My portfolio at the end of January
Here’s the summary of my positions at the end of January. Please note that PE’s, etc 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.
I don’t have to tell you that we have been in a major correction. I think I read that this was the worst start of a year on record, although it may have turned around this week. I finished January at 90.9% of what I started the year with, while the S&P was at 95.5%, and the Russell 2000 Small Cap Index was at 91.1%.
Please also note that I don’t ordinarily measure against the S&P, or any other index, but since I started this board I post my results against it since the MF uses it as their yardstick. A couple of months ago I started including the Russell, which is the most popular small cap index, as I thought it was unfair of me to compare my gains last year against a large cap index which ordinarily wouldn’t do as well as my small caps.
There’s a reason that I don’t measure against indexes. My goal is to make money each year that my family and I will live off. That’s what counts for me. Measuring against the S&P is setting the bar very low, as it’s a mix of 500 large cap stocks, made up of good stocks, mediocre (average) stocks, and poor stocks; so averaging good, poor and mediocre stocks, you’d expect a mediocre result as compared to selecting 10 or 20 good stocks. I mean, you REALLY should be able to SELECT a small basket of stocks that will do better than this mixture of five hundred mixed stocks.
I currently have eighteen positions total, although a few are such small positions that I hesitate to call them “positions” at all.
SWKS, SKX, INBK and LGIH are still my four largest positions, in the same order. Their PE’s are, respectively, 12.3, 18.1, 13.6, and 10.3, which is quite respectable and gives them an average PE of roughly13.6. Their average trailing rate of TTM earnings growth is 69%, so even if that drops by as much as two-thirds this year, to 23%, they will still be inexpensive with an average PE of 13.6.
INBK recently reported December results, and I’d suggest reading anirban’s excellent analysis. SWKS just reported on Thursday and did exactly what they said they would.
These big four make up about 58% of my total portfolio. Although these are fairly high-conviction stocks, that’s a real lot in four stocks. They are in completely different fields: microchips, banking, retail shoes and sneakers, and home building. This wasn’t by design, but it spreads the risk. You’ll note that LGIH has moved up into my top group, mostly through me adding to my position.
Now two fairly big positions, INFN and SEDG, both about 8% more or less. Their PE’s are both between 20 and 30. The trailing rate of TTM earnings growth is over 100% for each of them.
Now we come to my middle size positions, a group of six stocks which descend in size from about 5% of my portfolio down to about 3%. These include SNCR, CASY, AMZN, CELG, AMBA, and PN. I added especially to INFN, AMZN and CELG this month, took a new position in PN (which F1Fun introduced to the board), and sold out of my CYBR small position (PE too high when there were fast growing stocks selling at 10 to 15 times earnings). Together, the six of these middle-sized positions make up about 25% of my portfolio, and combined with my large and fairly big positions make up about 99%.
If I exclude Amazon as a special case (which you can consider as you like), the other five have an average PE of 16 and an average rate of growth of annual earnings of 64.4% (also excluding Amazon), even if I put an arbitrary cap on the unrealistically high rates of growth of AMBA and PN at 100% each. If their rates of growth also fall by two-thirds, they’ll still be cheap with a current PE of 16.
Finally I have six small to very small positions, SBNY, MITK, AMAVF, FB, CBM and CYBR, at 1.5% down to 0.2%. These are really small in the context of my usual position size. You don’t have to tell me that some of these positions don’t fit into the guidelines I’ve preached. I know. That’s why they are so very tiny. SBNY was recommended by Ophir Gottlieb’s CML Pro newsletter. MITK was introduced to our board by Neil. As you see, I took aback a tiny 0.2% position in CYBR.
This all adds up to over 100% as I have about 4% on margin.
What I do is “modified buy-and-hold”. Of my biggest three positions I’ve had SWKS and SKX well over a year (about a year and seven months and a year and eight months), and INBK for more than a year too. I had BOFI for about three years before I sold it. I held CELG and WAB for over two and a half years each. In no way am I a “short-term trader”. When I buy a stock, it’s with the idea of holding it indefinitely, actually for as long as circumstances seem appropriate, and NEVER with a price goal or the idea of trying to make a few points. If I try out a stock in a small position, and later decide it doesn’t fit, I sell it, and I really don’t care whether I gain a dollar or lose one. I just sell out to put the money somewhere better.
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 (currently post #15056.), which is a compilation of words of wisdom, and definitely worth reading if you haven’t yet.
I hope this has been helpful.
Saul
For Knowledgebase for this board
please go to Post #15056.
A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board