GTechie portfolio update

Investment Analysis Clubs Saul’s Investing Discussions
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Hey folks, I’m a longtime RB/SA subscriber, generally hands-off letting my winners (and most losers) run.
At one point a year or two ago I think I owned over 60 different companies. I told myself a mutual fund made from my favorite of DGardner’s best ideas has got to beat the market, right? And I did, by a few percentage points each year. But over the past year I’ve been lurking here I’m becoming more and more comfortable with paring that down and really understanding a smaller subset. It’s a work in progress, as I am ridiculously slow to change directions.

I doubt this will be very useful to anyone but me, but I hope nobody thinks reading it is a waste of your time. Perhaps you might find a nugget or two of useful info. Please feel free to challenge me on anything I say - that’s how we learn.

First, big picture stuff. I’ve been tracking my returns as described here: https://www.fool.com/investing/small-cap/2005/07/11/computin… for almost 3 whole years. Here are a couple historic returns (note, I didn’t start tracking this way until February 2017 so my 1st line below is just 10 or 11 months):


      CAGR   SPY CAGR
2017: 29%    18%  
2018: 14%     8%
2019: 21%    12%

It was in March 2019 that I started redistributing into the SAAS companies discussed so heavily here, and it’s been a slow path forward to get out of smaller “trial positions” and into my favorite companies. My stats at that time were 26% vs 10%. I guess the biggest thing that has changed over the past year is now when companies report earnings I’m looking for growth and subscription-type revenue, whereas before I barely looked at earnings much. The end of last year sucked, but I am optimistic for the future!

My list:

The big guns (21% of total):


11% MELI 
10% NFLX

MercadoLibre is a play on the growing middle class in South America and I love that the majority of their revenue is now coming from their payments instead of their website.

Netflix used to be my #1 holding by far but I’ve been paring it down little by little.

The next chunk of companies is 26% of the total:


7%  AMZN
7%  ISRG
6%  AYX
6%  TSLA

I never invested in Amazon until AWS became big. After being in (and out of) RAX, AWS made AMZN make perfect sense.

Intuitive Surgical was one of my first big hits. I like their razors-and-blades type business model, though selling large medical equipment has nowhere near the growth rate of software companies…

Alteryx doesn’t need much of an explanation here, but I wanted to note that I’m still buying, little by little even though I’ve invested more money into AYX than any other company.

Tesla isn’t allowed an explanation here, but I think this investment will either go to the moon or to the ground and I like what I see so far.

The next group is 36% of the total, made up of:


5%  TTD
5%  DIS
4%  OKTA
4%  MDB
4%  ZS
3%  GOOG
2%  TWLO
2%  PYPL
2%  DDOG
2%  CRWD
2%  OLED
2%  SBUX

I’m actively buying DDOG and CRWD. Who to cut down? Maybe GOOG because of its size (even if a couple moonshots hit, how much of a difference will they really make)? SBUX’s recent excursion into China is a huge opportunity that seems to be going well so far. I bought TTD before coming into the Saul world so its a keeper for me. MDB and ZS don’t look as sexy as they used to but I’m a slow mover so I haven’t acted yet. TWLO used to be up with them and I cut it in half after their last earnings…

Companies with a position size between 1% - 2% are:


CMI (not just diesels any more, getting into electric power too)
ILMN 
AAPL
SHOP (can they ever out-Amazon Amazon?)
FB (I've greatly reduced my position here, and will likely continue)
KMI
IPGP
VEEV
ZM
COST
TTWO
ZEN
GILD (I'm a big fan of their KITE acquisition but they're like GOOG that the small stuff doesn't affect the bottom line very heavily)
CGNX

And sizes below 1% are:


GH
AMT
WDAY
ALGN
RDFN
CASY
SMAR
TSCO (retail you can't buy on Amazon)
COUP (still learning about it before I invest more)
ABMD
and cash

Long term I’m looking at reducing my small positions, reducing my money held in large stoic companies (I’m 35, with plenty of time left until this money will be needed), and focusing my investments in my favorite ideas. Thanks for all the help, folks. Onward and upward!

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Hi GTechie,
Wow 36 stocks. My guess is that you are an engineer with a love of science and tech. Congratulations on beating the market these last three years, but to be clear, even if investing is your full time job, it is almost impossible to follow 36 stocks to a decent depth, so you would likely need to rely on the opinion of analysts at the Fool or somewhere else, which isn’t horrible, but I think that you could do much better. I heard that Fool analysts cover about 20 stocks as their day jobs. One reason that it would make sense for the Fool to suggest diversification and small allocations is that it increases reliance on their services (many of which I like). Another is that it could decrease the chance that someone would flip out over a single stock because a single loss doesn’t affect you that much.

With all that said, take a look at Saul’s Knowledge base, it’s worth a read.

https://discussion.fool.com/knowledgebase-newly-revised-part-1-3…

https://discussion.fool.com/knowledgebase-newly-revised-part-2-3…

https://discussion.fool.com/knowledgebase-newly-revised-part-3-3…

As you discuss concentrating your portfolio, I think if you could get your stocks down to 15 of your best stock ideas, you would be shocked. Just the act of concentrating your portfolio is a wonderful process that can be used to cement your convictions about what you’re invested in. A concentrated portfolio takes getting used to for sure, but it is well worth your effort. Based on the time, thought and effort you put into your portfolio review, I think if you resolve to concentrate in 2020, you will be shocked at how much clearer your rationale becomes (not that there’s anything wrong with your current thinking) and pleased with a step change in your returns.

Best,
bulwnkl

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Thanks for posting and shaking my tree. Also a SA/RB/MDP/SN subscriber for years and had accumulated a portfolio of 61 stocks and that’s after selling off a couple dozen ticker symbols.

I have been a lurker on Saul’s board for a few years but really only took the plunge and started buying SaaS stocks solely in the last 6 months. I lurk for a reason, I have nothing to offer as far investment savvy. I am learning and hope one day to be a small voice on this board as I find it incredibly educational and profitable. The knowledge base shared here is priceless and I am grateful for it.

My dilemma now is selling off stocks with some very nice gains and reinvesting into SaaS stocks. Not asking for guidance just stating facts. I hope I am not breaking any of Saul’s rules but I really identified with your post and felt it was important probably to me only, but I needed to reinforce my new investing philosophy in thought and word.

Thanks too Saul and all those who contribute to this board. I will now go back into lurker mode.

Gratefully,
James

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Right on, Bulwnkl. Engineer, into science/tech, totally relying on the Foolish analysis of most of these companies (I was even a Supernova subscriber for a couple years). I totally agree that the act of concentrating the portfolio is helping cement in the convictions. I used to take the “basket approach” to lots of stuff. I bought tiny amounts of all the biotech/pharma companies in the RB/SA universe, and admittedly did the same when I first started getting into SAAS (you see those small VEVA and WDAY positions, for example)?

So the word for the year is simplify, simplify, simplify. I’ll take another read through the knowledgebase (it never hurts) and keep thinking about my 15/20 best ideas.

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There’s no rule that you have to invest in SaaS and nothing else. If you just go with your highest 15 convictions, I think you will be light years ahead of owning 61 stocks.

Best,

bulwnkl

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GTechie. WRT your post.I would surmise that many on the board have had or are now having
experiences similar to yours with the same problems relating to asset distribution and the complexities of making changes.

I have become more comfortable moving faster to make changes but I still am quite cautious.

For sure I have too many RB/SA stocks to the point where some are inconsequential wrt overall performance. I am divesting these bit by bit. Perhaps I should just dump them and proceed with a cleaner slate???

For purposes of clarity,my portfolio overlaps your by 75%

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Another reason fr simplifying is that tiny holdings usually do not make much of a dollar contribution even if they double or triple . We retire on dollars earned, not on percentage increases. And then there is conviction, how can you have high conviction (albeit lightly held as others have said) with 60 stocks? I would have trouble even remembering what they do. If you want lots of diversity , ETF make it easy.
This concentration is one of Saul’s best ideas.

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Hi Gtechie
what catalyst do you see for GILD? GILD has been threading waters for now 5 years.

tj

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TJ, I know GILD is off topic for this board so I’ll keep it short and sweet. I considered selling GILD just before they bought KITE (I was a big fan of KITE but hadn’t pulled the trigger yet). Then I held on hoping KITE’s new tech would boost GILD’s results. If it did, it hasn’t been enough to make a huge difference, has it?

I used to have a ton of tiny biotech/pharma companies, plus the two big ones (GILD/CELG). GILD is simply the last man standing, I guess.

Thanks for the probing question.

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Nice returns.

But the post that starts this thread has the
2019 SPY ETF CAGR at 12%.

Actually it was almost 3x higher than that.
Typo maybe (32%??)

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Hi GTechie,
Thanks for sharing this. It is very helpful for me to see what other investors are doing.

I have been going through a similar process, I think. I had built up a portfolio of about 60 stocks based on MF recommendations from SA, RB and other services, but after following Saul’s board since the summer, I am looking at my positions more critically and starting to trim back some positions. I am down to 50 stocks now. :slight_smile:

The main thing is the the knowledge being shared here is helping me to shift my way of thinking about my portfolio.

Cheers,
Bill

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Georgia Tech techie I assume?

I too appreciate your post.

My investing journey is very similar to yours.

After basically buying and holding since 2010, I’ve been consolidating for about 6 months now and am down to 24 stock positions (from 60). I’m determined to reduce this to at least 15 positions by year end. Currently 85% of my portfolio is in the “old” stocks and 15% in the “new” stocks.

In looking at the year-to-date performances, the ROI on almost all of the “new” stocks is already in double digits. None of the old stocks are close. This is a lot of motivation to make changes.

John

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tpoto, that 12% calculation is going back to my starting date. It was 232.81 on 2/13/2017. On 1/2/20 it was 324.87. So it’s not a 2019 result, but an annualized result from my starting date.

Bill and John, thanks for your kind words. I’m glad I’m not the only one going through the same thought process. And thanks to Saul and everyone else here continuing to find these diamonds in the rough!

PS - yes John, I’m definitely a Ramblin Wreck from Georgia Tech. What’s the good word?

Happy New Year everyone.
GT