I am not one of the regular contributors of monthly results, mostly because I do not have much original to offer. Like most here I had miserable few years after our portfolio peaked in 10/21, and now that it is getting close to climbing out of that hole, I took some time to look back at my choices leading up to the crash, how I responded, and my choices now. It has been instructive to put it all on paper, and perhaps it will spur others to consider what they have learned.
It will become clear as you read this that I am not an experienced investor. I continue to make basic mistakes in buying and selling, though hopefully fewer than in the past. I have also too often succumbed to group-think, which was a very large contributing factor to the 2021 debacle.
Here is what our portfolio looked like 2.5 years ago, at its peak value:
Those of you who have been on the board for more than 4 years will recognize much of that. I’ve highlighted a few companies for more comment, but a few things immediately stand out: 1) One company is 30% of the (stock only) portfolio, and 20% of the overall portfolio. 2) A further 15% of the stocks is in what I would term unproven and very speculative companies (SE, LSPD, and GLBE).
What has happened in the meantime to them? UPST has gone from a high of ~400$ to now trading at ~25$. Here is a chart showing revenue growth and return:
Lightspeed has gone from ~120$ then, to about $15 today.
Sea Limited from ~$350 to ~$70.
Global-E is a somewhat brighter story, in that it was an IPO in 2021, at ~25$. It hit a peak later that year of about ~$70, but today is back trading around $30.
The common thread in these companies is that a person like me had no business whatsoever investing in them! The strong bias of the board at that time was SAAS (or something like it), growth would conquer all, and that it was crucial to ‘get in on the ground floor’ of a company to catch the right part of the s-curve. These all fit that mold, but only an amateur would have leapt in on that basis alone. I think all of those theses have been if not proven wrong, then at least shown to have sharply circumscribed importance.
Portfolio Now
It took far too long to sell off the inappropriate companies, and has taken possibly a bit too long to identify an approach that I am comfortable with. There have also been a number of false starts along the way (AEHR the most notable one), but that cannot be avoided, I think. With regard to AEHR, I enthusiastically leapt in that last year, and in time realized it was a repeat of the same behaviors that got me into trouble in 2021 with SE, LSPD, GLBE, etc.
Our portfolio as of this writing is:
Now that earnings are largely behind us, I will be re-allocating some funds (some fairly substantial), but I do not have any companies I am prepared to add or eliminate at this time.
Lessons Learned
Since the crash, the board has gone from a very strong ‘group-think’ approach of SAAS/growth to one that gives much more respect to fundamental business concepts such as profits (!), macro factors, global events, etc. Individual posters have taken on board all these new factors in very different ways, which I find fascinating. Many who I ‘followed’ no longer post, so I don’t really know what they are up to now, but we have now a spectrum ranging from people who to my mind turned extremely cautious, to those that repeatedly bring totally unproved micro-caps from their favored industries to the board. One board veteran for quite a while had the bulk of his assets in t-bills, cash, an index fund, and a company that made tasers and body armor. That doesn’t sound like an approach that can lead to outsized results, but he also seemed to have essentially day-traded IOT, and each month had very respectable returns. Go figure!
For my part, I have tried to diversify my sources of information, with the goal of rather than finding home runs (that was what drove me deep into Upstart) instead try to find already profitable companies leading their industries that I can count on for 30% or more growth for at least the next 3 years. Importantly at least many of those companies should be ‘cheap’, and also have to make ‘things’, or be directly involved in making things. Whether a company is ‘cheap’ or ‘expensive’ was almost a forbidden topic 5 years ago (I’m exaggerating only a little), but many of my poor decisions stemmed from purchases after a company had a strong run-up.
As I mentioned above, there have been false starts. One was AEHR (ticks many of the boxes of making things, profitable, etc.), which unfortunately is very much at the mercy of auto/solar/industrial users that may simply postpone new products. Another false start was Enphase, when I did not fully understand the complexity of interest rates and government subsidies, especially as they pertain to utilities.
I have also scaled down what I feel is ‘acceptable’ for a portfolio return. 5 years ago I took Saul at his word when he insisted that ‘anbody can do it!’. I no longer think “I” can do what Saul does, but instead hope with hard work and consistent attention I can achieve 25-30% returns. That would mean a doubling every 3 years, which is to my mind simply remarkable. I know others have done better, but for me I think looking for more, more, more led me into some very poor decisions.
This has gone on for too long, so I’ll end with a general thank you to everyone who takes the time to post, and to the board admins who keep it all on track! Good luck to us all!