Investment discussions

Investment Analysis Clubs Saul’s Investing Discussions
#26

Duma,

You OTOH imply you commit early on…

What does OTOH mean?

I have based this largely on what I have called the TALC/SALC disconnect.

What in the world does that mean?

more clarity to why Saul missed his destiny as a hedge fund manager

I could never be a Hedge Fund manager, nor would I want to be. I couldn’t do what I do managing billions of dollars, and I would find it a nightmare. Also I have no special training, no MBA, no accounting training, etc. I’m just an investor who has developed a method that works for me. I was actually a physician until I retired in 1996.

After all, there are an enormous number of potentially investable stocks out there…how did you decide to pick what you did?.. there are huge numbers of stocks that fulfill that criteria.

I don’t think or claim that I picked the “best” stocks out of that universe of investable stocks, nor that I handled the investment in the “best” way. Look, your portfolio was up 70% this year, which was better than me. What I’ve done is picked stocks out of that universe that allowed me to average 32% per year for a long, long time. That works for me.

May I ask then! what are your top 5 highest potential stocks as we now sit…not your top holdings but instead the top potential.

Look, if I knew which five would do best I’d only invest in five instead of twenty-five. I’m a poor predictor. Who would have thought that BOFI, a bank, would be up over 100% on the year, or that ELLI would barely have budged? Not me.

Saul

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#27

PS Who would have guessed that AMBA would go up 36.5% in the last three weeks, and in fact, would almost triple in the last 3 months (It closed at $13.40 one day back there)? I liked the company but guessing potential for advance is beyond me.

Saul

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#28

What does OTOH mean?

“on the other hand”

I have based this largely on what I have called the TALC/SALC disconnect.

What in the world does that mean?

Back in the post Y2k carnage, many a brilliant poster was left puzzled and suffering from PTSD…flabbergasted about how their brilliant research and deductions could have turned out so bad with that incredible market crash and the one that soon followed.

Several of us started trying to develop “rules” for technology investments (which many RB stocks happen to be) that might enable us to maximize profits and recognize when we had better get out or in a particular investment.

I explained the concept here because I observed that many times in conversations about stocks, there were parallel discussions occurring. One was about the excitement of a particular paradigm shift and the other was about a stock. The problem was that many times, the hype of a technology paradigm shift far surpassed the reality of the adoption.

But just as there are "early adopters in technology, there are early adopters in the investments. Yet these same early adopters can at times confuse their excitement for a technology with the hyped up price of a stock that they repeatedly argue the company will need to grow into.

With that observation, and watching what happened to stocks through hype and then disillusionment, it occurred to me that these same “brilliant” posters were more often correct in their original thesis but often incorrect in their investment approach with repeated hype and then crashes. They often left great storyline stocks because of the crashes in stock values only to see stock recover for several investment opportunities later.

I explained the concept back here (2 posts) and it tries to quantify the risk reward for investments based on the TALC/SALC disconnect:

http://discussion.fool.com/the-duma-rule-20598973.aspx

http://discussion.fool.com/stock-adoption-life-cycle-20518173.as…

I don’t think or claim that I picked the “best” stocks out of that universe of investable stocks, nor that I handled the investment in the “best” way. Look, your portfolio was up 70% this year, which was better than me. What I’ve done is picked stocks out of that universe that allowed me to average 32% per year for a long, long time. That works for me.

I am not impressed by my 70% gain…as I have said before, this past year was easy for everyone…even the dart board. What impresses me more, is your consistency over the years…point me to the mutual fund or money manger who has returned 32% annually average over 20 years!! Not sure that guy exists.

So from my perspective, if all we do is say “great job Saul”, then we have probably missed an opportunity to try to understand how you are so different from 99.9% of money managers.

So what is different Saul?

That is what I am interested in because many of your rules are pretty basic investment advice that everyone had had access to for decades. That is why I surmised that your instincts must be better than the average bear.

Look, if I knew which five would do best I’d only invest in five instead of twenty-five. I’m a poor predictor. Who would have thought that BOFI, a bank, would be up over 100% on the year, or that ELLI would barely have budged? Not me.

I agree but even so, you must have your favorites for stock price potential…everyone does. Which 5 do you think have the greatest risk reward and why?

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#29

Duma, if I understand your “TALC/SALC disconnect” theory then I assume that ISRG could be one of those fallen heros right?

#30

Duma, if I understand your “TALC/SALC disconnect” theory then I assume that ISRG could be one of those fallen heros right?

That is basically correct. The three obvious names that would apply to that second wave of SALC/TALC disconnect would be:

ISRG
OLED
CREE

Here are their present charts:

http://www.stockta.com/cgi-bin/analysis.pl?symb=ISRG&cob…

http://www.stockta.com/cgi-bin/analysis.pl?symb=OLED&cob…

http://www.stockta.com/cgi-bin/analysis.pl?symb=CREE&cob…

Of the three, ISRG still looks headed down and as you know it has a great deal of negative overhang including Obamacare as well as the GYN market questioning the added efficacy compared to standard laparoscopic hysterectomy.

ISRG is a “special” case in adoption IMO, since unlike most companies, it essentially has to go through an adoption lifecycle with every specialty. Just because a urologist uses the daVinci doesn’t mean that a cardiothoracic surgeon will embrace it…each is its on TALC.

As regards, the disconnect of SALC and TALC, each of the stocks have their reasons for disillusionment but I personally rarely IF EVER average down, so I wait for stability of the chart and both OLED and CREE appear to be better positioned for a leg up than ISRG at THIS TIME.

Hope that clarifies and please feel free to criticize and dispute.

#31

Sorry…left out this obvious stock as well:

http://www.stockta.com/cgi-bin/analysis.pl?symb=NUAN&cob…

#32

In my opinion, the best thing you could do Saul, is to post your moves moving forward- current portfolio, allocation, and trades. You keep impeccable records; hopefully this would be easy. At least for 2014/15 to better understand your thinking.

Everyone clearly appreciates your advice, your experience, and your track record. In addition to your snippets of wisdom and experiences, I recommend putting up a verifiable record. You could do it via CAPS and include details in the notes or just post it here.

You have an incredible track record and a lot of people are impressed and following your advice. I have seen your disclaimers asking people not to follow…but you do clearly give advice as well as call people out when you don’t like a recommendation from motley fool. You have been explicit in your results, I suggest you post details over the next couple of years as this is the responsible thing to do when you bring on a host of followers.

Look forward to your thoughts.

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#33

longterm

In my opinion, the best thing you could do Saul, is to post your moves moving forward- current portfolio, allocation, and trades. You keep impeccable records; hopefully this would be easy.

I’m not willing to do that because I have a responsibility to myself and my family to get the best results possible. What I’ve been doing works for me. If I started posting each trade, I’d feel I had to justify it (to the readers and myself), which I often can’t do. I’d be second guessing myself all the time and it would mess up what I do.

On the other hand, I do post where I am every month or six weeks. You have my positions at the beginning of 2014. And here’s a repost from the TSLA board of where I was in mid November, for comparison.

Saul

Several people on this thread have expressed an interest in following what I have in my portfolio, so here is a current list as of Nov 15 in size order, with a verbal description of the size for extra color (“very large”, for instance, means a very large position for my average position size).

CELG (MF RB) very large
ELLI (MF RB) very large
UBNT ------- very large
MTZ (MF RB) large
SYNA ------- large
AMBA (MF RB) large
BOFI (MF RB) large
INVN (MF RB) large
SODA (MF RB) large
WAB (MF SA) large
GTLS (MF RB) large
YHOO (MF RB) large
PSIX --------large
SCTY (MF RB) large
CSGP (MF RB) below average
INBK ------- below average
AFOP ------- below average
TMUS ------- below average
WETF (MF SA) below average
SZYM ------- below average
LNKD (MF RB) below average
PRLB (MF RB) small
AMAVF ------ small
QCOR ------- very small
TSLA (MF RB, SA) tiny position
SSYS (MF RB) tiny position

I wrote last time that “I sold out of TSLA at $165-$167. I still love the company.” Since then it went up to $194 or so and back down to $135, which tempted me to take the tiny position you see.

I also wrote last time that “I’ve been reducing my stake in SCTY for two reasons. I don’t see their moat. In other words what’s stopping anyone else from adopting the same business model? Also the utility companies are starting to fight back hard against solar power and it’s not clear how that will go.” Since then I have felt more secure due to the Rule Breaker recommendation and the last earnings report, and have rebuilt my position.

You’ll notice that I’ve reduced my positions in very high PE stocks. Even PRLB, LNKD, AMAVF and SSYS, and I sold out of Z. Most of them don’t seemed fazed by my decision at all, and have kept moving up in spite of it.

SZYM is an exception to my policy of not buying money losing startups.

Below is a list of my stocks from Oct 1st, a month and a half ago. You’ll see that almost all the names are the same. I’m not a short term trader.

As of Friday’s close, my entire portfolio is up 38.7% so it’s on track for my goal of averaging 30% to 35% per year (but who knows how the last six weeks will turn out).

Remember that my biggest positions doesn’t mean the stocks I’m buying now. The very big positions were bought normal size and grew to be big positions.

PLEASE don’t buy anything on my list without researching it yourself and making sure it’s a stock you want. Some of them (especially some of the non-MF stocks), I’m not sure of at all. And I may not stay in all the stocks I have now. Again, please decide for yourself.

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#34

Saul,

I’m delighted to have found this board.

Would you comment on CSGP? I was surprised to see it on your portfolio. I bought CSGP in 2007 and it has lost 70% of its value. I’m getting ready to sell it, but haven’t found much recent info on MF. (I’m an SA member, but not RB).

I’d love to hear what you like about this company. Thanks.

#35

akym,

CSGP lost 70% since 2007???

Yahoo shows it around $50 to $60 in 2007 and $182 today.

What am I not seeing here?

Gene

#36

Hello Saul, would like your thoughts on the new American Airlines. The airline sector was red hot in 2013. Do you like this space for 2014?

…my broker once made me a million dollars in airline stocks…

…I gave him 2 million… :slight_smile:

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#37

Hi Saul, I’ve really learned a lot from all your great posts and it did help me to reallocate my portfolio effectively in 2013. I had a very good year, not as good as yours, but good compared to my history. I’m really glad you created this board. I’m sure we can all continue to learn from one another.

Thanks for all these great posts and discussions on your approach.

All the best for a great 2014. Brian

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#38

akym,

I also looked up historical prices for CSGP in 2007 and found then in the $40 to $58 range. As it’s now $180, and near its all-time high, maybe you are thinking of a different symbol.

Saul

#39

About the CSGP error – I originally purchased LoopNet (LOOP) in 2007, which merged with CSGP in 2012.

After some digging today I learned that my LOOP stocks were transferred to CSGP at a conversion ration of .03702! That means, if I understand right, I received shares of CSGP at a cost basis of $594 each, when they were worth $49 on the open market.

What the hell? I know this is off-topic of your discussion, Saul, but I’m wondering if anyone can explain this to me. It’s the reason my cost-basis on Fidelity website (displayed as CSGP on my portfolio), looked like it was down so dramatically, from $594/share to $181. Realize this is an indication to me to follow my smaller holdings more carefully. But seriously, is it typical to lose so badly in this kind of merger? How could I have avoided this slip?

#40

I don’t know what it means myself, but I bet that if you asked the question on the CoStar board, someone could answer it for you.

Saul

#41

akym,

Here is the info:

WASHINGTON and SAN FRANCISCO, April 27, 2011 (GLOBE NEWSWIRE) – CoStar Group, Inc. (Nasdaq:CSGP), the leading commercial real estate information company announced today the signing of a definitive agreement to acquire LoopNet, Inc. (Nasdaq:LOOP), the leading online commercial real estate marketplace. Pursuant to the merger agreement, LoopNet shareholders will receive $16.50 in cash and 0.03702 shares of CoStar Group common stock for each share of LoopNet common stock, representing a total equity value of approximately $860 million and an enterprise value of $762 million. The boards of directors of both companies have unanimously approved the transaction which is expected to close by the end of 2011.

The bolding is mine.

You should have received a pile of cash.

This is why a person needs to keep track of their investments.

Gene

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#42

Gene,
Thanks much for the info. I had actually read that piece of news a few months ago when I first looked into this, but I didn’t understand the way they had split the merge out between $16.50 in cash per share, plus the conversion ratio. Now I do. You’ve helped me answer something I was scratching my head over for some time.

And yes to the keeping track, it’s my aim from here on out.

akym

#43

Hi Saul,

First, let me echo the thanks that quite a few before me have already stated, really appreciate your starting this board! I’m another of those who have benefited from your posts, and enjoy reading and learning from you, and appreciate having one place to easily find your thoughts on investing!

I have a question about how you scan for new investments. I know you posted your criteria for new investments in post 6, which included growing revenue, recurring revenue, growth potential, rapidly growing revenue, etc. These are the criteria companies must meet for you to invest monies with them. But what I’m wondering is, where do you scan for stocks that might meet these criteria. Are their particular magazines, newspapers, investment writers, websites, that you frequent that often highlight companies that peak your interest to investigate further to see if they do meet your criteria? In other words, I’m curious to know where you prospect for these companies?

Thanks,(and thanks once more for the new board!)
okapimoon

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#44

Saul, add me to the “thankful you started this discussion list” I missed it. (Since you were a physician - I got a strep infection around a plate a screws used to repair my tibia, so I lost a month fighting that)
I have appreciated you thoughts, and really appreciate your willingness to share your thoughts. I love the discussions on TMF, especially RB, where dissent is at least tolerated and sometimes embraced. It amuses me too that the Rule Breakers is where we find more mature investors.
I love hearing your thoughts and methods and I gotta say I am happy for the names. PSIX - what a find.
While others are pushing you for names, I hope that you will spend more time on how you find the names that begin to research. You have talked about metric and qualities you look for, but I am talking further back. Are your screening on metrics for your prospect list? Are you looking at new or relatively new issues? We all admire your success and hope to provide for our families the way that you have provided for your family. I have learned (and earned) a lot from your specifics, but I am mystified how you find the gems like PSIX in the first place.

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#45

I don’t know how I missed okapimoon’s post but yes where do you begin.