End of May Portfolio BEGINNING for me

Investment Analysis Clubs Saul’s Investing Discussions
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First, I want to bow to the court of Investment Kings. There are just SO MANY super smart folks contributing to the boards on Motley Fool. As some of you know, my name ProdigalFool17 was earned… I first joined TMF in the late 1990’s… paper newsletters… again around 2008-9 and final again in March 2018. My life has led me on an interesting path. But I am here to stay this time and have been rebuilding my portfolio.

There are many folks that post these amazing Monthly’s… with fantastic returns. I thought it might be fun to start reporting on a brand new portfolio and see where I can get to. It can honestly be intimidating, joining a board with people with just amazing success,… and I’m here posting my paltry 4% since March and my “zero point” that I’m starting. On the other hand… you have to START in order to get fantastic returns. Maybe posting this from the start will help others in the future… it’s NOT too late… I didn’t miss every run up… I just started now… just in time to catch the next and future returns.

I’ve been reading TREMENDOUSLY since I started again in March. Researching stocks, reading articles, reading boards. Starting some positions… refining… getting to a place that I’m comfortable.

Since March… during this set up period as I’ve been buying in and getting comfortable… I’m up 4%… the market is up 0.4% since I started… so, I’m just fine with that as a starting point while I was reading and researching. My stock choices are heavily influenced by some TMF services, Saul’s Investing Discussions and the NPI Board. You’ll see some picks correlate heavily to this board, some that are heavily discussed at NPI and some that aren’t discussed in either. I’m considering this my starting point.

June Starting Point
25.4% in cash.

Tier 1 Stocks with approximately 6% each allocations… 54.2% of my total portfolio:
PSTG
MDB
NTNX
PVTL
SHOP
SQ
TWLO
VRNS

Tier 2 Stocks with approximately 3% each allocations… 10.2% of my total portfolio:
AYX
NKTR
OKTA

Tier 3/4/5 Stocks with approximately 2% or less each allocations… 10.2% of my total portfolio:
TLND
ADBE
ANET
IBKR
ILMN
NVDA

17 total stocks. Not as super converged as Saul’s and some of the portfolios I see here. Certainly not as hyper-converged as some portfolios discussed, but pretty well converged for me.

My strongest convictions are PSTG, MDB. My weakest convictions are IBKR, TLND.

I also know that many folks recommend staying 100% invested. I’ve got 25% cash. I’ve also been reading heavily on Options Investing… I know that’s not a topic covered in this board, but I’ve chose to hold back 25% for cash for Options and “spot investments” if I see a pullback and can’t resist.

I want to thank everyone for all of your insightful analyses and sharing. I hope to contribute more in the future… my journey begins here. As always, comments are welcome. I’m always trying to learn.

Thanks
Mark

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Mark
I suggest you think twice before buying options. Most option buyers lose money. If you really want to use them you may be better off writing them than buying them.

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I suggest you think twice before buying options. Most option buyers lose money. If you really want to use them you may be better off writing them than buying them.

I’m definitely an Option Seller… and defined risk trades at that… I’m not even going to do very many undefined risk sells… and I’m not venturing into the woods on Options alone either. I’m studying under the tutoring of the Stock Advisors Options board and the OptionAlpha.com service.

Definitely going to go slow. ZERO intention of buying naked calls, etc.

Thanks for the caution. Definitely a valid point.

Mark

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Mark,

Great post. Thanks for sharing. You have a really interesting framework for your portfolio (Tier 1, 2, 3). I appreciate you sharing your mindset and how what you do works for you. Ultimately we have to invest in a way that we are comfortable with. Otherwise we won’t sleep well.

I look forward to reading your posts and seeing how you grow as an investor.

  • Austin

Shopify (SHOP) Ticker Guide

For information on all of my current holdings view my profile here: http://my.fool.com/profile/CMFAleeb/info.aspx

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Definitely going to go slow. ZERO intention of buying naked calls, etc.

A good reason to go slow. You can’t buy naked calls.
https://www.investopedia.com/terms/n/nakedcall.asp

Learn, then earn.

🆁🅶🅱

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Austin,

First, thanks for your service in the Air Force. I was Navy a million years ago, work for NASA now.

My framework of Tiers is the following:
Tier 1: Strong Conviction; potential high flyer.
Tier 2: Good Conviction; maybe a high flyer but some lingering doubts.
Tier 3: Not sure about these… most likely to sell… TLND. I got that one as a rec from a TMF Service. Shouldn’t have bought it before I fully understood it and was convinced.
Tier 4: Small starter position, still studying ILMN, ADBE or good performer I’m not willing to let go of until I get more confidence in others. IBKR, NVDA
Tier 5: Love ya… not willing to sell yet… maybe you’ll regain your greatness… ANET. I’ve got an “orphan” IRA with a small amount of money in it that I can’t put any new funds in. I switched it to ANET and maybe ANET will surprise everyone in the future.

If I were to consolidate further, TLND and IBKR would be the first to go… but I’ve been getting good returns on IBKR and I’m still on the fence on TLND. NVDA’s just a historical beast… but not sure of their trajectory going forward, and TLND I’m have trouble seeing how they fit in the bigger cloud picture. ILMN is a completely different sector and it’s been doing well for me.

The tiers help me stay focused on “where am I” with each stock. I’ll look at my list and ask myself, “Ok, Mr. Tier 1, do I have strong conviction in you? Are you a potential high flyer? Can I explain why and point at the research? Has anything changed?” Same with the others, “Hey Mr. Tier 2… I’ve got doubts… what are we going to do about that?” Example on that… NKTR… looks like a damn good company… but biotechs seem to be pretty much hit or miss. It’s good a massive pipeline and everything LOOKS amazing… but if those various drugs don’t pan out… NKTR could be a bad choice real quick.

Just helps me stay organized and focus my internal questioning.

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A good reason to go slow. You can’t buy naked calls.
https://www.investopedia.com/terms/n/nakedcall.asp

Learn, then earn.

See… Tutor correcting student!..

Correct… should have said I won’t be selling undefined risk positions like naked calls… or buying speculative calls… or trades like that. I’m more interested in selling defined risk trades… credit spreads, iron condors. That fits my risk tolerance better for options.

I want to learn. If I start getting Saul/NPI like returns on my stocks that outperform my options work… I’ll learn and adapt there too.

RGB… thanks… as you know I’m still learning.

Mark

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Thanks Mark!

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Hi Prodigal, I like your framework of Tiers. The only one I’d disagree with (and strongly actually), is your

Tier 5: Love ya… not willing to sell yet… maybe you’ll regain your greatness…

I’m objecting here to the principle, not to your example of Arista. I’ve seen so many people get stuck by falling in love with a company, and thinking “maybe you’ll come back.” I’m thinking of the opportunity cost here. Why would you put dollars in a company for the next six months or a year, hoping it will come back, instead of in one of your companies in which you already have high conviction, and which doesn’t need to “come back,” and which you expect would be up considerably in that time???

That’s the way I think about it anyway.

Best,

Saul

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Saul,

Thanks much. Really appreciate it when people challenge my thinking.

I let go of ANET.

M

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Hi Prodigal. Saul said:

I’m thinking of the opportunity cost here. Why would you put dollars in a company for the next six months or a year, hoping it will come back, instead of in one of your companies in which you already have high conviction, and which doesn’t need to “come back,” and which you expect would be up considerably in that time???

The Motley Fool has an almost never sell bias. Of the five accounts my wife and I have for trading stocks four of them are tax preferential, that is either an IRA or a Roth IRA. There are no tax consequences so there is really no reason to hand on if any stocks are in one of them. So if any of your companies are in a similar account the sell decision needs to be viewed in that light as well.

Jeb

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Completely true as far as I am concerned for these kind of holdings, but elsewhere, the effect on capital of interrupting compounding by crystallizing a taxable gain makes it a bad habit - you only have to draw an undulating line from bottom L to top R to imagine the damage to terrific investments where the share price is the totem instead of the business.

Oh Lord, when I look back at some of the companies I’ve sold from a lack of patience… and then bought again…

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I’ve also been reading heavily on Options Investing… I know that’s not a topic covered in this board, but I’ve chose to hold back 25% for cash for Options

You will lose that money to the market-makers over time. All of it. Options are a negative-sum game when costs are introduced.

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If you really want to use them you may be better off writing them than buying them.

The only possible use for the retail investor is buying protective puts. Period.

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"If you really want to use them you may be better off writing them than buying them.

The only possible use for the retail investor is buying protective puts. Period."

Totally agree. Writing PUT is like picking pennies in front of a steamroller.

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Hi Mark (ProdigalFool17):
I just want to encourage you to pursue Options.

  1. Ten years ago (@ age 75), at the encouragement “learn a new language to improve your mind”…
    I did just that and fortunately enrolled under the guidance of Jeff Fisher with
    Motley Fool Pro.
  2. I signed on with Think or Swim (now part of TD Ameritrade). At which I qualified for
    Portfolio Margin, which allows me to remain fully invested in stocks while
    Trading options on margin.
  3. Specifically, the ultra safe, conservative Options Strategies of Jeff Fisher.
    For the past 7 years, using my small investment portfolio, I have earned enough Options
    Income to cover our living expenses. Thus, leaving our portfolio to grow.

The “secret sauce” is Motley Fool Pro’s option strategies.

Best wishes, Floyd

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Floyd(etf101),

Thanks for the encouragement. I’ve found folks have strong opinions on options… one both directions/ That’s good. I listen to everyone. But like you, I decided to go learn that new language. It truly is a new language and new thought process.

I like learning. I am learning tons here on picking stocks. Learning tons on the NPI board. Learning in Stock Advisor. Several folks on the Stock Advisor Options board have been incredibly helpful and encouraging. I’ve also signed up on the OptionAlpha service which has fantastic training. So… I’ll keep learning… keep working.

One thing I should’ve been more clear on. While I’m “new” to picking individual stocks and very new to learning options… I’m not a novice financially overall. When I said I had 75% in the stocks I picked and reserved 25% for cash/options… that’s not entirely correct. The total that I am “investing” that I discuss here is roughly 1/25 of my investments. So the 75% of the individual stocks I pick are actually more like 3% of my investments and the portion I’ve allocated to cash/options is more like 1% of my total portfolio. I am very happy to leave 96% invested in the S&P500 index and commercial property. I’ll learn on this small amount for a few years… and as I gain skill and confidence, I’ll shift those percentages to include more of my portfolio. I’m not going to just jump in on picking stocks until I REALLY learn and can contribute here. It wouldn’t be very Foolish to go all in without knowledge. Similar to options… I’m only putting toes in the water. Learning. Giving myself time to learn on a SMALL portion of my portfolio,

Hope that makes sense. Happy to go slow. Happy to learn. Not trying to get rich quick. My biggest investment lessons have been consistency, patience and take the time to learn.

Mark

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I have sold relatively short-dated puts on stocks that I would be comfortable owning should the prices fall. In fact, most of the ones I have sold were for stocks that I already owned and was happy to increase my shares if it came to that. I don’t consider the premiums I have received pennies as previously suggested, but to each his own…

I have also bought calls but that is admittedly speculative. (i.e. buy TSLA calls on the dips)

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