OT - A little follow up on my results

Investment Analysis Clubs Saul’s Investing Discussions
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OT – A little follow up on my results over a wild two-and-a-half weeks.

On Monday, July 23rd my portfolio hit a high of up 64.3%.

Then we hit the big sell off of tech stocks, when shorts we had never seen on the board before showed up to warn us that “The end is near, repent, and go into value stocks or cash!”

When I gave you my end of the month totals as of the last weekend of the month on Friday, July 27th, my portfolio had fallen to be up just 55.3%. (This was just four days later).

By the following Tuesday, the 31st, it hit bottom at up 43.6% (This was just two trading days later, and it had dropped from 64.3 to 43.6 since the 23rd, so this was a pretty abrupt sell-off).

Now, nine days later, I’m at a new high of up 69.1%. (From up 43.6% just seven trading days ago).

Combined with my results from last year that means that my portfolio is at 311.5% of where it started last year. The whole portfolio, not one stock. More than a triple on the portfolio.

For anyone curious, here’s the simple calculation. (1.842 x 1.691 = 3.115)

That should set the minds to rest of those people who keep worrying what will happen to us if the market turns down. If my whole portfolio drops 50%, I’d still be up over 55% on the two years, and doing much better than staying in cash or buying index ETF’s (which would also have gone down). A little better actually, as I’ve been segregating living money as I’ve been telling you. On the other hand, if the market doesn’t crash….

By the way, as I always do, let me urge you to keep enough cash set aside to weather one of the major crashes without having to sell at the bottom. Tariffs and trade wars and rising interest rates can certainly crush the economy after a while.

Best,

Saul

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Thanks, Saul. Given the news about Turkey this morning was a timely bit of advice. :slight_smile: And taking your advice, sitting on 14% cash, a level I have comfort with both if markets go up and if they drop.

Bill Jurasz

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Saul one of the things that seems to be a pattern is high growth companies dropping in the period before earnings. It makes sense when you think about it. First investors extrapolate the cagr, otherwise stock prices would look like step functions (one price, the earnings and a new price that remains until the next earnings). Prior to the earnings, fear and greed tussle and people think “what if they miss” “this stock has had a good run I want to keep what I have made”. Second the company and execs can’t say anything in the quiet period, shorts use this. Third lots of people are playing, and they have plenty of different aims: long term buy and watch company earnings; buy and get a double sell half and you are in for no cost; momentum, ride the winners I don’t care what they do; own growth, but never across an earnings day… those different approachs drive price instability the further you get from a data point. Like an inertial navigation system that gets reset periodically from GPS…

It is great to witness the innovation going on in the world today. Companies are making money because they are solving real world problems faster than ever before.

Enjoying the ride,
Flygal

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Saul one of the things that seems to be a pattern is high growth companies dropping in the period before earnings.

Gee, not always.

Alteryx was at $42.87 last Friday. Then this week they rose to $44.72, $46.05, $47.80 (each of which was a new high close), and then they announced earnings and on Thursday they ran up to $55.33.

Twilio was at $60.71 two weeks ago, and at $56.02 four weeks before that, so they were rising towards earnings. They closed last week at $62.00, up further into earnings, closed at $63.27 on Monday (up again), announced earnings and kept going up, closing the week at $77.49, up 25% on the week.

I don’t think you can generalize like that. Some fall before earnings, some rise, and there doesn’t seem to me to be any clear pattern.

Saul

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Let me clarify, I’m not trying to say that ALL of the high growth companies are dropping before earnings, rather than LOTS of them have. Understanding that would be helpful to me, so I started thinking about it. The life changing investment for me was EMC, here is an article that talks about EMC and other fast growing companies of the 1990s http://articles.latimes.com/1999/dec/28/business/fi-48388
Maybe it was so long ago and I just don’t remember it, but I do not recall those knds of drops in the 1990s. Of course you had Market Makers then…

I try to have a mental model of what is driving stock prices. Earnings were huge, but potential earnings seem to matter more now. That makes investing more like poker, you don’t know the future earnings but the current sales give clues, like current cards do. But we are also playing against all the other players. We need to understand the other playing the game to figure out our best strategy. The game changes over time, getting same day access to earnings as conference calls is a change that has really helped individual investors, but lots of people guessing about outcomes too, betting before the event. Without market makers smoothing the stock price, and “orderly markest” no longer a stated goal.

I guess the volitity has me wondering, is there a bear market coming? So often in the past volitity increased before a major decline. But the market is very different in terms of information availability and market structure. And the innovation is cutting costs out of so many areas…

I think the innovation trumps everything, I think this era’s innovation is like going from water power to electricity and the effects of that change will play out for years.

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I think the innovation trumps everything, I think this era’s innovation is like going from water power to electricity and the effects of that change will play out for years.

Thanks Flygal, I love it! I think so too and I hope it’s true, but who knows for sure?
Saul

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