My portfolio at the end of March

My portfolio at the end of March

Here’s the summary of my positions at the end of March. I’ve put a lot of work into it this month, and I hope you find it useful. Since March 31st was Thursday, I’m including the 1st of April so the entire week is included.

Please note that the 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.

I don’t have to tell you that we went through a major correction and are now coming out on the other side. I read that early January was the worst start of a year on record. Early February got even worse and Feb 11th was my personal bottom when I hit 80.5% of what I started the year with. I finished February at 89.2% of what I started the year with, and am now finishing March at 97.6%, while the S&P is at 101.4% and the Russell is at 98.4%. I’m up 21.2% from the Feb 11 bottom, and up 9.4% from the end of Feb report.

In my post entitled Totally, Completely, and Absolutely Wrong, which is post #17358 on this board, I discussed how the bottom came just as everyone was totally panicked about the market, and all the Market Timers were sure we were going into a Bear Market, or The End of the World, and urging us to sell everything and go into cash or gold. I urge you to read the post if you haven’t already. (It had 65 rec’s so you may well have read it). It will give you some reassurance and context the next time we go into a market panic.…

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. Several months ago I started including the Russell 2000, which is the most popular small cap index, as I thought it was unfair of me to compare my gains in 2015 against a large cap index that on average 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. If the S&P is down 10% it would be small comfort for me to be down 5%. I need to make money!

Also, 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. 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 have to start off by remarking how humbling investing is. While I do well overall, I am constantly made aware at how flawed my individual decisions are, how often I’ll buy a stock and have it go right down, and how often the reverse happens: I’ll sell something and it goes straight up from there. One has to be satisfied with the preponderance of small correct decisions working out for the best, which they have by a large margin so far (fortunately for me).

I keep a weekly bar graph of the relative size of my positions. Actually, my computer does it for me. I just update the number of shares and the closing price for each stock. For quite some time the graph looked like a couple of giants (my biggest two positions averaging about 20% of my portfolio each), two tall positions (my third and fourth positions, at about 12% each), and then about ten pygmies, since the top four had taken up about 60% to 65% of my portfolio.

At the end of February I wrote that I had reduced the top two to 35% and that I felt it was more balanced and less risky with no stocks over 20% or 21%. This month, I’ve continued to bring down the top two towards a goal of a maximum of 15% of the portfolio in any one position, which is what I recommend myself in the Knowledgebase. Having 20% to 22% of my portfolio in a single stock was really too much.

My bar graph of position sizes now has a much more balanced look. There are no giants, just three tall positions at 16% to 13% (SWKS, SKX, LGIH), a couple of pretty tall positions at 9% to 8% (INFN, PN), and five “normal” positions between 7.0% and 5.0% (SBNY, AMZN, CASY, CBM, SNCR). Then I have three smaller positions between 3.8% and 2.0% (ANET, MITK, INBK), and finally I have three new try-out positions. (SHOP, GBX, and CYBR). SHOP is in the 2% range and the other two average just 0.6% apiece.

Thus SWKS, SKX, and LGIH are still my three largest positions, at 16% down to 13% of my portfolio. This month I reduced SWKS and SKX a bit as they had been just too large a percentage of my portfolio. The biggest reason that Skechers is down as a percentage of the portfolio, however, is that it has stubbornly refused to advance with the rest of my portfolio and is actually down 8% from my last report. (When you go down while the rest of the portfolio goes up, you decrease as a percent of the portfolio). This is in spite of nothing but good news and being rated the top shoe brand by a number of shoe business magazines, etc. I guess we just have to wait for earnings. I added some to LGIH during the month.

INFN and PN are now my fourth and fifth largest positions, but a bit behind the others in size, at about 9% and 8% in size. I added a little, but not much, to each during the month. The real reason PN has gotten to be such a larger percentage of my portfolio is that its price has about doubled since the last report. I haven’t sold a share at this point.

I’ve reduced my position in INBK, which was fourth last month. This was for several reasons: first because I needed cash for taxes and for investing in other stocks, second because my position in SBNY has grown now to 7% of my portfolio, and I didn’t want to be over-weighted in banking stocks, third because Anirban is now working for the Fool in Australia, and is no longer on the board regularly to give us the frequent updates that I depended on, and fourth because earnings have flattened somewhat sequentially. So when I was looking for a source of funds, INBK popped up. I have nothing against it and haven’t heard any bad news. It was just my best source for funds when I needed them.

The PE’s of my current top five are, respectively, 13.9, 19.2, 9.6, 20.6 and 10.9, which is quite respectable and gives them an average PE of roughly 14.8.
Their average rate of TTM earnings growth is ridiculously high if you average in PN’s rate of 387%, but even removing PN as an outlier, the other four have an average rate of growth of trailing earnings of 71%. A rate of growth of 71% and a PE of 14.8 sounds very underpriced, but I expect all the rates of growth to slow down in 2016.
My own predictions for their 2016 rates of earnings growth are 25%, 35%, 25%, 40% and 50%, with an average of 35% (about half of the 71% rate of growth for 2015). However, even at 35%, they will still be quite inexpensive with their average PE of 14.8.

These big five make up about 59.2% of my total portfolio, down substantially, and on purpose, from 68.6% a month ago. Although these are fairly high-conviction stocks, that’s still a lot in five stocks. They are in fairly different fields: microchips, retail shoes and sneakers, home building, optical data movement and storage, and insurance company services. This wasn’t by design, but it spreads the risk. You may also notice that I’ve reduced the top two to 29% where at times they have been much, much, more, and even last month they made up 35% of my portfolio. All together it’s more balanced and less risky, and I sleep better at night.

Now we come to five medium-sized positions, which descend in size from about 7% of my portfolio down to about 5.0%. These include SBNY, AMZN, CASY, CBM, and SNCR in that order. As you see, SBNY has moved up to 6th place. I really like SBNY and keep adding a little at a time. AMZN, in 7th place, is one of my favorites. I add a tiny bit each time I have a little cash, and all the tiny bits keep adding up. Of course the price has also moved up. CASY, is next. I like CASY a lot, and added a bunch when it got down to $102-$103, but I sold the extra back after the stock went up because it’s a low beta stock and I needed cash to buy other stocks that had sold off more, and would move more going up. CBM has moved up, both because the price is up, and because I added to it during the month.

I’ve explained elsewhere that I took my position in AMZN because of its rapidly growing operating and free cash flows, in spite of its lack of much EPS. If I exclude my position in Amazon as a special case (which you can consider as you like), the other four have an average PE of 18.4, and an average trailing rate of growth of annual earnings of 40% (also excluding Amazon). I estimate that for this year their average rate of earnings growth will be down to 31%, which still leaves their current PE of 18.4 apparently cheap.

Actually you’ll note that the weighted average PE of all my top ten major positions, again excluding the position in AMZN, is between 15 and 16, which is very comfortable. All my top ten positions were also in the portfolio last month.

To continue, I have three smaller positions, ANET, MITK, and INBK, in descending order between 3.8% and 2.0%. ANET is a new position, which always had had too high a PE for me, but it came down from about 50 about ten months ago to about 25 now. As it’s a disruptive company I started a small position in spite of the Cisco lawsuit. I added a little to MITK during the mont, but as you can see it’s still a small position. INBK I discussed above.

Finally, as I wrote above, I have three new try-out positions, (SHOP, GBX, and CYBR). SHOP is in the 2% range and the other two average just 0.6% apiece. I wrote a review of SHOP yesterday and someone thought my post was an April Fool’s joke, but it’s real. GBX has been discussed on the board quite a bit.

**To summarize,**this month I reduced SWKS and SKX a bit as they were just too large a percentage of my portfolio. I reduced INBK substantially, and sold out of CELG, which last month was my real position with the highest PE, but it seems to have been replaced by ANET, which has an even higher PE. There’s been a lot of good news about Arista though recently, and I started with a tiny position and built it up to now my 11th biggest position at present.

Thus, I put money into one new “position” position this month, ANET, as well as the three try-out positions SHOP, GBX, and CYBR. Both ANET and CYBR are positions I’ve held before.

I also added to (in alphabetical order): AMZN, CBM, INFN, LGIH, MITK, PN, and SBNY.

What I do is “modified buy-and-hold”. Of my top positions, I’ve had SWKS and SKX for about a year and nine months and a year and ten months, INFN for eleven months, and LGIH for six months. I’ve had INBK for a year and five months. I had BOFI for about three years 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, actually for 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, 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.


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


Thank you, Saul! Illuminating, as always. I’m kind of glad to see you sold CELG – I thought I was missing something. I don’t quite agree with you on AMZN, but I’m sure you know what you’re doing.

My real questions are about SKX and SEDG.

First, have the weekly reports from SKX been encouraging? I don’t know where to find them consistently, but a couple that I stumbled across randomly had sales increasing just single digits YoY. Granted, that was for only one or two weeks (that I saw), so maybe it doesn’t mean much.

For SEDG – have you considered getting back in? Can you say a little more about why you sold? I’m sure the risks you spoke of are disruption risks…but so far all seems well with them, right?


I have three new try-out positions. (SHOP, GBX, and CYBR). SHOP is in the 2% range and the other two average just 0.6% apiece.

Saul, I’m curious what your thought process was on CYBR. Granted, you procured a tiny position, but I found it interesting in that the P/E is pretty high for what your philosophy typically calls for:

Price @ 4/4/2016: $42.61

4Q15  3Q15  2Q15  1Q15
.39   .26   .19   .16

TTM EPS = $1.00
P/E = 42.6

They do have some compelling factors: 56% YoY Revenue growth, strong bookings, strong FCF, no debt, a belief by the CEO that they can expand from 2.5k customers accts to well beyond 10k, and a belief that their core product (privileged account security) is a need for virtually every company in every industry. [Source:…

In addition to all of that, they have been independently recognized as a market leader, and just recently their Privileged Account Security Solution was added to the U.S. DoD Unified Capabilities Approved Products List (UC APL), which, according to the company, is the only comprehensive privileged account security solution on the list. [Source:…

However,…their 2016 guidance has them growing revenue by 28% but dropping EPS from $1.00 for FY2015 to $0.83-$0.86, which I’m guessing is due to increased expenses, such as R&D, that are needed to sustain their growth. Needless to say, that doesn’t help the P/E.

So what swayed you to take a nibble?