Help for those struggling with themselves

I received the following question (slightly edited) which I will respond to on the board as I thought it is a good one and that my response may be useful to many new board members.

Hi Saul,

I’ve been following you for almost 2 years now, and I was thankful for all your knowledge several times. I would like to ask you to give me give me some mental help (not investment advice what I should buy). Although I was talking to myself that I do invest Saul-like - if I am really honest to myself, then I still didn’t really get it I think. Please let me explain quickly:

I went through all the pros and cons and decisions from all of the portfolio summaries like yours, stocknovices, GauchoChris etc, and I see why it makes sense to trim some older positions…Yes, I still hold some of these older names - I can’t be as ruthless as you, but this is not my main issue at the moment, I am ready to trim them. In fact I did already. But I don’t want to be sitting with cash. I want to shift the money into the best positions.

The positions which I would like to add to are with their current sizes in my portfolio:
AYX 15%
CRWD 13%
DDOG 13%
ZM 8%

So now I have about 3% Cash and I thought about adding to ZM and/or FSLY because they are still not big positions like the other top 3 and they do have strong outlooks in terms of fundamentals like growth.

But I’ve got this barrier in my mind: ZM and FSLY ran up so much lately.
Is it really the right move to just shift the cash from into these two right now?
I know, you are teaching this all the time, but somehow I just can’t do it. What is holding me back? I need a push into the right direction.

Thank you,

Here’s how I would answer:

Hi M, I’ll be glad to give you some mental help, but you are correct, I can’t tell you what to buy. That is your decision.

Secondly, I don’t know what the market will do and what any of these stocks will do, or even what any of these companies will do, over the next few years. I’m just making judgements and evaluations, just like you are. For instance, on March 16, when my portfolio was down 16% (it had fallen from up 34% to get there, which was pretty scary!) and everyone was shouting “Sell, SELL! Go into Cash!”… I never would have dreamt that my portfolio would be up over 168% from there in three and a half months !!! Never!!!

Next, I once looked back at Amazon and saw that it was at something like $5 per share at sometime in 2001, and when it went to $10 many people may have said to themselves “It’s doubled already. It’s too high to get in.” And at $20, “My God! It’s quadrupled!” Now it’s at $2890….

Or look at Shopify. I bought it initially at about $27 (as I remember). In about six weeks it was at about $47, which was up 74% in six weeks. I bought a lot more. It’s now at $1030. (I sold out for about a quadruple, which turns out to have been a mistake, but I have no regrets as the companies I’ve invested in instead have done just great). And what I did is irrelevant for this post. What I’m trying to show you is just that if a company has gone up, it probably gives you more positive information than negative about buying. And just because a company has gone up doesn’t rule it out for purchase. It’s very likely up for a good reason (or two or three good reasons)!

As far as the companies on your list, all except Alteryx seem to have gotten a boost from the shift to the cloud which has been caused by the pandemic. And customer companies which have invested in making that shift are very unlikely to go back to their old way of doing business.

Next, I wouldn’t recommend taking a 12% position all at once in one of these companies, but you are talking about splitting 3% of your portfolio in cash between two or three companies. To ease your mind a little, if you invested a third of it (1% of your portfolio) in Fastly, for instance, and it dropped 30% suddenly (unlikely, but certainly possible), that would hurt your portfolio by all of 0.3% !!! I doubt that you would notice the difference.

Finally, I added tiny amounts to Zoom, Cloudstrike, and Fastly myself this very week, at current prices. I think that they all should have rather extraordinary earnings reports next quarter. But that’s just what I did, and I make lots of mistakes.

I hope that that helps.



Happy Fool Day Saul!

I think it is interesting that many of us have independently zeroed in on CRWD and ZM as the best place for new money right now. I was recently talking with some other investors after I had gone through and reevaluated each of my positions. ZM and CRWD both seem to be undervalued for their future prospects. If either of them do what they are saying they are going to do I can see significant price appreciation for both of them. Maybe I have some confirmation bias but now I’ve seen multiple investors that I respect say the same thing.



Hi Ethan

FWIW - I felt compelled to top slice some more of my Shopify as it reached 24% of my portfolio last week. Crowdstrike was one of the companies I redirected my proceeds into.

As much as it has advanced, it really hasn’t felt as appreciated as it should for its growth rate and stunning earnings report. Its growth rate and performance is just so strong it feels that the street just can’t be overly impressed as it is just accepted as business as usual.

Top slicing Shopify at All Time Highs might be helping me sleep well at night on the other hand it has proved an unprofitable strategy given how much SHOP has continued to move up in absolute and versus my other investments.

The only 2 holdings that I have redirected my proceeds into that have matched Shopify’s performance?
Crowdstrike and Zoom.

The rest (TTD, MDB, GH, ESTC) have done well but nowhere near as well.

That being said - if we are talking about mental gymnastics, I’m top slicing Shopify at 900+ whilst the street is putting 1000+ target buy ratings on the stock. Although to be fair - I wouldn’t be selling Shopify if it weren’t for the size of the stake in my portfolio. To be clear, I’m definitely not selling because it is up 1500% or even because it is sporting a P/S of 70.