Just checking: Saul vs DG

[Croesus2024]

Just checking on simple math re Saul vs DG:

I started this post to ask why Saul is so revered for his constant cultivating, while David Gardner’s untended picks on Stock advisor are up - what initially seemed a mammoth - 600% since 2002. But in the course of asking the question I did some simple math - which wasn’t self-evident to me as I’m relatively new to this - and had an epiphany, and just want to make sure I’m right -

Saul seems to have averaged around 25% for decades. So in this same period of time (2002 'til today), Saul would be up…like, 3000+%? Whereas DG would seem to have averaged 12% a year…is my math close to right? If so…um…has anyone out there attained the knack Saul has, which, from his descriptions of his decision making, seem somewhat intuitive at this point - like he didn’t like the tone of one phone call, or another one was euphoric…

I just today heard DG’s idea of never more than 5% in one stock, although I know my father believes in 10 - but being relatively new, I had lots of very small things…anyway, thoughts for someone relatively new to this? PS I actually have kind of a lot invested (well, a lot for me), so am not in the mood to experiment too much. Thanks

[qazulight]

I am pretty sure Saul has a time machine.

Cheers
Qazulight

[bulwnkl]

Hi Croesus,

You could take a look at Saul’s knowledge base to get grounded and more information on his returns. He has modified his approach through the years, but its worth a look:

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

As for the allocation, it sounds to me that DG is shifting towards a more concentrated portfolio from his recent Rulebreaker podcast. Strictly speaking, he said that he would not initially invest more than 5%, but would add to the stock later with further positive developments.

Now for your comment:

I actually have kind of a lot invested (well, a lot for me), so am not in the mood to experiment too much.

Investing is a lot like baseball. Nobody bats 1.000. The best you can do is study your opposition and prepare yourself to hit the pitches well. There are no “sure things” so we all have to develop the disposition to take wins and losses in stride. To get started, maybe you could build an imaginary portfolio with 12 - 20 stocks, and see how the stocks did and why they did what they did. Maybe, you would be more comfortable after that. Another, thing you can do is split your money 3/4 in an index fund and a 1/4 in individual stocks. By starting small you might be able get more comfortable with independent stocks.

I hope this helps.

Best,

bulwnkl

[brittlerock]

I’m not going to check your math, it’s probably close enough. I’ll just share a bit of my personal investing history.

Prior to following this board, my thinking was that no one (other than a few legendary full time investors) can beat the market, so why bother trying. There’s a ton of literature that proves this is true. Even Buffet says if you are not willing to make this a full time profession just stick your money in an S&P index fund, it’s safe, free of fees and it will grow over the long term.

Well, I didn’t put money money in an index fund, but all my “investing” was based on tips, that is to say company stories. I subscribed to some newsletters authored by some questionable advisors and my performance was not good. I can’t quantify it because I never actually measured it. When I retired in 2010 I had a pretty good nest egg from a 401 accumulation and the inheritance from my mother’s recent death. I decided I didn’t know what I was doing and I sought professional help in the form of Edward Jones based on the recommendation of a colleague. I found myself then invested in a bunch of very mediocre mutual funds and an annuity. After about three years of going slowly down I decided I couldn’t do worse on my own. My advice, stay away from portfolio management services, especially Jones.

I re-found TMF (I had become aware of TMF sometime in the 90s, but stopped paying attention) and subscribed to a couple of their publications and eventually invested in one of their paid advisory services. Things got better. But it was from there that I found Saul and this board (I had actually read a post by Saul sometime before he started this board and it impressed me).

I had previously maintained a well diversified portfolio with 25 to 30 positions. The problem with this is that the winners are pretty much off-set by the losers and go nowhere positions. I guess it reduces risk, but similarly, it reduces rewards. Over about a year I left the paid service and transitioned my portfolio to a more focused one. My goal was to get 20% annual return. I don’t compare my performance to any index, my thinking is that if I can get 20% or better, I’ve reached my goal for the year. This took some courage in that I finally had to recognize some paper losses were in fact real losses. That was 2016. I showed about a 10% real money loss for the year. But I recognized it for what it was and persisted.

Last year was my first year of holding a lean portfolio (15 or fewer positions) of high growth “Saul” type stocks. I never tried to copy Saul’s portfolio, but I’ll freely admit that most of my investments were derived from discussions on this board. In 2017 I showed an unbelievable (for me anyway) 83% gain. This year I’m down to a 54% gain as of a couple of days ago (so it’s a bit lower today). I say “down” because about a month ago I was up about 65%. Recall, my annual goal was, and still is 20%.

I’m not trying to tell you what to do, just relating my experience. Make your own decisions. It takes some courage to defy the “experts” and every so often we get someone who posts that we are all doomed, or at least or financial welfare is. If you were paying attention, you might have noticed I didn’t start investing in this manner until I was several years into retirement. I have some retirement income, but it’s far less than what I was earning while employed. I have my life savings invested in a few companies. It took some guts and conviction to go from the safety of diversification and mediocre performance to this aggressive growth strategy. And maybe I’m not far enough along to know if it was truly a good decision. Lately, with the political turmoil being what it is, I’ve increased my cash position a bit maybe 4% - 6% (last year it hoovered slightly above 0%).

Saul reminds us frequently that a recession and bear market will come. It will be unannounced and it remains unpredictable (despite the warnings of those who have predicted it for several years now). Everyone reminds us that the bull is long in the tooth. But the way I see it is if my portfolio drops 40% from where it is today, I’ll still be up over 50% from where I was when I started investing in this manner, and like every recession and bear market, it will pass. If it doesn’t, it won’t make much difference what you’re invested in.

[captainccs]

is my math close to right?

For me that is the core issue when comparing performance. Unless both use the exact same method of calculation the results are simply not comparable.

In bonds, for example, one uses “yield to maturity” to compare the various issues. This calculation normalizes time to maturity, interest rate, interest payments, and current price. If you could come up with a similar calculation for stock portfolios you could make a trusted comparison. They do have such a method for mutual funds but it only works with identical start and end dates.

Any investor who does 20% or better over the long run, assuming the calculation method is reasonable, is a bloody genius!. Warren Buffett, for example, does not use stock price or market CAP but book value but you can calculate book value in various ways. I use Internal Rate of Return (Excel function XIRR). Saul explains his method in the Knowledge Base. It’s a conundrum.

Denny Schlesinger

[Croesus2024]

Thanks Bulwinkle - Although I’ve picked a few stocks starting when I was twelve, and usually done quite well - I started doing it with actual amounts of money that actually matter for about a year. (So, “not long” as compared with Saul, say!)

I’ve had maybe 40% in a mutual fund, something like you suggest, and the rest in stocks.

But the devil is in the details.

Fidelity says I’m up 23% for the past year, including the 10% gain in the mutual fund - which would seem to mean I’ve done well with the stocks I’ve picked. BUT this doesn’t count the money I took out of Fidelity (embarrassed to say, around 25%), and stupidly was trading with a computer. No, I didn’t lose it all, only about 10% - but of course I lost the upside potential had I left that capital in something approaching sensible investing, in a bull market.

Another thing that would have given me a greater return is that sometime early this year I got worried about all my things like Nividia, and even Amazon - was there some bad week or day in February? - and mostly because I didn’t know what the hell I was doing, I sold a lot of the FANG/tech stuff and put more into the mutual fund at that point, so…

Anyway, my entire investing universe is up far less than 23%! It’s comforting Fidelity says that, but a) that’s through Septmember, so doesn’t include my October surprise (see below) and b) it doesn’t count the opportunity cost of that 25%, nor the c) 2.5% I lost being stupid (ie “trading”). (Being literally foolish, as opposed to “foolish”.)

“Live in learn” is nice, but I’d rather learn first. You guys do the living, I’ll do the learning - how’s that?

(Oh, btw, my initial “investment” in Nvda was in, like, 2015? But it was just one share! haha. And I got two other things DG advised, I think Baby and something else, so it was mostly a wash, though NVDA was up, like…1450% or something? Something crazy. Almost enough for a pizza!)

FOMA:

The other STUPID STUPID STUPID STUPID thing I did only a week or two ago was, after discovering Saul, I went on a selling and buying spree, and ended up with, like, 8% in AYG, same in ZS, in one day - one morning - like the day, or the day before, everything sank. And I freaked out, as maybe others have done at least once in their lives, and sold most of those purchases at a loss (keeping v small amounts), realising I should have recognised that Saul’s “starter position” is the functional equivalent of “cost averaging”, even if he thinks about it differently.

(FOMA)

I suppose it’s not hugely tragic in your eyes, but it hurt like hell to see everything drop.

I decided to punish myself, (well, no choice, really,) and not buy something I really wanted to get (a car that’s not a death trap - although, come to think of it, maybe THAT would be, in its own way, a wise investment! That was my rationalization, but as the amount I lost was more than the cost of the - used - car I wanted…well…too many details, except not:

I see I made another mistake, conflating short term (what will I buy in the next few months) with long term (investing…)

So that’s my story…for now

Nice name though, huh? I never intended it to be publicly used…but after discovering this board, well….not a bad name, is it?

Thanks again everyone who responded! Remember, this is my new motto. You live, I learn! (I’ve made enough mistakes for the year…)

Croesus

[Croesus2024]

thanks denny and brittlerock,also.

I need to read your messages (especially as brittlerock’s is longer) more carefully, later.

I’m completely new to this - I think - really old fashioned message board system, which is why I may have mis-spelled brittlerock’s name, etc. - I have no idea how to check it without deleting what I’ve just written…)

Well, I’m learning, and at least I’d lurked enough (for the past two weeks) to know to stay on topic, etc.

Thank you, I really appreciate it, it’s very very very nice to have people with more experience sharing it - their experience, wisdom, etc.

Thank you!!

[XMFALieberman]

Cro and everyone else,

Please stop this thread now. It is way off topic for this board.

Cro, please read the knowledge base which is linked on the right side of the board and Saul’s Saturday or Monday Morning Rules Of The Board posts to learn what’s on and off topic here.

Please do not reply to this message on the boards. Thank you.