My portfolio at the end of Nov 2017

My portfolio at the end of Nov 2017

Here’s the summary of my positions at the end of November. As usual, I’m figuring as of the last weekend of the month, so think of this as a four week summary if you prefer. December, obviously, will be five weeks and run to the end of the year. Please note that any PE’s that I give are always based on adjusted earnings, which very rarely may also have small modifications of my own.

Giving you my end-of-month results has become really embarrassing. I’m sorry guys and girls, but NOBODY deserves to be up this much roughly eleven months through the year, me included.

Look, my portfolio closed Friday up 97.0%. That’s just not a rational expectation, not one that you should expect from me, or from yourself, and certainly not a result that I expected, but that’s the way it is, so I’ll give you the results.

It’s so bizarre that I even considered stopping giving my results monthly because I felt it sounded so like boasting to give you such a perposterously large number. Then I realized that this has been a cooperative effort, in which we have all helped each other to find great stocks, discuss them and evaluate them. I have certainly got many of my stocks from posters on this board. Thanks to you all, and PLEASE don’t expect me to be up another 97% next year! It ain’t goin’ to happen.

I’ll try to give just give the bare results (without self-praise), but I will discuss my stocks as usual:

The three indexes that I’ve been tracking against are as follows:

The S&P 500 is now up 16.2% for the year. (It started the year at 2239 and is now at 2602). Some people like dividend-added results. This would add a couple of percent, but make no significant difference in the overall comparisons. I will keep using actual price results for consistency with my earlier summaries.
The Russell 2000 Small Cap Index is up 11.9% for the year. (It started the year at 1357 and is now at 1519).
The IJS Small Cap Value ETF is up 8.2% for the year. (It started the year at 140.0 and is now at 151.45).

These three indexes thus have averaged up 12.1% for the year so far. (The average will be a point or so higher if you use the S&P with dividends added). You can make your own comparisons of my results (and your own), with the averages. I don’t feel comfortable doing it, but it’s clear that most of us are way ahead of the averages.

You may ask, “Why these three indexes?” When I started this board I compared my results to the S&P 500. Then I considered that the S&P is all large caps, and smaller caps tend to do better over the long term, so I added the Russell 2000, a small and mid-cap standard. Then last year, it was claimed that the IJS, which tracks the S&P 600 Small Cap Value Index, has the best long term results. So I added the IJS. This gives me 500 large caps (the S&P), 2000 small and mid caps (the Russell), and 600 small cap value stocks (the IJS), which combined ought to give me a very representative set of standards to compare against. I’m sure some people will say “Why not drop this index and add that one?” but these are the three indexes I compare against currently, and I will probably continue to do so. I think they give me a pretty good approximation of how the market overall is doing.

I know that there’s no way this can continue like this forever, and that there are bound to be reverses. By the end of next month the results may be significantly down from these levels for all I know. However I’m no good on timing the market, and I don’t try. If I did, I would probably have exited all my positions at the end of April, when I was up 26% in four months and was “aware” that it was “impossible” and couldn’t continue like that. It’s hard to remember now, but…back at the end of April, up 26% seemed like a ridiculously enormous amount in four months, and way “over-bought.”

Does anyone still doubt that intelligent stock picking with a modified buy-and-hold strategy can beat any index or average? How could it not? When an “average” is just that: an average of good, mediocre, and poor companies?

Here’s a little table of the monthly progress of my results so far this year:

**End of Jan 		+ 8.5%**
**End of Feb		+13.9%**
**End of Mar		+20.4%**
**End of Apr		+26.1%**
**End of May		+36.2%**
**End of Jun		+38.1%**
**End of Jul		+45.7%**
**End of Aug		+48.7%**
**End of Sep		+64.8%**
**End of Oct		+76.6%**
**End of Nov		+97.0%**

I’m sure that some of you have done even better, as I made some bad choices along the way that cratered as soon as I bought them, and others that continued going up after I sold them.

The stocks I’ve been in since the beginning of the year are Arista, LGI Homes, Shopify, and Ubiquiti, and they make up 42.1% of my current portfolio.

For those who want a time frame, current positions I’ve added since Jan 1st have been:
Feb – Talend
Mar – Square, Hubspot
Aug – Nvidia
Sep – Nutanix
Oct – Wix, Splunk
Nov – Align, Nektar

I wrote at the end of Sept that Alarm and Brinks were little positions that I wasn’t yet sure I’d keep. Well I sold out of Brinks in October and out of Alarm in November, not because I found anything wrong with them, but because they just weren’t my really my kind of company, and I needed cash for other purchases. I sold out of Instructure in Nov because I felt it would be years until they showed a profit, if then, in spite of everyone loving their products. I’ve toyed with taking a tiny position back, but I haven’t. I was briefly in and out of another little position in Teladoc in September. I liked the story but then realized that they had just taken on a lot of debt to make a very expensive large acquisition of a no-growth company, and the story reminded me too much of Synchronoss. In October, I was briefly in and out of TFSL, a little bank stock. Nothing wrong with it, a good value stock, but just not my thing. Twilio was a tryout in August. I never built up my position and exited it in September. It was my second trial with it and I just wasn’t comfortable. I had held Kite since January but it was bought out in September for a huge gain. I exited Mulesoft and Splunk also in September. I had held Mulesoft since March and finally gave up on it. I started the year with Splunk. In fact I held it for about a year, and it went nowhere for most of that time. It was reorganizing its business model, but diluting its stock a great deal, and I just had had enough. I liked the “story,” but I felt I had better places for my money. I dipped my toe back in in October, and it’s now grown to a 2.6% position.

Here’s how my stocks have done in the ten months since December 31. I’ve arranged them in order of percentage gain. I’ve used the start of the year price for stocks I’ve been in all year, and my initial buy price for stocks I’ve added during the year. Note that the best four are all up over 100% so far this year


**Square** from 17.50 to 35.20, 	 **up 179.1%** 
**Shopify** from 42.90 to 111.9,     **up 160.8%**
**LGI Homes** from 28.73 to 67.45,   **up 143.9%** 
**Arista** from 96.80 to 242.05,     **up 150.1%**
**Talend** from 26.80 to 42.80, 	 **up 59.7%** 
**Hubspot** from 62.40 to 82.00,     **up 31.4%** 
**Ubiquiti** from 57.80 to 66.90,    **up 15.7%**

**NEWER POSITIONS taken in the last 4 months**

**Nutanix** from 21.70 to 34.30,     **up 58.1%**
**Nvidia** from 161.2 to 216.95      **up 34.6%**  (3rd time)
**Splunk** from 64.50 to 84.10,      **up 30.4%**

**Wix** from $69.20 to 54.85,      **down 20.7%**

**EXITED POSITIONS THIS YEAR** (showing prices when I entered and when I exited)

**Kite** from 47.50 to 179.00,         **up 276.8%**
PayCom from 45.50 to $69.00, 	   up 51.6%
Splunk from 51.15 to 67.75,        up 32.5% (1st time) 	 
Amazon from 750 to 985, 	   up 31.3% 
Horton from $8.31 to $10.44,       up 25.6% (1st time)
Horton from $10.90 to $12.75,	   up 17.0% (2nd time) 
Nvidia from $146.3 to $166.1       up 13.5% (2nd time)
Brinks from 79.70 to 85.65         up 7.5%     
Instructure from 31.75 to 34.05,   up 7.1% 
Signature Bank from $150 to $160   up 6.7%
A O Smith from $51.10 to $53.80    up 5.5%	
Twilio from $28.85 to $30.00	   up 4.0% (1st time)	
Alarm from 43.85 to 45.50	   up 3.8% 
Nvidia from $149.5 to $154.4       up 3.3% (1st time)
Wix from $73.25 to $74.00          up 1.0%

TFSL from $15.80 to $15.79         down 0.1%
Trade Desk from $51.90 to $50.65   down 2.4%
New Relic from 47.2 to 44.75,      down 5.2% 
Mulesoft from 22.25 to 20.80,      down 6.5%
Twilio from $30.90 to $28.75       down 7.5% (2nd time)
BlackLine from 37.40 to 29.95,     down 19.9%

I also exited four biopharmas in July (Cellectis, ZioPharma, bluebird, and Matinas) at prices ranging from a gain of 20% (Cellectis) to a loss of 42% (Matinas). All of the positions were tiny and none of the results were material as far as my portfolio results.

I’d like to note that since 2010 (with fears of a double dip recession), well-intentioned people have been warning us constantly that another bear market and/or recession is coming. “The bull market is too old.” or “The market is too high.” or “This technical indicator proves the the market is in a bubble.” All of their charts and indicators proved it in 2010, 2011, 2012, 2013, 2014, 2015, 2016, and again this year in 2017. Eventually they’ll be right, and think “See! I was right all along!”

Of course a marked correction will come eventually. Look, it could come next week for all I know! But we never really know when. And what a price those people have paid in “keeping their powder dry” and staying out of this market for the past eight years, waiting for the big correction that never came. Picking good stocks makes much more sense than trying to pick good stocks AND trying to time the market too.

I don’t see ANY euphoria. All I hear is warnings! It seems to me the market is climbing a wall of worry. Also large caps (S&P) are up much more than small caps (Russell and IJS), which doesn’t sound like people are wildly casting aside caution. But what do I know?

Now let’s look at my position sizes. I’m still trying to keep my portfolio concentrated and streamlined and I’m currently back down to 13 positions, of which 11 are regular postions, and 2 are tiny try-out positions.

Here are the positions in order of position size.

**Shopify   		15.6%**
**Square			13.7%**
**Arista		 	11.3%**
**Hubspot			10.6%**
**Nutanix			 9.9%**
**LGI Homes		 9.1%**
**Nvidia	 		 7.9%**
**Talend			 7.4%**
**Ubiquiti		 6.1%**
**Wix	 		 3.8%** 
**Splunk			 2.6%**
**Nektar			 0.9%**
**Align			 0.7%**

Eye-balling that list you can see that there are two over-sized positions (Shopify and Square), then nine positions tapering from roughly 11% to roughly 3%, and finally two tiny look-see positions, both of which are less than 1%.

Let’s start with Shopify, my largest position.

Shopify helps small merchants, and increasingly larger ones, open and operate online stores. It’s growing VERY fast, and grew to be my largest position by far. It got up higher than I was comfortable with, and above what I recommend to others, and I’ve trimmed it down a little, mostly for cash. I know that it’s a very large position, but I haven’t seen too many Shopifys in a lifetime of investing.

I bought Shopify last year at about $27 as I remember… It closed Friday at $111.80, which is up about 314% since I bought it maybe a year and a half ago. Growth is slowing slightly with size but it remains an incredible success story.

This is a SaaS company with no GAAP earnings. They guided to positive adjusted earnings in the December quarter, but they surprised, as I guessed they would, with positive earnings a quarter early (Sept quarter). Revenue is almost all recurring in one sense or another. They weathered a short attack from Citron in October. It’s a smaller percent of my total portfolio than it used to be, partly because its price was hit by the short attack while the rest of my portfolio was going up, but also, as I said, I sold some for cash. It’s still well above my next largest position position.

Square is now solidly in second place, at 13.7% of my portfolio, and at a price of $48.85, up an astonishing $13.65 from last month. I started my position in March at an average price of about $17.50, and have added several times along the way. This company is also growing revenue like mad (45% last quarter, which accelerated from 41% growth the quarter before), and also has a lot of recurring revenue. It has been profitable for the past six quarters, but not a huge amount.

Square’s original purpose was to allow any merchant with a mobile device to be able to accept card payments. Since then, it has evolved into a robust payments solutions business, and it also provides more sophisticated services such as:

Instant Deposit, which allows retailers to receive money instantly in their bank accounts upon swiping a customer’s credit card, instead of waiting up to four days. For each instant deposit, Square charges 1%. This is incredibly lucrative for Square, as it’s a three-to-four day loan at 1% (which is a huge compound rate, at little risk).

Square Capital is a service that facilitates loans to Square’s merchants, who pay the loan back gradually, as a percent of transactions. These loans especially appeal to small businesses that don’t normally have access to capital. And, because Square is so familiar with its customers’ businesses, it can decide whom to offer loans to with a high degree of safety.

Caviar – this might seem an odd service for a payments company. After all, restaurant delivery and pick up services are fiercely competitive. However, Caviar has quickly grown since coming aboard. The most important thing is that restaurants that use it often sign up for all the rest of Square’s services.

What have I done this month? Well, I hadn’t bought or sold any as it kept going straight up, but this last week I finally gave in and trimmed it a little, as the position size was getting too big as the price went straight up. Don’t worry though, it’s still a huge position at 13.7% of my portfolio.

Arista is in third place at 11.3%. I’ll let Smorgasbord explain what they do:

They make ethernet switches, which has been Cisco’s bread and butter for decades. However, instead of each switch being its own separate entity, Arista’s switches use SDN (Software Defined Networking), which enables the entire network (no matter how complex) to be modeled and controlled via software

Arista was founded by a small group of very smart people who used to work at Cisco. They developed a better way of doing something (using SDN), but Cisco didn’t want to deploy it (the legacy dinosaur’s dilemma) because it would undermine their legacy products. So the Arista guys (and gal) left, started their own company, and got sued by Cisco because they are taking market share left and right. They have been moving up steadily and were up another $53 this month to $242, as the threat from Cisco’s law suits diminishes.

Their last quarter was another incredible one with revenue up 51%, and up 8% sequentially, and EPS up 89% year over year and 21% sequentially. I bought some after earnings, even though it had already shot up. I haven’t sold any in the last three months in spite of the rise.

Hubspot is in fourth place at 10.6%. It’s another SaaS company with very rapid growth, lots of recurring revenue, and just breaking into positive adjusted earnings.

What does it do? It’s a complicated and long description, so see my Oct end of the month summary, which you can access on the right panel of this page

They’ve been reporting great earnings and revenue and raising guidance regularly. This quarter they moved their conference (which fell into the Dec quarter last year), back into the Sept quarter where it usually is, but this cost them about 12 or 13 cents in yoy comparisons in the Sept quarter. This just didn’t register for casual observers, and the stock fell somewhat. I’ve net added quite a bit this month.

Nutanix is in fifth place at 9.9%. Nutanix was a new stock in September, which I entered since Bert praised it so highly, and it was discussed at great length on the board at the time, with a lot of skepticism. While Nvidia has gotten all the hype, Nutanix has risen 23% more since September than Nvidia has risen since August, when I took the two positions. Nvidia is actually up 58% total since I bought it in September.

Nutanix is growing revenue at a great rate, has loads of deferred revenue ($369 million last quarter, up 69% from the year before), but no earnings as of yet. It’s area is “hyper-converged infrastructure” in data storage. Like Arista, in a way, it sells hardware, but what counts is its software and operating system. I didn’t buy or sell any during the month.

LGI Homes is now in sixth place at 9.1%. It’s a small home builder that specializes to selling first homes to apartment dwellers. It started this year at $28.75 and is now at $67.45, which is up 144%. You know the story about their weak closings in Jan and Feb, followed by huge closings numbers from May to Oct. They “weathered” the Sept hurricanes without excessive damage, and they are opening new communities like mad. I pleaded with guys on this board who had “lost faith in management” and sold out 140% ago, not to do it. I tried!

I realize that this is a cyclical industry, and that it eventually will get overbuilt, but there is a nationwide shortage of homes now, and they are selling them as fast as they can build them. Their current PE is 15.6.

What have I done this month? I’ve reduced my position somewhat. Why? First, this is a stock in a cyclical industry. Second it’s up over 250% from the $19 it was at two years ago, and up over 140% from the $28 it was at earlier this year, and Third, it’s gotten a lot bigger by growing and opening new communities, but it will hit the law of big numbers and the RATE of growth will gradually slow down. I certainly haven’t exited, or even considered exiting, and it’s still my sixth largest position, but it used to be my second largest, which was just too big for a home builder after such a large fast rise. I believe it will continue to beat estimates, and to grow revenue and earnings, just perhaps not at a 50% rate again.

Nvidia is still in seventh place at 7.9%, at a price of $217. I got back into it in August, talked into it by all the great write-ups and discussion by members of the board. I have nothing that will add to the discussion, except that I’m making an exception in buying shares in a “chip” company, but I feel that this is a special case. Don’t let the dollar rises make you lose perspective, by the way: a $15 rise from $186 to $201 over the course of a month, for example, is exactly the same as as a $1.50 rise from $18.60 to $20.10 over the course of a month, which doesn’t sound nearly as impressive. I didn’t buy or sell any during the month.

Talend is still in eighth place at 7.4%, and a price of $42.80. I wrote it up early in May, and you can probably look up my summary. Suffice it to say that it’s another big-data analyzer that is growing very rapidly, has no earnings, but has huge amounts of deferred revenue, and is free cash flow positive. I consider it a category crusher as well as a disrupter, as it seems to have no effective competition at present. In the May conference call the CEO said:

…our win rates remain ridiculously high, which is evident from the growth rate… The market dynamic is that the large (legacy) players continue to be challenged, and long term I think most of the competitive battle is going to be fought with very small players that are trying to get up to scale right now. So we’re in this kind of special period in the middle right now (with no functioning competitors) and we’ll see how long that lasts.

This still seems to be the situation. I added to my position this month when the price briefly dipped below $40.

Ubiquiti is still in ninth place, at 6.1% of my portfolio. I’m cautious since this is still an internet hardware company, after all, with no recurring income, and it’s moving into new fields which involves some risk given their crowd-sourced sales model. But they have two businesses, a cash-cow stable WISP business, and a new enterprise model that is growing very fast, and that will soon be the largest part of the company. They have survived a short attack which was based on what seems to be nonsense. They are buying back shares aggressively. I suggest you read Wouter’s excellent write-ups.

Trimming. You’ve probably noticed that I trimmed several of my largest positions during the month. In past months I’ve explained that my total positions for my portfolio added up to 102% to 104%, because I had a 2% to 4% margin across my entire portfolio. I currently have roughly a 0.3% positive cash position, and my stock positions should thus add up to about 100%.

Wix and Splunk were tiny last month. They’ve grown.

I have taken two tiny positions in Align and Nektar, both in the past week, and both of which I got from you guys. I’m not yet sure I’ll keep either of them. They’ve both been discussed quite a bit this month. Friday, before the opening, Nektar announced that one of its products didn’t reach the looked for results and was being terminated. It was off 7% to 8% in the premarket. I thought that this was a peripheral product and I hadn’t even figured it into my hopes for the company, and I added to my little position at down 7.4% in the premarket. Later in the day I saw that it was back to unchanged, and by the end of the day it closed up 6%. Up 6% because one of its products was being closed down??? The only thing I can figure is that momentum players and robo computers saw it going back up, didn’t know anything about it and just bought because it was going up. It’s a strange world we live in, but that made my buys in the premarket very lucky purchases.

Finishing up. When I take a regular position in a stock, it’s always with the idea of holding it indefinitely, or as long as circumstances seem appropriate, and never with a price goal or with the idea of trying to make a few points and selling. I do, of course, eventually exit after months, or sometimes years, but I’m talking about what my intention is when I buy.

I do sometimes take a tiny position in a company to put it on my radar and get me to learn more about it. I’m not trying to trade it and make money on it, I’m just trying to decide if I want to keep it long term. If I do try out a stock in a small position and later decide that it’s not what I want, 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. If I decide to keep it, I add to my position and build it into a regular position.

You should never just try to follow what I’m doing without making up your own mind about a stock. In these monthly summaries I’m giving you a static picture of where I am currently, but I may change my mind about a position during the month. In fact, I not infrequently do, and I make changes in the position. I usually don’t announce these changes until the end of the month, and if I’m busy or have some personal emergency I might not announce them even then. Don’t just follow me blindly! I’m an old guy and won’t be around forever. The key is to learn how to do this for yourself.

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 try to 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 (a couple of times) if you haven’t yet.

I hope this has been helpful.


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


Fantastic achievement Saul. Never feel embarrassed to show what can be done. I notice also that you trim accordingly, enabling you to have spare cash for whatever is needed elsewhere(including your pocket)thereby taking some off the table at the same time. Plus it does appear that you have a gut instinct for when to get in or out…
I’m nowhere near your figures but learning fast. Up 43% which based on previous years is more than pleasing.
Long may your success and instincts continue.



A few things:

  1. Please don’t stop posting your results, pleeeeease. They motivate me, period. I think they do most others here as well.

  2. Regarding LGIH. I have a position about the same % of port as you and I’m holding it there. I bought a lot more during the post hurricane selloff which has done nicely in addition to my earlier purchases in the spring. I have the same concerns you do. My question for you and maybe GauchoChris would be how many selling communities do they need to keep growth at the current rate? Currently, I don’t think they have enough but it also depends on how large the community is as well and that isn’t something I could find on a quick look at the last CC. Just curious what the thoughts are on that.

  3. I have also taken a small position in NKTR, 3% for me. I plan to dig deeper into their research pipeline and post about them in the near future. I really like what I’ve found so far.

Keep up the excellent work!



Please don’t stop posting your results, pleeeeease. They motivate me, period. I think they do most others here as well.

thanks so much for the kind words, MC

Thanks for placing those caution signs up front.

Does anyone still doubt that intelligent stock picking with a modified buy-and-hold strategy
can beat any index or average?

Are you saying that these YTD results are sufficient evidence to prove intelligent stock
picking beats any index? (Whatever you mean by “intelligent stock picking” and “beat”). Doesn’t
that contradict the advice you were giving up front to temper expectations going forward?



Something about these numbers don’t look right to me…

Square from 17.50 to 35.20, up 179.1%

I thought perhaps you miscalculated the percentage gain, but no. It’s the closing price that’s off (currently 48.86, not 35.20)


Are you saying that these YTD results are sufficient evidence to prove intelligent stock
picking beats any index? (Whatever you mean by “intelligent stock picking” and “beat”). Doesn’t
that contradict the advice you were giving up front to temper expectations going forward?


Not Saul here but clearly:

Intelligent stock picking means owning individual companies you carefully select instead of buying index funds or etfs

And beat means outperform – or produce a greater return

Ears, you’re a smart guy. I’m sure you already knew this. I can’t think of any reason you would ask except that you’re frustrated Saul is doing so well when he’s not following the conventional wisdom. Don’t let your jealousy blind you. Saul’s method really is better long term. We’re not cowboys. We just understand the math. We know we’ll lose 50% at some point. We’ll just be so far ahead by then, it will be worth it.



I really shouldn’t be replying to this question

Does anyone still doubt that intelligent stock picking with a modified buy-and-hold strategy can beat any index or average? How could it not? When an “average” is just that: an average of good, mediocre, and poor companies?

because it’s not question.

The best affirmation of the above is Buffett’s The Superinvestors of Graham-and-Doddsville. I best let it speak for itself. After you finish reading it, please return here

The Superinvestors of Graham-and-Doddsville

“Superinvestor” Warren E. Buffett, who got an A+ from Ben Graham at Columbia in 1951, never stopped making the grade. He made his fortune using the principles of Graham and Dodd’s Security Analysis. Here, in celebration of the 50th anniversary of that classic text, he tracks the records of investors who stick to the “value approach” and have gotten rich going by the book.…






Welcome back!

The other side of the story is looking at the market instead of looking at individuals, something that seldom is done. Back in 1906 Vilfredo Pareto…

made the famous observation that twenty percent of the population owned eighty percent of the property in Italy, later generalised by Joseph M. Juran into the Pareto principle (also termed the 80–20 rule). In one of his books published in 1909 he showed the Pareto distribution of how wealth is distributed, he believed “through any human society, in any age, or country”…

The Pareto principle certainly applies to the stock market and it is the reason why three out of four mutual funds underperform the market. I wrote about this, see the link below.

The Pareto principle is a power law distribution that applies to many things in nature, not just to wealth. There are a few killer earthquakes and thousands of tiny ones. Seen from this perspective if everyone used Saul’s methods three out of four would underperform the market average! This is the nature of the power law that governs wealth distribution. Why three out of four instead of one out of two? Because the market does NOT have a normal or bell curve distribution.

A small enough group of investors following Saul’s methods can outperform but as the following grows the results must diminish. I doubt that the following one can have at TMF is large enough to upset the apple cart but in theory it will happen. This is what destroys all highly popular strategies.

Not everyone has the time, inclination, and ability for “intelligent stock picking.” Ben Graham in is book The Intelligent Investor divided investors into “defensive” and “aggressive.”

We have already defined the defensive investor as one interested chiefly in safety plus freedom from bother. [page 4]

The fourth revised edition of The Intelligent Investor is copyright 1973 long before indexing and ETFs. If there were a New Millennium Edition it would recommend indexing and ETFs for defensive investors.

Denny Schlesinger

February 20, 2011
Why Does the Average Mutual Fund Underperform?

It has often been stated that the average mutual fund underperforms the market but I have never seen an adequate explanation. I used to believe in a simplistic reason: Since mutual funds make up the average, if you deduct their management fees, their results will be that amount below the average. While this holds true, it is not the real reason. For an explanation we have to look at the Pareto Distribution of wealth.…

The Intelligent Investor: The Definitive Book on Value Investing.…


Something about these numbers didn’t look right to me…Square from 17.50 to 35.20, up 179.1%…I thought perhaps you miscalculated the percentage gain, but no. It’s the closing price that’s off (currently 48.86, not 35.20)

Thanks James for catching that. I calculated from the $48.86 but forgot to replace the closing price on the table. The $35.20 was where it was a month ago at the end of October. I re-use the table and plug in the new numbers so I don’t have to do all the formatting of the tables over and over each month.



Does anyone still doubt that intelligent stock picking with a modified buy-and-hold strategy
can beat any index or average?

Are you saying that these YTD results are sufficient evidence to prove intelligent stock picking beats any index?.

Why would anyone who doesn’t think intelligent stock picking can beat any index be investing in individual stocks? And why would he be wasting his time reading our board when he could just put his money in an index?

Whatever you mean by “intelligent stock picking”

Try reading the Knowledgebase. It’s pretty well spelled out. By the way, it’s not just me having market-beating results by using intelligent stock picking and other techniques spelled out in the Knowledgebase [reducing the number of positions, selling when appropriate, looking for recurring revenue, large runways, rapid growth of revenue, insider ownership, moat, etc etc]. It’s lots of people on the board. Read their monthly summaries too.

Doesn’t that contradict the advice you were giving up front to temper expectations going forward?

You must be kidding!!! Does saying you shouldn’t expect results up 97% every year contradict “that intelligent stock picking with a modified buy-and-hold strategy can beat any index or average”???



Jealousy equals ignorance.

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I was encouraged that Saul threw in some caution flags up front – e.g., this year was highly
unusual, don’t expect these same results going forward – but was surprised further on when he
made this claim about stock picking, which seemed to be based on those YTD results. So I was
curious. Was that the “beat” he was talking about, or was he talking something longer term?
Was the “intelligent stock picking” his own efforts, or as he seemed to imply, was it the efforts
of the collective board? I was looking for clarification as to what seemed to me a glaring
contradiction. That’s all. Nothing sinister.


P.S., Saul himself has pointed out that he’s had a number of years where he’s under-performed the
index. If you look at his results carefully you’ll see long stretches – in some cases more than a
decade – of under-performing the index. Do we throw out those negative results and only keep the
ones that support your claim that Saul’s method is really better long term? That’s not meant as a
knock to you (or Saul) – just curious how you evaluate the evidence.

P.P.S., how do you know the limit is 50%? Many of these are early-stage companies – you could
lose everything. I did once. I’d hate to see it happen to you.


Don’t let your jealousy blind you. Saul’s method really is better long term. We’re not cowboys. We just understand the math. We know we’ll lose 50% at some point. We’ll just be so far ahead by then, it will be worth it.

Bear, I wouldn’t go this far either - I’m getting smoked by Saul this year and stand in absolute awe, but there are other approaches that can work just fine long-term. I’ll admit - every time I see a stock with NG earnings and fat top line doubling in short order it causes me to absolutely cringe but thankfully I’ve got 20+ years of investing in different types of markets to know what makes me comfortable - and what does not. Unlike Saul, my results are professionally measured (by the way, nothing meant by this - I just mean my are literally professionally measured on time-weighted ROI basis with every transaction on earth included) and I know what returns worked in 1999 as well as 2009 and even a crummy 2017.

Course, Saul tried to give me LGIH (growth/value wrapped into one) and I refused to take it - bad news on my part.

I do know this - following this board is good fun. Thanks for posting and sharing ideas…


those using the insulting word “jealousy” in fact know nothing about the poster’s psyche or motivation. So it is not in the spirit of this board.

not saying anything about the quality of the approaches . Only the language. And personalized attacks

A couple of other points - unlike Saul I see pockets of over optimism. But while the price rises of “Saul type” stocks sometimes seem bubble like, these companies , not just the stocks, are indeed way out performing. So they deserve the high prices

I don’t think the general market feeling has yet reached bubble euphoria levels. Valuation measures are useless over a 1 or 2 or 3 year time span.

The beauty of the better MF boards is the feedback and interplay of multiple posters, not just one.

Me I think a lot of our performance this year is luck, being in the right stocks at the right time. A super bull cloak covers lots of flaws.
But I won’t turn down the gains…


First of all Happy thanksgiving to all of you guys and congrats to Saul and others on an outstanding performance. I just started on this board actively about 4 months back and I got to say Saul really has that knack of timing else how can you explain Nektar which is a 17 year old company suddenly picking up steam . In fact the key is identifying companies at the right time something I am yet to get a hang of .
I have a portfolio where 50% of my stocks are in large companies like AAPL, COST, ISRG etc and 40% in smaller companies and 10% in options . My portfolio has gone up by 69% this year so far but its because of having stuck with companies like OLED, ANET, MAZOR and ISRG in the last few years but I also realize that I need to figure how to enter these positions better which is the key since OLDED has taken almost 8 years though it has gone up by 11 times for me since then.

I have learnt a few key things from this group like pruning the stocks to a small set, throwing away yoru losers and sometime not looking back with regret and I thank this group of people for these little gems of knowledge.



I think the best thing about studying your approach has been focusing my approach. Shifting to a portfolio of around 15 stocks has saved me more time and has probably doubled my returns. Probably the most important thing to me is when I have the details locked in on each of my stocks, I have greater comfort when downturns happen, and I firmly believe they will happen in 2018.

I think 2018 will provide an interesting dichotomy. While I believe many stocks are bloated and overvalued, I also believe we are in the middle of a technical revolution that is dwarfing anything I have seen in my lifetime: personalized medicine in the process of eliminating cancer, 5G cell networks ushering in a step change in automation like driverless cars & automated delivery, and AI that is radically changing industrial research (my focus) so great companies may buck any downturn.

I find my time working on stock investing really well-spent. My returns last year were 4X my salary, and I enjoy applying my background to stocks. I think that the better my retirement position becomes, the better I am able to focus on my day job. My day job is focused on technologies that help to address with anti-biotic resistant bacteria. As an aside, did you know that the WHO predicts that, if nothing changes, we will not have any effective antibiotics by 2030? Anyone reading this, take note and thoroughly wash any cuts or scrapes.

My point is that my shifting investing approach has improved both my investments and focused me on a satisfying career.



PS I am still kicking myself because I couldn’t bring himself to buy LGIH because it is in a cyclical industry (LOL).


Please, please keep posting.

Your results inspire.



Hi Branmin, thanks for all your kind words. I really appreciate them. glad to have you on the board.

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I got to say Saul really has that knack of timing else how can you explain Nektar which is a 17 year old company suddenly picking up steam.

Hi Rajesh,
It was Gaucho Chris who brought Nektar to the board back in May, not me. I just got on board a week ago, much higher than when Chris first recommended it. (But, then again, the good thing is that I don’t price anchor and avoid buying because it used to be lower than it is now.)



I think I should say you have a gift of timing because just trying to understand a company takes time and you wet your feet before u dive in and hats off to you for the ability

I can only say that very few people have that gift and I am thankful to learn from people like you .