My portfolio at the end of October
Here’s the summary of my positions at the end of October. This time I’m posting it actually on the last weekend of the month. The summary this month is again longer with more detail with more discussion than I used to have.
I’ll start off by saying that this has been a terrible month. And a terrible three months since the beginning of August, as we have been in the midst of a real correction. A number of my stocks have gotten pounded, really pounded into the ground, some for good reasons, some for less good reasons, and some for no reason at all. These pummeled stocks included all three of the top three positions that I entered the month with (SWKS, SKX, BOFI).
BOFI is down because of a short attack followed by a whistleblower lawsuit. We don’t know how authentic the reason is for the drop, but I’m out of it, as I’ve stated.
AMBA is down because of worries about GoPro and worries about being commoditized.
INFN for no particular reason.
SEDG because the price of oil is falling. And now because SCTY is slowing down.
SKX - truly for no good reason.
SNCR, there must be a reason but I haven’t even seen a short argument anywhere.
SWKS because it’s lumped as an “Apple supplier”.
CNC perhaps because people were worried about the integration of their merger. Also political worries.
ABMD it seems because their beat-and-raise wasn’t “enough” of a beat-and-raise.
But most of it is just because we are in a correction, so people are searching for reasons to sell, especially small cap stocks which have had a rise.
Note that all of these stocks above except SEDG and ABMD were recommended, and are still recommended, by at least one MF paid service.
Again, let me say that this was a tough month for our stocks. Really a tough month. We’ve been in a correction now for three months, and nothing a company reports is good enough. I started the month at up 33.1% and I’m now up 13.1%. I was down 15% during the month (113.1/133.3 = 0.85) due to a bunch of meltdowns, which I just mentioned above. However, after three months of this, I’m still up 13%, while the S&P is up 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. 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 good stocks, mediocre (average) stocks, and poor stocks, so averaging good, poor and mediocre, you’d expect a mediocre result as compared to selecting 10 or 20 good stocks.
I currently have thirteen positions total. I’ll try to tell you what I’ve done with each during the quarter. My biggest position, SWKS, was also my biggest position last month at 21%, at a price of $88, a PE of 18, and a rate of growth of earnings of 76%. Right now it’s at a position size of 21.9%, a price of $77, a PE of 16 (!), and still with a rate of growth of 76% as it hasn’t reported yet. Note the huge disconnect between the PE of 16 and the rate of growth of 76%! There has been NO company specific bad news.
What did I do in SWKS during the month? Well a couple of weeks ago it hit $75 intraday and I bought a bunch at $75.50. I just couldn’t resist in spite of my large position. The trouble was that it pushed my position size well over 23%, so I sold it back the same week at $80.25. No other trades during the month.
SKX was my second biggest position last month and is still my second biggest. Last month it was at a position size of 19.4%, at a price of $46.40 (split adjusted), a PE of $32, and a trailing rate of growth of 107%. Right now it’s at a position size of 17.4%, a price down to $31.20, a PE of 20, and a trailing rate of growth of 73%.
Why are they down from $46 to $31? Well, they announced revenue of $856 million, up from $674 million the year before, which was apparently interpreted as a disaster. Backlog was up 28%. Earnings were up 30%.
What did I do during the month? I bought a lot at $29.88, and a little bit more on three occasions at an average price of $31.70.
BOFI was my third biggest last month at 15.7%, and is now gone for reasons that have been extensively discussed.
INBK was my fourth biggest last month at 10.9%, and is now my third biggest at 12.8%. Last month it was at a price of $32.80, a PE of 21, and a trailing rate of growth of 123%. It reported a shocking earnings growth of only 82%, and its trailing earning growth has “fallen” to just 118%, so it sold off to $30.70 and a PE of 17.2 (!)
What did I do during the month? I bought some at about $31.40. I was willing to keep adding to INBK as I no longer felt over weighted in banks with BOFI gone. I had said for months that I especially had strong hopes for INBK but couldn’t take a bigger position in it because it’s such a small company with lack of liquidity, and that I already had a much larger position than was probably prudent for me. It indeed has continued to rise since then, and has grown on its own to become my third largest position in spite of my concerns.
My big three make up about 52% of my total portfolio. Although these are pretty high-conviction stocks, that’s a REAL lot in three stocks. They are in completely different fields: microchips, banking, and retail clothing. This wasn’t by design, but it spreads the risk. Their average trailing PE is roughly 18, which I’m very okay with. Their average rate of growth of trailing earnings is 89%, which is even better. This is not an inherently risky portfolio. After three months of getting pummeled, and a terrible last few weeks, I’m still up 13% year-to-date.
INFN has grown to be my fourth biggest position at 8.4%. Last month it was sixth at 6.2%, a price of $20.10, a PE of 35, and earnings growth of 142%. It has recently reported quarterly earnings up 100% and revenue up 34%, with a rate of growth of trailing earnings of 176%, so of course the share price has fallen to $19.75 on those terrible results, and the PE is down to 28.6.
What did I do in INFN during the month? I bought some at $18.00, and a little less at $18.60. (Yes, the price did get down close to $17.00, believe it or not).
AMBA is still my fifth biggest position at 7.6%. It was at 6.8% last month, with a price of 58.30 and a PE of 19.8, and a rate of growth of trailing earnings. It hasn’t yet announced but the share price has fallen to $49.50, which gives them a PE of roughly 16.8. I bought some at $57, but I feel that I now have enough because I’m not tech savvy enough to be able to judge their growth prospects going forward, in spite of all the recs and re-recs from various MF services.
LGIH is new this month, and is now my sixth biggest position at 6.9%. Its price is $28.00, its PE is 16.3, it is growing trailing earnings at 26%, but in the last two quarters quarterly earnings were up 50% or more. I took my position between $29.50 and $32.50. It has fallen in recent days because of disappointing national new-home sales (nothing company specific).
CASY is my seventh position at 6.2%. It was eighth at 4.8% last month, with a price of $106.40, a PE of 22 and earnings growth of 55%. They haven’t yet reported and the price, PE, and earnings growth are unchanged. I’ve been gradually adding to CASY between $103.50 and $108.50.
SNCR is eighth at 6.1%, a price of $35, a PE of 16 and a rate of earnings growth of 29%. It was 10th at 4.6% last month, at approximately the same price, and a PE of 17. It has reported earnings of 58 cents, up from 46 cents, and revenue of $151 million, up from $126 million. I added to my position this month.
Out of curiosity, I averaged my PE’s up to here and got 19.
SEDG is ninth at 5.6%, a price of $18.50 (which has fallen in half from $37 during the last month due to weakness in the price of oil, and then the weakness in SolarCity). Their trailing earnings, as close as I can figure them, are 66 cents, up from a loss the year before. Their PE is 28. I bought some on the way down at $22, but now will wait to see what happens.
ABMD is tenth at 4.3%, with a price of $73.60, a PE of 59, and a rate of growth of trailing earnings of 112%. They reported quarterly revenue up 47%, and GAAP earnings up 89%, but I’m waiting for their SEC filings to figure out what their real adjusted earnings were. I bought some at $69 intraday, when they fell hugely after that terrible quarterly report.
I’ll finish with AMZN, CNC, and AMAVF at 2.2%, 2.2%, and 1.2% positions. AMZN and AMAVF are new. I added to all three of these during the month. I sold off PAYC during the month, as it was very high PE, and I had various other stocks I wanted to buy.
What I do is “modified buy-and-hold”. Of my biggest three positions I’ve had SWKS and SKX over a year (about a year and four months and a year and five months), and INBK for just over a year. I had BOFI for about three years, before I sold it. I kept CELG and WAB for over two and a half years each. In no way is this “short-term trading”. When I buy a stock, it’s with the idea of holding it for as long as circumstances seem appropriate, 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 and I sell it, 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 #9939), which is a compilation of words of wisdom, and definitely worth reading if you haven’t yet.
Hope this has been helpful.
Saul
For Knowledgebase for this board
please go to Post #9939.
A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board
LGIH, I am happy to say, was a discovery from IBD that Saul ended up liking.