NVDA and ANET Starter Positions

I am late to the party, but am interested in a starter position in each of NVDA and ANET. I have positions in 25 other stocks and realize too small a position in NVDA and ANET won’t move the needle much. However, seeing these as longer term growers as smaller position might grow into a larger one:) I have already made up my mind to purchase shares in these companies. Any thoughts on what percentage I should put towards each of these stocks to start? Thanks in advance for thoughts.

John

To me, it would depend on what else you have. If you already have a lot of high-growth stocks, then buy less than you would otherwise, or sell some shares to buy these.

1 Like

Hi John,

You left out some important information and other information is personal. So
here is the best suggestion from a fool owning both companies.

(Questions: You will have 27 positions, but how much cash? How many positions will
you ultimately have?)

Where …

T =Total Account Value (Holdings + Cash) (USD based)
P =Your Goal for eventual Number of positions
T/P =Eventual Average Position Size
N =Nvidia Position
A =Arista Position

Position Size (USD based)

N =T/P*.75
Amin =T/P
Amax =T/P*2

Reasoning

Nvida IMO is riding a cylcial wave. It will produce excellent gains for
a limited time period. Ride these original shares as long as they perform
to your satisfacton.

Arista IMO has the potential to become one of those companies that we all
wish we had, 5-7 years from now. Might want healthy sized position.
Add shares of ANET on any dip IF you are comfortable with their
performance to whatever that date may be.

Adjust sizes as experience dictates.

Dan

7 Likes

Thanks for your response Dan. I’d like to get down to a more focused portfolio of 20 stocks or less. I’m a Supernova member and they have over 30 stocks. I don’t bu6 all their recs.

I’m reducing my positions in UA and CMG to free up some cash for NVDA and ANET positions. Also, think prospects for UA and CMG isn’t as strong. Nonetheless, I’ll still have 3 percent is him those still. Interesting formula you shared. I’ll check it out.

Did you mean I shared information that was too personals?

Thanks again.

John

I have positions in 25 other stocks and realize too small a position in NVDA and ANET won’t move the needle much.

Any thoughts on what percentage I should put towards each of these stocks to start? Thanks in advance for thoughts.

Is there anything magical about 25? I would sell the 12 to 15 worst performing positions and bulk up on the remaining best performing positions as the way to “move the needle.” Getting rid of losers is more potent than acquiring winners. Trade up to quality.

Denny Schlesinger

PS: Concentration is not for everyone. I believe that a dozen well selected positions is diversification enough. Twelve high tech stocks is not diversification. Twelve stocks spread out over several sectors (high tech, healthcare, finance) is.

11 Likes

Would like to get under 20, but following Odyssey 1 Mission some and they got a lot of positions. 25 positions seems a few too many and I’d like to be more cocentrated, but 12-15 is too few for my comfort level.

John

Hi Denny,

Is there anything magical about 25? I would sell the 12 to 15 worst performing positions and bulk up on the remaining best performing positions as the way to “move the needle.” Getting rid of losers is more potent than acquiring winners. Trade up to quality.

If only I had the gumption to do this a few years earlier. Despite reducing my portfolio from over 30 positions to 15 now, I still haven’t been able to part with some of my losers in a timely manner. This, for me, has been a major setback.

My portfolio has been cleansed of DWSN, DDD, SCTY, PRLB, LL, XPO, SWIR, CRTO, MELI, SSYS, SODA, AMBA, COH, BWLD, TTS, WFM, SBUX and a few others. Some of these companies did and are doing well. Most of them did and are not doing well, especially when considering the price I paid for them.

However, some companies that you may find objectionable have done really well for me, despite the fact that they were losers. This is because I made the commitment to better understand them and feel confident about determining value points. For example, four companies that have been very good to me are MIDD, BOFI, UBNT and SWKS. When the stock prices got whacked at various times the last couple of years, I used the proceeds from selling the other losers to buy more. I should include SKX in this discussion. These are all good companies that have seen their ups and downs over the past few years, and I was able to buy more of all of them pretty close to their low valuation points.

Nevertheless, I probably held on to some of my losers way too long. I did this, because I didn’t do enough homework on the companies I owned and froze every time I felt like selling. If you don’t properly do your homework, it’s difficult to tell when to buy and sell.

For example, I am so stuck on Chipotle that I continue to hold about 85% of the shares I bought, even after selling the 15% I don’t have for about $380 a while back. At one time in 2015, it made up over 20% of my portfolio, and I thought that it was overvalued at the time. Today, it’s at about 6% of my portfolio, due primarily to the fact that the stock tanked while virtually everything else I own went up.

I guess what I’m trying to say in addition to your recommendation to get rid of the losers is this: Invest primarily in companies that you could follow and understand. For me, 15 companies are enough and already pose a challenge that is virtually impossible to overcome, especially with a full time job. Maybe some of the losers are still good companies that warrant more of your investment. By understanding them better, you’ll probably be able to figure out which ones get rid of.

DJ

24 Likes

I guess what I’m trying to say in addition to your recommendation to get rid of the losers is this: Invest primarily in companies that you could follow and understand.

I agree entirely!

One of the most difficult things is to be able to distinguish between a drop in price and a “loser.” A drop in price could be a buying opportunity and not a sell signal. We will never get it 100% right but understanding our companies is a big help. By understanding I don’t mean all the minutiae of the business, that you only need to run the business. I mean from an investor’s point of view, what Ben Graham called “Security Analysis” but is not limited to FA but also including TA.

To give an example. I really like The Trade Desk’s business but Mr. Market has strong reservations because it is confused with ad-tech. So that’s a negative. But then, The Trade Desk has a rather concentrated customer base, the giant global ad agency conglomerates which endangers their pricing power. It was this last that convinced me to sell despite being quite certain that the company has a brilliant future. Just how exactly the company functions internally was of no concern to me. On the other hand, a company with high debt to assets would get a negative vote for internal reasons, for example Micron.

Denny Schlesinger

10 Likes

there have been plenty of academic studies showing 12 to 15 truly different type stocks is enough for 95+% of possible diversification. But why bother, you can do the same thing a lot easier with a couple of index funds.If you are really diversified do not expect to outperform, you have become “the market”

No matter how many "Saul stocks"you own you will not come close to being diversified. You will reduce company specific risk but sector and general market risk remain. And they are biggies
I own a dozen tech stocks but am way overweight in the two you mention. So I am massively un- diversified.

Looking 5 or more years ahead I am more confident with ANET. Look how long Cisco provided well for stockholders, and it is still selling lots of stuff. Software (ANET) usually beats hardware longer term.

NVDA is partly being supported by dreams of widespread car autonomy. While technically feasible sooner than most think, real world adoption may be sluggish. See my NPI posts. Also there’s lots of talk about AI but at this point it’s hard to see who is massively benefiting, and thus who will be ordering lots of those NVDA chips.

5 Likes

Did you mean I shared information that was too personals?

No sir. One of the biggest variables in port construction is total $ available. I don’t want to know and
you should not tell me. However, you never stated your goals of how many positions. All same size, or
variable? You also didn’t relate YOUR conviction level of NVDA or ANET which is absolutely critical if
I’m the idiot giving you advice.

<i<I’d like to get down to a more focused portfolio of 20 stocks or less. … I’m reducing my positions
in UA and CMG to free up some cash for NVDA and ANET positions.

No, no, no. :slight_smile:

I have some bad news, my friend. If that’s the way you are going to deal with low-conviction stocks (and
that is certainly your right) you will never be able to run with concentrated portfolios. Ever. Never pretend,
or you’re going to get really frustrated.

These days I personally don’t buy a stock, any stock, unless I am so convinced of its success, that I could
buy it and hold it for a year without ever checking back. I DO check back :slight_smile: but the idea is still there. In
fact, NVDA is the only stock I have right now that I consider somewhat cyclical, meaning that when I feel
the juice is squeezed out, I’m out of it. Oops, I have 2, I also have a company that makes machines that
make chips and sells to all the big fabless guys. It’s cyclical.

Otherwise, my holdings are not just place fillers for portfolios. THEY ARE MY ABSOLUTE FAVORITES.
THEY ARE MY BEST IDEAS. THEY ARE THE STOCKS I CHOOSE FROM THE 7,000 AVAILABLE.

See the difference? It’s not for everyone, don’t feel left out. You have to invest the way that fits you
best. Just don’t pretend you’re going to keep 3% of each loser and then you are going to become
concentrated. The differences in port management are crucial and not the same. Know where you’re going!

Dan

6 Likes

John, for some reason I couldn’t get the post to submit unless I broke it down.
So here’s part 2 of 3.

Unusual for me, I currently have 19 stocks of various size positions since Jan 1. My plan of attack is to water the flowers and kill the weeds. I expect to eventually get down to 10-15 stocks, maybe a little less. When I sell something, I will add to my highest conviction stocks unless another stock is at a bargain price. (Hasn’t happened lately.) :slight_smile: If nothing changes, that means my holdings performed perfectly.

If it helps, here are 3 accounts I manage for others ranging from a few 10s of thousands to several hundreds of thousands of dollars. “Targets” is the port management sheet for these 3 ports, containing all the stocks I want to own in them right now, and the size. The other 3 columns are exact sizes in the accounts, since this sheet goes through the cover sheet which has all positions for 7-8 portfolios, and counts shares by account. See how close they come? Also, I just sold Micron (MU), so the actual holdings are 0%.

part 3 :slight_smile:


**Ticker Target 	Acct A	Acct B	Acct C**
ABMD	5.0%	4.9%	4.9%	5.1%
ALGN	8.0%	8.5%	6.9%	6.8%
ANET	10.0%	11.1%	10.1%	10.6%
BESIY	2.0%	2.0%	2.1%	1.9%
CGNX	4.0%	4.0%	3.3%	3.5%
FB	5.0%	4.5%	4.4%	4.2%
GOOGL	3.0%	2.9%	2.5%	3.7%
GRUB	4.0%	3.6%	3.7%	3.7%
HDP	2.0%	1.7%	1.8%	1.8%
IPGP	6.0%	5.5%	6.7%	6.7%
LRCX	4.0%	4.2%	4.0%	4.0%
MA	6.0%	6.1%	6.5%	6.5%
MKSI	4.0%	3.5%	4.8%	5.1%
MU	0.0%	0.0%	0.0%	0.0%
NVDA	4.0%	4.0%	4.5%	4.5%
PAYC	3.0%	2.8%	3.0%	3.0%
PYPL	4.0%	3.7%	3.8%	3.8%
SHOP	7.0%	6.3%	6.4%	6.5%
SQ	9.0%	8.8%	9.9%	8.7%
TREE	5.0%	5.4%	5.8%	5.0%
1 Like

Hi Dan,

I’m clear where you are coming from and thanks for your advice. One thing I could see is a more concentrated portfolio with several smaller starter positions. For example, my top positions constitute 70 percent of my portfolio. That seems pretty concentrated, right? The other 30 percent I have in smaller positions in the hopes that some of them will be blockbusters. That’s how I’m playing it right now. However, I am open to and learning about an even more concentrated portfolio that you referenced in your response. This board has been helpful in my thinking. Not there quite yet as I like some of the safety and security of a smaller percentage of my portfolio being more spread out. Does that make sense? What are your thoughts?

Gratefully, John

Dan,

I appreciate he thought and time you took to help me think through this more cocentrated portfolio. I responded before seeing your parts 2 and 3. I find myself wit( too many stocks and some with smaller positions that have become ver inconsequential. As I mentioned! I am highly concentrated in 10 of the 25 socks that are 70 percent of my portfolio. Some of those smaller positions have grown nicely (CGNX, PYPL), but others are almost nothing. The SN Odyssey 1 Mission I follow (not blindly) has encouraged not selling some that could still come back (TWTR, TRIP). Not sure if they dropped in price or are come backers. I did sell GPRO realizing too late that it’s prospects IMO are dead. Tha3 are some of my questions going forward.

John

Hi Dan,
I really what you said about “conviction level”. Can say something about developing that?
Thanks
Usha