My portfolio at the end of October

My portfolio at the end of October

Here’s the summary of my positions at the end of October. As usual I’m figuring it on the weekend and missing the last trading day of the month on Monday. I’ll tell you what I’ve been doing, if you are interested, but I have to warn you: Don’t follow what I am doing. I’m pretty discouraged by my results so far this year.

I suggest that you read this in conjunction with the Brief Reviews that I posted about a month ago. They are a month old, but most companies haven’t posted quarterly results yet.…

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

At the end of September my portfolio was at 106.5% for the year (up 6.5%), and I was finally ahead of the S&P after weathering disastrous drops in Skyworks and Skechers. I am now back to 98.0%, so I lost 8.5% this month, while the S&P only lost a couple of percent and the Russell lost about 6% (I think). It was a terrible month.

Why? What happened? Well, the big noise was Amazon, Skechers and Bofi falling after earnings, but a lot of stocks fell just as much during the month just melting away with no company specific bad news at all. My biggest position, LGIH, dropped 20.6% for no discernable reason, and certainly no company specific bad news. (Perhaps generalized worries that rising interest rates will hurt the housing industry?) My second largest position, Amazon, dropped 7.3% in spite of basically great results, because they weren’t quite as great as hoped for, and the stock was richly valued. Shopify, my fourth largest was down about 5%, like LGIH, for no discernable reason, and certainly no company specific bad news. And Skechers dropped 9%, for perceived reasons which may or may not be valid, but which, in any case, have been well discussed on this board. (That 9% they dropped for the month is after they bounced back 9.6% this last week, in a falling market, from an even much lower value, so maybe the market is agreeing that things aren’t as bad as were once perceived). And BOFI, a small position, dropped 18% mostly due to another short attack. HUBS and SNCR dropped 9.1% and 10% in a sector sell-off with no company specific news for either of them. Finally Mitek, a small position and a tiny company, dropped 20% on no bad news that I’m aware of.

Out of all of that, I’d have to say the biggest factor had to be the drop in LGIH, as it was an overweighted position, which dropped over 20% and is now down to a PE of 9.6. (For reference, its 12-month trailing earnings are up 77%, and its 12-month trailing revenue is up 53%, so it would take a heck of a slowdown in growth to justify a PE of 9.6).

As I’ve said before, we’ve been going through a very difficult period of time in which to make money in the market, and it’s been a very difficult year for me. It’s way under my expectations, and it’s been really discouraging for me.

Now let’s get to my positions. I currently have exactly the same 14 positions as last month, with no additions or deletions. My graph of my positions looks different though. It’s no longer a few giants and a bunch of pygmies, and it is more evened out, with the larger positions not so large (because they’ve fallen), and the smaller positions not so small. There are no tiny try-out positions at present.

My top five positions are the same as last month, but not exactly in the same order as SBNY passed AMZN for second place yesterday (due to Amazon’s post-earnings fall), and Shopify passed Skechers (they were tied last month).

LGI Homes (LGIH) is still my largest position, but it is down to 13.3% of my portfolio. I haven’t been adding to it, figuring that I don’t know why it’s falling, and that in any case I have quite enough already to make a significant impact on my portfolio value if it should start to rise.

LGIH’s earnings last quarter were 96 cents, up 45% from 66 cents a year ago. Average home price was up nicely. Closings were up nicely. Gross margins are holding steady. The housing market for starter homes is doing very well, with a shortage of homes for sale. As management put it in the conference call : Absorption was very strong, averaging 6.8 closings per community per month. This was up from 6.4 last year; all while increasing the average sales price by 6%, and adding 11 communities outside of Texas. Their PE is just 9.6. As I wrote above, its 12-month trailing earnings are up 77%, and its 12-month trailing revenue is up 53%. I’m continuing to hold a oversized position.

Signature Bank (SBNY) is now my 2nd biggest position at just above 12.1%. The stock price was pretty much unchanged for the month. They have announced earnings and I discussed my thoughts on the board. Here’s a link to them:…

Amazon (AMZN) is now my 3rd position, just below 12.1%. You must be aware how I feel about AMZN as I keep telling you I love the company. I also wrote about my thoughts on Amazon’s results:

Shopify (SHOP) now has sole possession of 4th, at 9.1% after being tied with Skechers last month. As you remember, they have no earnings yet but their revenues have been rising over 90% compounded for several years and were up 93% last quarter. That’s Revenues! Up 93%! And renewable revenue was up 70% last quarter. They have not yet announced Sept quarter results.

Skechers (SKX) now is my 5th largest position at 7.0%. I have also extensively discussed my thoughts about SKX.……

Silver Spring Networks (SSNI) is now 6th at 6.2%, after being 7th last month. They don’t have much earnings, and they have a high PE (64), but they have won a series of huge mega-contracts that don’t show up on their books yet. In fact, they have won ALL the mega-contracts in their field that have come on the market this year. What they install has recurring revenue for at least 15 years and growing. The price got as low as $10.30 a few months ago and is up 37% since then.

These big 6 make up about 60% of my total portfolio, while last month my big six made up 68%, which gives you an idea how much the portfolio has evened out.

Arista (ANET) is now 7th, at 5.8%, because I have trimmed some for cash. Its stock price is $85, and has risen 35% from when I started this position 7 months ago at $63 (and then added at $58). Arista’s business keeps booming and worries about the Cisco lawsuit are fading (very) gradually. Earnings and revenue last quarter were both up 37%. Arista’s PE is 30.

Ubiquity (UBNT) has moved up to be my 8th largest postion this month at 5.6%, moving up from 11th last month, when it was a new position. Last quarter, revenue was up 28% and earnings were up 38%. They haven’t yet announced for this quarter. Their PE is 21.7 even after the price rise. There has been a considerable amount of discussion of UBNT on the board in the past couple of months, if you are interested.

Paycom (PAYC) is in 9th place at about 5.5%. It was in 10th place last month, at 4.8%. Its stock price hasn’t changed much and is still in the $50-$51 range. I added a small amount to my position during the month. I started this position in Paycom about five and a half months ago at about $37.50, and have added all the way up, but just added a small amount this month. Its revenue has been rising about 50% per year, plus or minus, and earnings have been rising roughly 100% per year. Its current PE is 72. Recommended by a MF service in June. Recommended by Bert as well.

Synchronoss (SNCR) is now in 10th place at 4.8%, having dropped from a tie for 8th. Its stock price dropped from $41 to $37 on a sector sell-off with no company specific news at all. It seems to me that business-wise they have finally turned the corner, and that all the expenses they had in the last six to nine months in order to build out enterprise solutions in partnerships with Goldman Sachs and Verizon, look like they will pay off. Their current PE is 16.5. They haven’t yet reported results.

Bank of the Internet (BOFI) has dropped to 11th place, at 4.5%, down from a tie for 8th last week. It dropped a considerable amount in the past couple of days, on another short attack combined with a perceived slight miss on their reported results. They are down to a 9.6 PE. Earnings per share were only up 12.5% this quarter, but tangible book value was up 24% and is now up to 61% of the current stock price. The efficience ratio was a healthy 38.9%. I have discussed BOFI at length and won’t say any more about it, except to reiterate that there is plenty of risk here if the legal stuff blows up in their faces.

Splunk (SPLK) is 12th at 4.4%. It was new last month and in 14th place. I discussed Splunk, the company, in my Brief Reviews a month ago. It closed last month at $58.70, and actually rose during this terrible month to finish at $60.95. It hasn’t yet reported its quarterly results.

To move on down again a little, my 13th largest position is
Hubspot (HUBS) at 4.3%, up a bit from 4.1% last month. This is a recurring revenue company with decreasing losses, positive operating cash flow, and increasing metrics on every part of its business.

Finally Mitek (MITK). is my smallest position at 3.45%. It’s dropped to last place mostly because the price dropped to $6.60 from $8.29 on no bad news that I’m aware of. I’m cautious because Mitek is truly a small company, with a small float. Its PE is now 24. It hasn’t announced earnings yet this quarter, however it keeps announcing new patents granted and new contracts signed.

I have just 14 positions again this month, and I don’t have any really small try-out positions. I’ve settled into a portfolio that I am comfortable with for now, but I am always looking for new ideas.

To summarize, this month my big three are still the same LGIH, SBNY and AMZN. They are followed by a somewhat smaller position in SHOP. Then a drop down to SKX, with a gradual tapering down to SSNI, ANET, UBNT, PAYC, SNCR, BOFI, SPLK, HUBS, and another small drop to MITK in last position.

I’ll list the position sizes here:

LGI Homes		13.3%
Signature Bank		12.1%
Amazon			12.1%
Shopify			 9.1%
Skechers		 7.0%
Silver Spring 		 6.2%
Arista			 5.8%
Ubiquiti		 5.6%
PayCom 			 5.5%
Synchronoss  		 4.8%
Bank of Internet	 4.5%
Splunk			 4.4%
Hubspot			 4.3%
Mitek       		 3.4%

When I want to compare positions I don’t just look at that column of numbers, as I find it hard to grasp. I always look at my bar graphs of position sizes. If you want to get a visual picture of my position sizes (or your own), I’d strongly suggest you make a quick bar graph of them. Either your computer can do it for you, or if you are not computer savvy, you could do it with pencil and paper in probably two or three minutes (17% = 8.5 inches , 14% = 7 inches, 11.4% = 5.7 inches, etc., or if you are a metric person like me, 17% = 17 cm, etc.). But do it in bars.

What I do is “modified buy-and-hold”. I’ve had SKX for 29 months, and LGIH for 13months. I’ve had SNCR for 20 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. Besides, I don’t seem to be doing very well this year at all.

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.


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


Saul, I know it’s a small consolation prize, but your continued generosity with sharing of your knowledge and thinking processes is a huge help to everyone on this board. Please don’t be discouraged, all we can do is our best and continue to learn. In the end, a lumpy 20% annual return is better than a smooth 10% (SP500).

Having discussed Amazon and Skechers ad nauseum, I think Shopify is still undervalued. They don’t really need to invest much if anything into capital expenditures, the only “growth” cash flow they have to spend on is sales and marketing, and that can be turned on and off as they need (only worrying part is that some management teams are not very nimble, so this would be a bet on management). The scalability of the service is tremendous, and their partnerships are rock solid. I’m definitely looking to add more

Interesting aside, their ticker on the Toronto Exchange just changed from SH to SHOP, here’s a part of their tongue in cheek release that I found humorous:

“Shopify has already been going from strength to strength with the launch of multichannel offerings and our mobile efforts. And now, we’re excited to announce 100% growth in stock ticker digits,” said CEO Tobi Lütke from an undisclosed location.…


“Shopify has already been going from strength to strength with the launch of multichannel offerings and our mobile efforts. And now, we’re excited to announce 100% growth in stock ticker digits,” said CEO Tobi Latke

I love it. There’s a CEO with a sense of humor!



Saul, thanks from me too as this has become one of my favorite boards in this site.

I follow the LGIH commentary with great interest as the valuation seems to offer very good value and potential opportunity. Morningstar shows that there is 30% short interest in the stock despite the healthy-looking operating metrics. I guess the question is to assess whether the inventory and Texas-related concerns warrant this level of short interest? Or what expectations from earlier in the year have not been met? The comments under a seeking alpha article this week suggest that CAA is a safer comparable entity

It was a terrible month.

I was just running some numbers for a post on another board (behind subscription firewall). My analysis isn’t on a monthly boundary - it is for a “purchase” made in a play-money portfolio made up of Hidden Gems stocks. We bought one particular company on September 22 of this year. On an annualized basis, the S&P 500 is down 20% since 9/22. Even more tellingly for the types of companies you hold, Saul, the Russell 2000 is down 44% on an annualized basis since 9/22.

A terrible few weeks indeed!

As I’m sure you realize, when one looks back historically, September and October can be like that.

I agree with Alphalite: Please don’t be discouraged.

Thanks and best wishes,
See my holdings here:
Peace on Earth


Thanks Bob, Alphalite, and others who have encouraged me. I could use the encouragement.

Thanks for the encouraging posts.

My portfolio is painfully down too.

Good to not be alone.


If you want to get a visual picture of my position sizes (or your own), I’d strongly suggest you make a quick bar graph of them.

Actually, I think a pie chart works better. Here’s one I quickly built:


Actually, I think a pie chart works better. Here’s one I quickly built:

That’s amazing smorgasbord! It’s really beautiful. Actually though, I think I prefer the bar graphs because I can instantly see the difference in sizes (between 4.8% and 4.1% for instance, which just come up as slivers on the pie graph). But each of us has our own favorite ways of doing things. Thanks for showing me that.