Feel free to skip the first two paragraphs.
OK - I’ll admit it. On two occasions I’ve posted political oriented commentary on this board. The first time I was somewhat new to the board and uninformed about the unwritten policy. I was reprimanded by another follower of the board. I did not respond, but decided that it was probably a good thing. I’ve been silent on political matters until very recently when Saul opened the door to a political discussion. With this more recent occurrence I tried very hard to keep my personal politics, for that matter anything that seemed to lean in a partisan direction out of my post. But I did not shy away from asserting that a political solution was the only viable approach to addressing the issue Saul had raised. I elaborated on the implications of the issue and where I thought political attention would be required.
I think I’ve learned my lesson at this point. I will make a sincere effort to avoid further political discussions, opinions, asides and so forth no matter who initiates the discussion. The investment discussions on this board are too valuable to allow partisan politics to become a destructive force. Not every one of my friends share my political leanings. I am to maintain the friendships nonetheless. I don’t know everyone here personally, but it’s a friendly association. We all need to participate in keeping it that way.
That being said, I’ll change the subject to a more on topic investment discussion.
Jim posted:
I keep it simple and never use puts, calls or options. I’ve converted to owning only around 15 stocks.
I’ve been striving to do the same thing with mixed results. I’ve mostly made money with options, but even so, there have been option transactions I’ve regretted. In January I sold some AMBA calls with a strike price of $70.00. They recently matured. I didn’t really want to loose the stock. On this one I got lucky. So happened the stock dipped on a morning a day or two before the option due date. I was able to buy them back without a loss even though the stock was still above the strike price. The time value was gone and I came out of it up a few dollars after transaction costs. Other times I’ve not been so fortunate. Forced to buy the options back at a loss, allow the stock to get called away, or try to roll up an out without losing any money. I usually have to hold my nose and select one undesirable alternative or another.
Why did I sell the options in the first place? I liked the company. In early January when I sold the option AMBA was trading close to $50. That was already about 80% gain in the year since I first bought it. My thinking was along the lines of if I can get another $20 a share in 5 months, I’ll be happy to bank it. And also, there was some price anchoring going on - I thought the stock has gone up 80% in a year, there’s not enough gas left in it to carry it that much higher that quickly. I’ll bank the premium from the option transaction and continue hold the stock. And finally, this was before I had learned some of the lessons from this board. I bought the stock on a TMF recommendation, I really didn’t have a good understanding about how to evaluate it. I really didn’t know if the price represented an undervalued, fair valued or overvalued stock.
Since that time I’ve changed my investment strategy. I only want to hold stock for which I understand the valuation. I want to have a solid understanding of why I buy a stock in the first place. If the numbers aren’t great and I buy the stock anyway (XPO for example), I want to have a good reason for my action - and I want to make sure that my rational plays out. Given that, I find less motivation to trade options at all. I’m aware that it can be an extra source of income. And even if a stock gets called away you can turn around and sell puts if you still really like the company. But, I won’t sell naked puts, so it idles some cash. I’m not fond of that either. The easy way out of this dilemma is just don’t trade options. That’s pretty much what I’ve done, but I am still tied to an ESRX leap which will require a loss to close. I’m not all that thrilled with the company. I should probably just bite the bullet and close the option so I can sell the stock and put the money to work.
I’m still struggling with the second part of Jim’s comment. Consolidating my portfolio to just 15 or so companies. I know Saul does the same thing. And I am acutely aware that the more companies I hold, the harder it is to keep current with everything. It’s burdensome. But when confronted with actually selling all my SBUX for example, I’m reluctant to do so. I’ve purchased SBUX 7 times in the last three years (there have been some sells mixed in also). On average, I’m up 50%. My longest held position is up 110% over 3 years, my most recent buy is up 40% over the last 14 months.
Saul has said he wants to hold companies that are not so big that they have a good shot at doubling or even tripling in an unspecified short time (I guess a year). That’s why he doesn’t hold AAPL (I’m long that one too). SBUX is already the big dog in it’s segment. I don’t think there’s any chance it will double in a year. But I have different criteria. My goal is to grow my portfolio no less than 20% a year. If I only hold companies that grow 20% a year, I’ve reached my goal. SBUX is up (split adjusted) 25% since January. It’s PE is around 35, 1YPEG over 2, YoY earnings +18%. I hold HAIN with a similar story, though it might have an easier time of making a near-term double than SBUX. HAIN is in almost every aisle at Whole Foods, but they’re just getting started at Walmart and Kroger. There’s a bunch of traditional regional grocers they’ve not even entered yet. Just the same, looks like I should take the money and run. But I’m reluctant to do so. I find it hard to let go of winners.
Not long ago I posted on this board asking for help because I was struggling with this same issue. I got a lot of informed input, but as might be expected, there was a fair amount of conflicting opinions about what to do. At present, I hold 21 companies. Down eight or nine since my earlier post. The ones remaining are tough decisions. What to do?
Here’s the list (alpha order):
AIOCF - OK, this one is not too difficult, I’ll sell most if not all.
DIS - Up 125% since 1st buy in 4/12. Up 36% since last buy in 3/14.
ESRX - Already discussed above. Have to bail on a call at a loss.
HAIN - Similar to SBUX discussed above. A puzzle
IPGP - Discussed recently on this board. Inclined to hold a while longer
KMX - Pretty good numbers. Maybe gotten ahead of itself a bit
MNST - Sky high valuation - I know I should sell
PCLN - Great numbers, probably a hold
SBUX - Discussed above. A puzzle
SWIR - Numbers are good, positive earnings for last year. Probably a hold
Opinions? Random thoughts?
