My portfolio at the end of November

My portfolio at the end of November

Here’s the summary of my positions at the end of November. As usual I’m figuring it on the last weekend of the month and missing several trading days. If you prefer you can think of it just as a “four-week” summary. My summary for December will go five weeks to the end of the month, and will be a true end of the month, and end of the year, summary.

Please note that any PE’s that I give are always based on adjusted earnings, usually as the company has given them, but rarely with small modifications of my own.

At the end of October I wrote that I was really pretty discouraged. I had lost 8.5% in October and had dropped from plus 6.5% to down 2.0% in the course of the month, due partly to Amazon, Skechers and Bofi falling after earnings, but mostly due to my largest position, LGIH, which dropped 20.6% over the course of October for no discernable reason. Shopify also dropped over 5% with no apparent reason.

So how was November? Well, I regained all I had lost in October, and then some, starting at down 2.0%, falling a little more before the election, but then rising like a rocket over the last two and a half weeks climbing 9.9% for the month, to finish at up 7.9% for the year so far. What a surprise!

Well what happened? Going through my positions alphabetically:

Amazon was actually pretty flat for the month, starting at $776 and finishing at $780. This is apparently because of worries that they might have troubles with the new administration, and partly because it’s perceived that limitations on free trade would hurt them.
Arista started the month at $85.10, and gained a only few percent until this last week, but then their work-arounds got approved by US Customs as not infringing on Cisco’s patents. This allows them to import them and Arista took off, finishing the month at $94.65, for a nice move of up 11% on the month.
Bofi made a big move, starting at $18.75, hitting $25.00, and finishing up 32% at 24.67, in spite of another short article. Its previous high close for the last six or seven months had been $23, so just maybe the shorts are through.
Hubspot started at $52.35 and finished at 57.75, up 10%. I trimmed some this last week.
LGI Homes bounced back a little from the disastrous October, finishing this month up 14%, rising from $29.19 to 33.23.
Mitek, my smallest position has continued to sink, and has fallen in two months from $8.30 to 5.95, a drop of 28%. There is no reason for the drop that I’m aware of except revenue growing without earnings growing. They had announced beforehand that 2016 would be an investment year, investing in grabbing market share in the spaces of verifying identity and of filling forms from mobile devices, so, to tell you the truth, I’m not sure what’s going on. And as I don’t understand what was going on, rather than adding to this small position, I reduced some of my position on the way down.
Paycom started the month at $52.50, dropped 25%(!) during the month to $39.35, but bounced back to close down 17.5% at $43.30. I bought some at $44.15 on the way down, and a lot more at $41.80.
Signature Bank, my second largest position at the end of October, and again at the end of November, had an exuberant month (because it is a bank, and banks had an exuberant month based on the election results). It started at $118.30 and finished up an enormous 27% at $150.20. I thought that this magnitude of rise was perhaps “irrational exuberance” and I trimmed a small part of my position on the way up.
Shopify started at $40.80, got as low as $37.90 during the month, but finished up 6% at $43.30. I bought some on the drop at about $40.00 and some more at about $38.40.
Skechers started at $20.75, and like so many others, dropped a little the first week, but finished the month 7% higher at $22.14. I trimmed some of my position at about $22.40.
Synchronoss started at $37, but boomed on earnings, and finished up 33% at $49.20. I added after earnings and the conference call, at about $46.60, and was very happy with my purchase. As I have mentioned, I feel they have truly turned the corner, and it should be nothing but up from here for some time. And even after the boom in price the PE is only 21.
Splunk remains range-bound (as it has been since I bought it twelve weeks ago), staying between $58 and $62 probably 95% of the time. It closed at $58.30. I kept adding small amounts during the month.
Silver Spring started at, $14.10, dropped the first week almost 10% to $12.80, got over $15.00 last week, and finished at $14.70, up 4% on the month. I trimmed my position a little.
Ubiquiti had also been range bound between $51 and $54, but broke out the last two weeks to finish at $57.40, up 10% on the month.


Now let’s get to my positions. At the end of October I was able to say that I had exactly the same 14 positions as at the end of September, with no additions or deletions. At the end of November I can say the same thing: I still have the same 14 positions with no additions or deletions. So let’s look at position sizes. Remember that a percentage of the portfolio can rise, not because I added, but because it rose more than the rest of the portfolio. Similarly, a percentage can fall not because I sold some, but because the price fell, or rose less than the 9.9% that the rest of the portfolio rose.


**October                 November**

LGI Homes		13.3%			14.2%
Signature Bank		12.1%			12.7%
Amazon			12.1%			10.2%
Shopify			 9.1%			11.0%
Skechers		 7.0%			 5.7%
Silver Spring 		 6.2%			 5.4%
Arista			 5.8%			 5.7%
Ubiquiti		 5.6%     	         5.7%
PayCom 			 5.5%			 5.5%
Synchronoss  		 4.8%			 7.4%
Bank of Internet	 4.5%	                 5.2%
Splunk			 4.4%			 4.6%
Hubspot			 4.3%			 3.4%
Mitek       	         3.4%			 1.9%

So what’s changed and what’s the same?
Well the top four are still the top four, the only change being that Shopify passed Amazon for third place. That’s partly because I net sold a little Amazon, and partly because I bought a bunch of Shopify when I realized that they could become profitable whenever they wanted to (tomorrow if they wished). The top four as a group remained pretty stable, advancing just from 46.6% to 48.1%.

Next, Synchronoss went from 4.8% to 7.4%, moving it up to a clear grip on fifth place. This was because of a substantial price increase, and also because I added to my position. (see my discussion above).

Next we have Skechers, Silver Spring, Arista, Ubiquiti, Paycom and Bofi, at 5.7% to 5.2%. As they are all within a half of a percent of each other you could consider them essentially tied for 6th through 11th places. By tied I mean they could change places any day depending on normal market fluctuations. Last month they were more spread out, but still fairly close to each other. That takes us through my top eleven positions.

Bofi (which I included above), Splunk, Hubspot and Mitek are still my bottom four positions, and still in the same order, but Hubspot and Mitek have gotten relatively smaller, Mitek especially, because of the price decline and because I sold some. I also trimmed a little Hubspot, but its price rose.

I’m planning to write up a new series of Brief Reviews in the next few days, post-earnings season, so you can look out for it.

What I do is “modified buy-and-hold”. I’ve had SKX for 30 months, and LGIH for 14 months. I’ve had SNCR for 21 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.

What I mean by modified buy and hold is that, when I take a position in 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. I do sometimes take tiny positions 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.

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 now, but I may change my mind about a position during the month. In fact, I not infrequently do, and 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 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 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.

Saul

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

65 Likes

Thanks Saul,
Frank

Saul - when you don’t make changes to your holdings for a few months is that usually because you:

  1. aren’t unhappy with your investment theses
  2. haven’t found anything else worthwhile to invest in
  3. a combination
  4. operating a tightly ruled cap on the total count of stocks that you want to actively manage
  5. been too busy at this time of year baking turkeys and buying holiday season presents

Are there any stocks you have seen that you are monitoring on your wish list?

Ant

Saul - when you don’t make changes to your holdings for a few months is that usually because you:
1) aren’t unhappy with your investment theses
2) haven’t found anything else worthwhile to invest in
3) a combination
4) operating a tightly ruled cap on the total count of stocks that you want to actively manage
5) been too busy at this time of year baking turkeys and buying holiday season presents
Are there any stocks you have seen that you are monitoring on your wish list?

Hi Ant, Thanks for your question.

I’m generally happy with my stocks, which has diminished my motivation to look for new ones. I like having a small number of stocks (14) but I don’t have a tight cap and if anything interesting came along I’d certainly take a look and a small position. Not too busy.

I’ve heard some people on the board discuss Twilio and have it in mind to investigate it at least, but I have to admit haven’t got around to start. Probably goes back to I’m generally happy with my stocks, which has diminished my motivation to look for new ones.

Have a good weekend.

Saul

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I’ve heard some people on the board discuss Twilio

Hi Sual, if you look into them, start with the CEO. Not sure if this was posted here on on another board but well worth the read. I think he is a CEO that is worth following

http://www.businessinsider.com/twilio-ceo-jeff-lawson-ipo-in…

3 Likes

Hi Saul, if you look into them, start with the CEO.

I will, jdc, thanks for the link.
Saul

Just charted and dropped all 14 of your positions on the Free For All Economics Board so as not to clutter up your board with T/A.

2 Likes

Just charted and dropped all 14 of your positions on the Free For All Economics Board so as not to clutter up your board with T/A.

Thanks RockO, first for not putting them on our board, but second for posting them somewhere that those who are interested in TA can find them.
Best,
Saul

This month’s summary was missing the index benchmarks.

YTD we have the following:

S&P 500: +8.6%

S&P Small-Cap 600 Value: +27.7%

3 Likes

LOL YouAreNumbersix you really are hot for this index. When I looked at the index, and correct me if I am wrong, for the last two years there was almost no difference between the S&P and the IJS. It is really only since November 4th that IJS really took off and is accounting for almost all its gains in the last 3 weeks. I generally have my reservations with IJS but I certainly would caution people against jumping into IJS right now with its huge gap up. I am sure that there will be some retracing.

Actually for myself I compare my returns to the SPXTR which is the S&P total return which takes into account dividends and although most of us do not invest for dividends they can add up especially on subpar years. YTD we have 8.3 on S&P and 10.45 on SPXTR.

3 Likes

LOL YouAreNumbersix you really are hot for this index. When I looked at the index, and correct me if I am wrong, for the last two years there was almost no difference between the S&P and the IJS.

To answer your specific question about past performance, here are the numbers from the last 11 years, as measured by the IJS ETF:

2006: +19.29%
2007: -5.17%
2008: -29.47%
2009: +22.74%
2010: +24.43%
2011: -1.52%
2012: +18.10%
2013: +39.72%
2014: +7.27%
2015: -6.84%
2016: +27.76% (YTD)

The S&P 500 index did zero in 2015 and 8% in 2016 YTD, so it looks like it is trailing IJS badly, in that time frame.

It is really only since November 4th that IJS really took off and is accounting for almost all its gains in the last 3 weeks.

IJS was up 8.7% YTD on Nov 4th and is up 27.7% as of this weekend. So yes, it had a big run but why is that a negative? Why is everybody else entitled to enjoy their big jump in November but not IJS?

I generally have my reservations with IJS but I certainly would caution people against jumping into IJS right now with its huge gap up.

I am not suggesting that people should invest in IJS. I am simply positioning it as the measuring stick to compare against. In the last 100 years, the Small Cap Value index had been the best performing asset class and it takes zero sophistication to invest in it. For that reason, I consider it to be the opportunity cost for anyone that picks individual stocks, myself included.

7 Likes

UR#6, I fully understand your love of the IJS and over long term it seems like a great vehicle to invest in at the appropriate time and the appropriate amount. I only take issue with you suggesting that Saul’s performance is lacking because YTD the IJS up a whopping 27%.

In reality if you compare the IJS and S&P from January 1, 2015 until November 7, 2016 (The day prior to the election) the two were running neck and neck with a paltry 3.5 and 2.9% respectively.

After the election the IJS took off bigly and that is where that gain came from. Do I resent the gain as you tend to suggest - absolutely not - all the power to those holders of IJS but I am not sure that gain will hold as a lot of it seemed to be exuberance with 9 and 10% jumps in stocks daily for several days. I personally think that IJS will retreat but either way it seems a little unfair to compare Saul’s gains to two weeks of post election relief rally.

There are also some very big gains and losses in IJS from year to year and so while I personally have and will use IJS as an investment vehicle I would caution any new investors who see your post and think that IJS is a home run. Perhaps after a correction it will be a nice time to enter.

2 Likes

I only take issue with you suggesting that Saul’s performance is lacking because YTD the IJS up a whopping 27%.

Did I do that? I did not even mention Saul or his portfolio in my post. Check it out. I just provided S&P 500 and S&P Small Cap Value results YTD.

After the election the IJS took off bigly and that is where that gain came from.

C’mon man… My post provided 11 years of IJS performance. It is statistically significant.

Do I resent the gain as you tend to suggest - absolutely not - all the power to those holders of IJS

You are not resenting it, you are discrediting it as a one-hit wonder.

There is significant body of academic papers (Fema & French) that delve into the fundamentals of why small cap value stocks tend to out-perform the market. I did not come up with this is not a temporary fluke. If I am not mistaken, Fema and Frenchhad been awarded the Nobel Prize in Economics for their work.

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For those who might want to look up that information numbersix is referencing, it’s Fama and French, it’s a very complicated set of formulas, and wikipedia doesn’t mention any Nobel Prize, but you can Google it for yourselves.
Saul

Let’s be careful not to look at the incredible 2016 performance of the IJS in a vacuum. When you look back even to 2015, where it was down 7% and Saul was up 16%, it’s apparent that IJS isn’t always an outperformer. In fact, it averages around 10%. Saul averages 25%+ or something.

No one’s saying that Saul’s performance is easy to reproduce. But it’s silly to think we can achieve anything like his results by just putting everything in the IJS and hitting the golf course.

Bear

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No one’s saying that Saul’s performance is easy to reproduce. But it’s silly to think we can achieve anything like his results by just putting everything in the IJS and hitting the golf course.

People continue to put words in my mouth, read between the lines and ascribe meanings to my post that were never there.

I am not taking anything away from Saul’s fantastic performance over the years. I think Saul’s life-long annual returns are in the 25% area, handily beating the Small Cap Value index. Let’s put this one to rest.

I don’t understand why such resistance to an honest evaluation of how we are doing?

That said, I spelled “Fema and French” wrong. It is “Fama and French”.

Eugene Fama won the Nobel Prize in 2013. The other author, French, did not.

http://www.nobelprize.org/nobel_prizes/economic-sciences/lau…

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The way I think of the IJS is as a stock with an excellent long term record, instead of as an index. As a stock, I have considered taking a position in it along with my other stock positions (although I haven’t yet). If somebody on the board took a position in it, I would certainly have no criticism of that. I certainly wouldn’t dream of putting my entire portfolio in it, any more than I would with any other position, no matter how much I like it. I hope that this clarifies a bit where I stand on it.

Best

Saul

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