My portfolio at the end of August

My portfolio at the end of August

Here’s the summary of my positions at the end of August. As I usually do, I’ve figured them as of the last weekend of August as I have more time on a weekend to figure all this out. Thus what this amounts to is a full four weeks since my end of July summary.

I’ve really tried this month again to tell you more about what I was thinking about, why I did what I did, and what each stock did. Please note that any PE’s that I’ve given are based on adjusted earnings, usually as the company has given them, but occasionally with small modifications as I’ve calculated them. When you get to the end of this please feel free to ask questions.

At the end of July my portfolio was at 99.9% for the year. I am now at 104.6%, so it was a very good month (up 4.7%), and I am at my highest level of the year. I’ve even caught up some on the S&P 500. The last I looked, at the end of June, it was doing 5.8% better than I was. As of the end of this month it’s doing 1.4% better than I am, so I’ve caught up 4.4% in the two months.

In fact my portfolio is up 30.0% from the February 11th low, when all the “smart” guys were mocking us for being buy-and-hold investors, and not going all into cash (the way they were). Up a full 30% (!) I wonder how much their cash is up since then.

I have to reiterate that we’ve been going through a very difficult period of time in which to make money in the market, and it’s been a very difficult year for me. Up 4.6% for the year so far may not sound so bad, but it’s way, way, under my expectations.

We keep having people warning that the market is frothy, extended, and overvalued. However, we have a rising economy, rising employment, rising wages, more hours worked, falling unemployment, low interest rates, low oil prices, and rising company revenues and earnings, etc. And it’s a market that just keeps inching up, like watching grass grow, or paint dry, in spite of nearly everyone being pessimistic about it, and not a euphoric booming market that should make you worry.

Now let’s get to my positions. I have no new positions this month and eliminated a few old ones: LGI Homes (LGIH) is still my largest position at 17.3%. (This is big: it’s 33% bigger than my next largest). I didn’t buy or sell any LGIH this month. It ended last month at $34.21 and rose this month to $35.47, up about 3.5%, which was less than the rest of my portfolio, hence its percent of the portfolio slipped a tiny amount from 17.5% to 17.3%.

17.3% is still very big! I’m ambivalent about what to do, as I’d like to let a successful position run, but this is real money, and the real world, and 17% of my portfolio in one stock, in a cyclical industry, does make me nervous. To reiterate what I wrote a couple of months ago:

I note that I waver about position size. When I was younger, and my portfolio size was smaller, I was more willing to concentrate my positions, and I think that enabled better returns. However, it meant more risk, and now that I have a larger portfolio, and it is harder to exit a position in an emergency, and I’m retired as well, without new money to make up for losses, I find myself being more cautious. So I may not be consistent in my thoughts about position size.

LGIH did announce earnings, which were 96 cents, up 45% from 66 cents a year ago. Average home price was up nicely. Closings were up nicely. Gross margins are holding steady. The housing market is doing very well. As management put it in the conference call : Absorption was very strong, averaging 6.8 closings per community per month. This was up from 6.4 last year; all while increasing the average sales price by 6%, and adding 11 communities outside of Texas.

Their PE is 11.7. I guess I’ll let this successful position run.

Amazon (AMZN) is still my 2nd position. It was 12.8% last month and 12.9% this month. Its stock price only rose from $759 to $769, or about 1.3%. I’m not complaining about the 1% rise though, as Amazon is up 49% since I started my position at $515 a little over six months ago. I added a tiny amount during this month. I don’t have to tell you how I feel about AMZN. It’s one of my favorites. But I do feel my position is now big enough and I probably won’t be adding except perhaps tiny amounts when I can’t resist.

Signature Bank (SBNY) is still my 3rd biggest position at 11.6%, just behind Amazon. The stock price actually fell 0.6% this month from $120.2 to $119.5, due I think to worries about their having had to increase their reserve for taxi medallion loan losses. I wrote this after June earnings were announced:

They are clear about what’s going on: Growth was great, book value was way up, loans were way up, efficiency ratio was way down, new banking teams came on, all the things you want to hear from a bank. This quarter’s earnings were impacted by a one-time set aside in case of possible specific taxi medallion loan losses. This reduced net income and earnings on paper. They said they did not expect any additional set asides for this problem next quarter (or even at all). So next quarter they will have the net income they would have had this quarter, if not for the set-aside, plus the growth in net income they have sequentially every quarter (for 26 quarters in a row, anyway). This means next quarter should be a double large sequential gain.…

That is pretty much the way I still see it: They set aside some money this quarter for a possible one-time loss. This made a small reduction in their quarterly earnings - but their business is doing better than great. I figure this set-aside eliminates the uncertainty for me, but the market is waiting to be sure. I added a small amount this month.

Skechers (SKX) is still my 4th largest position at 9.75%, pretty much flat with a month ago. Its price of $24.72 is up about 3% from $24.02 a month ago, to which price it had sunk after earnings. I added a tiny amount this month when the price dropped to $23.40. Their PE is 13.7. They gave cautious guidance in July. It’s hard to imagine that a company which had been growing earnings at well over 50% for years will suddenly grow just 5% to 10%. We’ll have to see what happens. These big 4 make up just under 52% of my total portfolio.

We then step down to my Middle-Size positions:

Shopify (SHOP) was 6th last month but has moved up to 5th this month. It’s at 7.7% of my portfolio, up probably by 1.5% from last month. I added a bit on the way up, but the real reason it’s up so markedly is that the stock price moved up 21% from $34.27 to $41.50 in the past four weeks. (You’ll remember that I took this position at about $27.50 about three months ago after it was recommended two months in a row by a MF service. It was then written up by Bert shortly afterwards. He wrote them up again this month.) They have no earnings yet but their revenues have been rising over 90% compounded for several years and were up 93% last quarter. That’s Revenues! Up 93%! And renewable revenue was up 70% last quarter.

Arista (ANET) was 5th last month and is now 6th, at 7.1%, although that 7.1% is up from 6.5% last month. It hasn’t been standing still, and its stock price has risen 11% from $71.3 a month ago to $79.0 now. It’s just that Shopify went up even faster and passed it. Arista’s business keeps booming and worries about the Cisco lawsuit are fading (very) gradually. Their earnings and revenue last quarter were both up 37%. Their PE is 28. I added a little to Arista this month at about $69.50. And by the way, Bert recently wrote them up again.

Bank of the Internet (BOFI) was one of the smallest of my small positions last month at about 3.0%. It is now my 7th largest position at 6.5%. This is partly because the price has risen 36% from $16.80 to $22.90, but partly because I substantially increased my position size at prices between $16.15 and $17.15 four weeks ago. I have discussed this at length and won’t say any more about it, except to reiterate that there is still plenty of risk here if something blows up. The PE by the way is still only 12.3.

Silver Spring Networks (SSNI) was 7th last month and is now 8th at 5.75% being passed by BOFI, although SSNI was no slouch itself, rising 11% from $12.57 to $13.95. I also added some to SSNI at prices from $11.80 to $12.50. Look, they don’t have much earnings, and they have a high PE (63), but they have won a series of huge mega-contracts that don’t show up on their books yet, and what they install has recurring revenue for at least 15 years and growing.

Salesforce (CRM) has moved down from 8th place to 9th at 5.6% of my portfoio as Bofi moved up and pushed everyone else down one slot. I must say that I am disappointed about this stock (not the company). The stock has gone nowhere since I started to accumulate a position about three months ago. I bought it mostly about $82 and it’s now $79. Not a catastrophe, but not great either. The problem is that its PE is quite high because it’s a SaaS company so it only gets to count its revenue month by month. Its performance has been great. It dominates its category. Its revenue rises each quarter, not only year-over-year but sequentially as well. Its operating cash flow rises, its deferred revenue rises (it currently has $4.0 billion(!) in deferred revenue, and $7.6 billion(!) in “unbilled deferred revenue.” In other words, the success of their business is not being fairly described by the current accounting system.

Now lets drop down to some slightly smaller positions:

Synchronoss (SNCR) was a 3.8% position last month and is now tied for my 10th and 11th largest positions (with PAYC) at 4.6%. That’s partly because the stock price rose 10% from $37.35 to $41.05, and partly because I added to my position after earnings were announced (mostly around $40.50). The stock rose (and I added to my position) because it seems they have finally turned the corner, and that all the expenses they had in the last six to nine months, to build out enterprise solutions, in partnerships with Goldman Sachs and Verizon, look like they will pay off. Their current PE is 18.

Paycom (PAYC) was about 3.5% last month and is now tied with SNCR at 4.6%, for 10th and 11th place. The stock rose 8.7% from $47.2 to $51.3 and I also continued to add to my position on the way up. I started this position in Paycom about three and a half months ago at about $37.50, and have added all the way up. Its current price is up about 37% from where I started, but the rest of my positions are naturally up less as the stock has gone pretty much straight up, and I’ve been adding along the way. Its revenue has been rising about 50% per year, plus or minus, and earnings have been rising about 100% per year, again, plus or minus. Its current PE is 71. Recommended by a MF service in June. Recommended by Bert.

To move down again a little, my 12th largest position is
Hubspot (HUBS) at 3.65%. It rose a little in price from $54.60 to $56.80 (after being as high as $59.50), but I also added to my position during a decline the first week of this month at $51.10 and $53.40. I’ve been in this stock since the week before Brexit (remember that?). I bought initially at $47.50 and added to my position at $42.50 on the Brexit fall. (It’s up about 34% since then). I kept adding to $52.50, but haven’t added above that. This is a recurring revenue company with decreasing losses, positive operating cash flow, and increasing metrics on every part of its business (as you might deduce from the stock action).

My 13th largest is Mitek (MITK) at 3.25%. It went from a price of $7.55 to $7.71, for a small 2% gain on the month. I added a little during the month, being consistent with only buying below $7.80. I’m not letting my position in Mitek get large because it’s a truly small company, with a small float. Its PE is 28.6. It keeps announcing new patents granted and new contracts signed.

Then I have my last two positions, 14th and 15th, which are really small, at 2.1% and 1.6%. These are Atlassian (TEAM) and CyberArk (CYBR) . After rising from $46 to $56 over a couple of months, CyberArk fell off to about $54 this month. I’m cautiously building, but very cautiously. Atlassian was at $30 a month ago, and at $29 now, but inbetween it got up to $32 before falling back. I’m keeping both of these small because of high PE’s in spite of their great stories.

I exited some stocks during the month. These included Rubicon and Cambrex which were small positions last month, for reasons I have discussed. I also exited Skyworks, which was a very small position last month, and which I have also discussed, and LogMeIn, which I just had as a tiny position for a couple of days, and got out because I decided it was just a play on benefits from synergies after a merger, and that wasn’t my thing.

To summarize, this month my big four are still the same (LGIH, AMZN, SBNY, SKX). Then, SHOP, ANET, SSNI, CRM, SNCR and PAYC follow, with SHOP having pulled ahead of ANET this month, and BOFI slipping in after ANET. My final four smaller and very small positions are HUBS, MITK, TEAM and CYBR. During the month I exited RUBI, CBM, SWKS, and LOGM (which I just looked at for a couple of days).

What I do is “modified buy-and-hold” . I’ve had SKX for 27 months, and LGIH for 11 months. I’ve had SNCR for 18 months. I had INFN for a year and INBK for a year and a half each before I sold them. I had SWKS for 26 months before I sold out. I had BOFI for about three years the first time before I sold it. I held CELG and WAB for over two and a half years each.

When I buy a stock, it’s with the idea of holding it indefinitely, as long as circumstances seem appropriate, and NEVER with a price goal, or with the idea of holding it a few days or a few weeks, or with the idea of trying to make a few points and selling. If I try out a stock in a small position, and later decide it doesn’t fit, I sell it without hesitation, and I really don’t care whether I gain a dollar or lose one. I just sell out to put the money somewhere better. I’m not trying to trade it and make a dollar on it, I’m just trying to decide if I want to keep it long term. I often change my mind about a position during the month though, so you should never just try to follow what I’m doing without making up your own mind about a stock.

Since I began in 1989, my entire portfolio has grown enormously. If you are new to the board and want to find out how I did it, and how you can do it yourself, I’d suggest you read posts #4 through #8 at the beginning of the board, and especially the Knowledgebase that Neil keeps for us, which is a compilation of words of wisdom, and definitely worth reading if you haven’t yet.

I hope this has been helpful.


For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board



Can you elaborate a bit on why you like SBNY, from your current perspective on the company? I am having a hard time seeing the prospects for this company.

The finances look reasonable, though that is scant praise compared to my typical investments. I get what you say about the business doing great in spite of the taxi medallion loan losses. Then I look at the stock price and see it has been falling steadily for most of a year. This steady decline is especially noteworthy because so many stocks have been rising steadily (though slowly) since February (with the exception of the brexit hiccup).

What concerns me is the “next quarter will be better” viewpoint. I’ve watched more than one stock I’ve owned slide slowly into oblivion under such a premise. I didn’t know then how to evaluate a company (I essentially bought them blind) so I can’t really say this concern is in any way valid, it is just what comes to mind.

As I have noted before, I have a bias against debt and thus against banks. I am nonetheless trying to understand the situation to see what I can learn. I understand the view that SBNY is being undervalued by the market and that next quarter might give amazing results compared to expectations. But 11.6% of your portfolio allocated to SBNY indicates a rather higher degree of conviction than I have been able to understand.

Can you expand a bit on your thinking on this stock?

Thank you,


Thank you Saul. I’m one of the many that are on the sidelines reading your posts. Thank you for sharing us your methodology. It’s has helped me a lot.


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Othalan - I would suggest you read this memo by Howard Marks, and try to train yourself to look at price as an indicator of opportunity, rather than value:…

Signature was being valued very richly early in the year (at 3 P/B, when most banks are hovering around the 1 P/B range), so the fall in the past few months was probably justified. Its interest income continues to climb, and the decentralized model they have really aligns incentives correctly - the teams are far more energized than at commercial banks because their compensation is laid out in a simpler format and every member on the teams shares in the wealth when they do well

They are probably still small enough that there’s a lot of growth left (in a great and profitable niche as well with their private business clients), the only thing I would say about banks is that you really have to pay very close attention to its portfolio on a consistent basis. Losses really only show up on the financials with a time lag - if multifamily properties suddenly begins tanking, Signature would get hammered as that’s 50% of their loan portfolio

I don’t own banks currently because rates are so abysmal and I don’t think they will rise very soon. With Signature, I wouldn’t worry too much about rates, since the bank focuses more on private client acquisition than profiting from spreads, and I wouldn’t worry too much about debt, since they are very well capitalized. They are heavily concentrated in real estate (tho not construction, so less risk) - I think I would probably be nervous with both LGIH and Signature as large anchors in my portfolio, but one or the other wouldn’t be too bad

Just my two cents


Thanks Saul,

I also think LGIH will continue to boom, but the growth in stock price will be due to the increase in underlying intrinsic business performance, the multiple probably won’t expand anytime soon because the housing collapse occurred recently enough that investors are still scarred by it - the anxiety I get from the construction/home building industry is that once you sell the developed product, there’s no recurring money coming in the future, and you’ll have to find more space/lots/projects, so it strikes me as riskier than AMZN or SBNY or SKX, where the services rendered has a time expiration limit and you’ll get to sell again. However, I think housing is riding a rising tide, and it’ll probably continue for at least 2-3 more years. You’re definitely a braver investor than I when it comes to LGIH

I share your enthusiasm for SKX and SHOP, I feel both are in that sweet spot of size where growth comes a lot easier than for much larger companies like AMZN or CRM, I’ve really been itching to buy more SHOP but it keeps going up in price, and I’m getting more and more impatient, so I may take some nibbles soon even if it doesn’t dip any more

With regards to CRM - does you have any concerns about market saturation, or the continued rise in spending on SGA? Seems for every new account/revenue stream they get, it’s used up on spending for R&D, G&A, or most egregiously, sales and marketing. I’m dubious of whether the business is truly scalable, where additional revenue will eventually fall into the bottom line as cash or profit - salesforce really seems like a business run to enrich its employees (especially its salesmen) and not so much its investors. Of course, the stock has about tripled in the past 5 years, so what do I know?


Othalan - I would suggest you read this memo by Howard Marks, and try to train yourself to look at price as an indicator of opportunity, rather than value:…

I would phrase that differently: “Train yourself to look at price and value.

Value persists over time while price fluctuates rather randomly in the short run. Using the two together is, IMO, the way to get best results. I have a wish list of stocks that are worth buying (value). I buy them when the price is right (margin of safety).

Denny Schlesinger


I would phrase that differently: “Train yourself to look at price and value.”

Value persists over time while price fluctuates rather randomly in the short run. Using the two together is, IMO, the way to get best results. I have a wish list of stocks that are worth buying (value). I buy them when the price is right (margin of safety).

Completely agree Denny, in case my statement wasn’t clear, it was meant to say “train yourself to look at price as an indicator of opportunity, rather than at price as an indicator of value”


Thank you for that article you linked, it is very well written. I agree with you completely. What you wrote helped me understand my own question so let me rephrase it more concisely and clearly:

I am using SBNY to help improve my understanding of banks as investments.

I get that SBNY is in a good business position.
I get that SBNY at today’s price is an opportunity for a good entry point.
… But …
How much growth is possible?
Where will that growth come from?

The position in Saul’s portfolio indicates a belief in far more potential for growth in this company than I have been able to identify. I feel like I am missing something, or perhaps underestimating the importance of something obvious. I am looking to understand more of Sauls’s (or anyone else’s) thoughts on the company.

Aphalite, maybe it is as simple as the intangibles of the business model you laid out and I am not giving that enough credit. I need to think on it some more. Thank you!

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I don’t own banks currently because rates are so abysmal and I don’t think they will rise very soon.

Janet Yellin just said that The Federal Open Market Committee “continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives,” Yellen said in prepared remarks.

More pointedly, she added, “Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.”

The possibility of a December hike, around 50 percent before Yellen’s remarks, moved up to 60.2 percent, according to the CME. The market continues to doubt anything happening in September — less than two months before the presidential election — though the probability for a move jumped to 30 percent.…

Some of the speculation is that the Fed wants to have rates be somewhat higher so that if things should get worse, they have room to “ease” things again.

I think I would probably be nervous with both LGIH and Signature as large anchors in my portfolio, but one or the other wouldn’t be too bad

For the record, I would think SBNY (which benefits from high interest rates) and LGIH (which benefits from low interest rates) would be a good tandem.