Hi Saul,
You know I think I may have started all the discussion of traders and trading and the word clearly bothers you so I will apologize for any friction that caused. The discussion that you are having in this thread however, really gets to the heart of what my earlier thread was trying to get at, and that is your investing philosophy and more precisely, when to sell.
From my perspective, your philosophy and TMF are similar but not exactly the same on both the buying and selling sides. On the buying side, you look for compamies with growing revenue and earnings basically over the last couple of years it longer is better. In fact, the way you track your companies is very telling in that you plot earnings versus stock price and ensure that the two are tracking well together. No criticism here, it’s a great idea but I am only saying it seems to be your primary, but not only criteria.
This fits nicely with your selling side which is quick to react to any information that points to the trend changing. You have no issues with selling a stock if there is reason to believe the story is longer playing out. Since you do not have an overly large portfolio you can track your positions closely and in your view there is always another stock to buy into so why bother sticking around with too much uncertainty.
TMF, on the other hand seems to look for broad based trends that will play out over a long time period. They are also looking for rapid revenue growth but are less concerned with earnings if the revenue and the broad social trend plays out.
By the same token, their sell side is much looser than yours. They do not like to sell period, once the initial purchase is made. Since the trends are broad based social trends the reasoning is that there will be bad quartes and even years but you can’t predict the volatility ahead of time and therefore want to be in those trends based on finding the very best owner/operators that fir the bill. Because of this they tend to give the owner, who they trust a lot of room to maneuver through uncertain times. Furthermore, their feeling is that if you do so there will be a number of losers, but a few very big winners over the long term that will make up for the losers. I think their record speaks for itself, even though I would agree that sometimes, they hang onto stocks incredibly too long.
It is interesting that their decisions to hold longer and buy seemingly crazy picks (in your opinion) brings out such a strong reaction. My theory is that it is because you have such a strong belief in your methodologies and their validity. In truth, I think that is what makes you such a successful investor. To be successful you need to have unshakeable faith in your philosophy otherwise you get shaken out in the tough times. A good example of this is when Warren Buffet was taking so much heat back in '99 when he wouldn’t buy technology stocks. What a mistake it would have been for him to listen to the critics and start buying technology since it would have been exactly the wrong thing to do.
Just to be clear, I think you have this system figured out and it works very well for you…clearly. It can work for anyone else, if they truly understand the principles and stay true to the philosophy. That is the magic. For Maria, Who wrote a beautiful post, by the way, owning long term high risk stocks is probably not the path. Aside from following Saul, which will work as long as he continues to graciously post his ideas, Maria may find that Income Advisor, or at least SA might be a better subscription. And is SA is selected, buying the starte stocks, who by definition are much safer selections.
Sorry for the long post, I really am trying to come to grips with my large portfolio of stocks and work through a process of getting rid of a few that have not played out as I hoped when I bought them. Unlike your very admirable trait of selling and walking away happy Saul, I fret way too much and always notice how my sales seem to rise after I finally give up on them.
Randy
