock market do the heavy lifting for me.

Before I begin, I want to make some contextual statements. In addition to my stocks, I own shares of five mutual funds. Two are international equity mutual funds, and those are actually my two largest holdings. These are rounded out by one fund that specializes in REITs and two that focus on small-cap stocks. Those latter two are legacy holdings from a time when I felt comfortable investing in individual large-cap stocks, but wanted professional management for my small-cap holdings. I no longer advocate that and, indeed, these small-cap mutual fund holdings are being drawn down to fund the early days of my retirement. In like vein, I may lighten one of my international funds a little since my international holdings are currently above their target percentages (a rarity in recent years). Were I to include the mutual funds in with the stocks, all would be top-ten holdings. Of the stocks, the largest makes up almost 5% of my portfolio while the smallest on the list is just over 1%. Combined, these 18 stocks account for just 38.5% of my portfolio. Those five mutual funds account for another 30%, ballpark. As you can see (especially if you refer to my profile), there are a lot of small holdings at <1%. I deliberately don’t diversify into bonds (it would take double-digit yields on Treasuries before I’m even tempted). I have some cash, but it is residual and not managed towards any given percentage. Clearly, I’m a “stock guy”.

Although constructive comments and criticisms are always welcome, that isn’t my goal today. Please do feel free to fire away, though, if so compelled.

My largest 18 are NVDA, EXEL, IPGP, MDT, EBIX, ISRG, UA (both classes combined), NKE, CMG, FB, AKAM, SBUX, UNH, GOOG (both classes), JLL, SWKS, INFN, and MA.

So I don’t bore everyone to tears, I’ll limit my discussion to the top ten. Maybe I’ll follow-up with others in another post, if there’s interest. This is easy for me to write, as at least nine of the ten are beating the market. Otherwise, they wouldn’t be in the top ten! A discussion of the bottom ten might be filled with a few more coughs, gasps, and ahems. I’m sure a few of them won’t survive 2017 in my portfolio.

NVDA - I bought this in 2004 and my cost basis is in the single-digits. I’m glad I held! This is in a taxable account, and I’m reluctant to recognize capital gains (or, if I do, it will be slowly). On the one hand, the run-up of the past eighteen months seems unsustainable. On the other hand, the market for NVDA’s products is far more wide open than it was years ago (AI and smart automotive applications as opposed to just gaming graphics). It’s a chip company and volatility comes with the turf. Commoditization seems distant, but it is the main threat, IMHO.

EXEL - This biotech holding is a result of five purchases made between 2005 and 2010. I’ve spent a lot of time studying this company. I think my in-depth analysis of this company may have been one factor towards my invitation to become a TMFer. EXEL went through a very rough spell (stock-price-wise) in 2014 and 2015. Sometimes I thought about buying more, but decided I had plenty already. I intend to cap this holding at 5% of my portfolio, selling some if it exceeds that. My holding is spread across IRAs: traditional and Roth.

IPGP - This is the industry leader in fiber lasers - a disruptive (although not new anymore) type of laser technology. IPGP has a very large percentage of the fiber laser market, they are constantly pushing high-power and high-quality thresholds, and they are extremely vertically-integrated, making it difficult for others to compete on price. Their largest market is China, but they’ve been nearly immune so far from economic or competitive issues. China wants to be seen as an industrial powerhouse and lasers are a part of that. I bought this in 2007 in a Roth account.

MDT - This medical devices company is my longest-tenured holding (1994). It had long been my largest holding, but I cut it in half when they announced their “inversion”, merging with Covidien and domiciling in Ireland (they had been based in Minneapolis). This way, I spread my capital gain out over two years. In the last century, this seemed a no-brainer to me as Baby Boomers aged.

EBIX - This software provider creates insurance exchanges, mostly relying on software talent in India. I saw it as an investment that would partially diversify the threat of MY job being shipped overseas. I bought this in 2008 and it sits in a Roth account. I’ve studied this company intensively in the past. The CEO is quite idiosyncratic, but keeps good focus on the things needed to keep the business running profitably. After my purchase, the stock rose rapidly. I sold slightly more than half my shares in 2010, taking out roughly double my initial investment, and I let the rest ride. That’s an atypical move for me, as I like to let my winners run. But the combination of a very large holding and idiosyncratic CEO got the best of me. Over the next few years, EBIX ceased to be a TMF recommendation at any service, but I continued to hold (perhaps more due to inertia than faith). Those years made my partial sale seem smart. EBIX’ share price has done well for me since the beginning of 2015. I’d be richer today without that sale, but I don’t really regret it in hindsight.

ISRG - This is the big robotic surgery manufacturer. I bought shares in 2005 and 2008, and they are spread across traditional and Roth IRAs. I’m not sure what my end-game is here. Growth has slowed of late, but this isn’t the first time that has happened while I’ve held it. For now I hold.

UA (and UAA) - Under Armour is a great growth story where the market is currently dinging the company for the inexcusable flaw of sacrificing short-term growth for long-term sustainability. I bought UA (and CMG) at a time when I was running a play-money portfolio for one TMF service and was looking to expand to a second service. This was back in 2008. Based on the frequency of updates for those portfolios and the then-current TMF trading restrictions, it would have been extremely difficult to find a window to buy any company recommended by both newsletters. So I gave every “overlap” stock thoughtful consideration and settled on UA and CMG in my taxable account. While neither has done well in 2016, I couldn’t be more pleased with the eight-year performance of such a “forced decision”.

NKE - I purchased this iconic maker of running and basketball shoes back in 2004. I’m very happy with this holding and its relative size in my portfolio, with no plans to add or sell.

CMG - This one is giving me fits right now. I know the Chipotle story very well and am a satisfied customer (although with MUCH less frequency post-retirement). The business’ unit economics are incredible. That said, their “Food With Integrity” mantra currently sports a black eye. Food-borne illness happens in the restaurant industry. You do what you can to prevent it, but it’s a fact of life. I’ve gotten sick after eating at a VERY upscale restaurant. I felt as if restaurant management treated me quite fairly in response. While I don’t think I hold a grudge, I also note that I haven’t returned; there are other choices I like about as well that are somewhat less expensive. I think Chipotle’s response to the fourth quarter 2015 issues was appropriate, but I fault management for not acting earlier as there were a couple of less-well publicized outbreaks in the months leading into the more familiar crises. It should be interesting to see how the recent management and board of directors shake-ups unfold.

FB - I make only limited use of Facebook’s social network because I’m keenly aware of the adage, “If you’re receiving a service for free, then YOU are the product.” I bought shares in 2014 in a traditional IRA. I really should have figured this one out more quickly, but I think I was hobbled by my reaction to their “product”. I bought a second, larger helping a few weeks ago on the theory that the size of my holding didn’t match my conviction regarding the stock’s prospects. Incidentally, I did the same thing with SBUX at the same time for the same reason. My second FB purchase is trailing the market but, at just a few weeks, such a comparison is noise.

I hope some find this useful. Saul, if you don’t like it, just let me know and I’ll cease and desist.

Thanks and best wishes,
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth


I hope some find this useful. Saul, if you don’t like it, just let me know and I’ll cease and desist.

Hi Bob, You must be kidding! Posts about stocks and investing are what this board is all about. I love posts like yours, that we can all learn from. Please do keep it up!



This kind of post is exactly why I joined TMF. Keep them coming.

Hi Eyelise17!

Thank you for your kind words and congratulations on your first post to the TMF boards. I’m honored that your inaugural post thanked me.

In my experience, one brings a certain level of intellectual rigor to an idea when one needs to convince oneself that the idea is true. Yet another level of rigor is required when one tries to convince others that the same idea is true. Posting on the message boards regularly forces one towards higher intellectual rigor because there will be some pretty bright people looking critically at your ideas. Thankfully, this is a supportive community - not a community of trolls (well… mostly; you’ll figure out who they are and what to do). You may find that other people run with an idea you’ve presented in ways that you didn’t anticipate - hopefully in ways that delight you! Presenting your idea strengthens you (through the increased rigor of making a presentation and through the vetting such a presentation will receive). Presenting your idea strengthens the community, as we all get a little smarter from everyone’s contribution. It’s a real win-win, and I look forward to seeing more of your posts.

As I indicated earlier, I’ve thought about a “Bottom 9 Holdings” post, but I’m not sure I can jump on that right away. Later, it occurred to me that I made 15 sales in 2016, which is an atypically high number for me. A handful were forced (i.e., acquisitions), but most were due to me wanting to reshape my portfolio for the better. I think a discussion of those sales could be beneficial. On the flip side, I made 11 purchases, and the thinking behind those is probably worth offering to this board. As I scan that last group, I notice at least one that I’ll have to chalk up to “bad process”. If I “come clean”, I think I’m less likely to repeat the mistake. So… Those areas are where I hope to go next.

Sadly, come January 11, I’ll have to turn my attention to the coming earnings season, and it probably wouldn’t be until late February that I can return here with non-earnings-related posts.

Again, thanks for your kind words, and I’m especially gratified that you chose to make me a “favorite” of yours. Choosing favorites can help other board participants recognize whose posts are most important to read. I know that I pay attention to this! I’d encourage everyone to take advantage of the “smiley face” to the right of an author’s name for those authors you consider deserving.

Thanks and best wishes,
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth