Portfolio Performance

Investment Analysis Clubs Saul’s Investing Discussions
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Good evening,

Given that a number of board regulars have taken the time and trouble to report their portfolio performance results as a teaching/learning exercise, I felt maybe I ought to do the same. I am hesitant however, because I do not invest in the “Saul” stocks so beloved on this board, and discussions of companies that I own have been deemed verboten. Sigh. I’ll keep this post brief and to the point.

As of the end of the day today, my portfolio grew by 38.3% in January 2019.
Portfolio performance for all of 2018 was 51.18%
(These results came after I harvested sufficient profits to fund two years’ worth of living expenses. I’m retired and rely on my portfolio for income. Much as I would have appreciated some other revenue source, there was none and I have bills to pay and groceries to buy. Sigh again).

Some (most) may be surprised by my performance results. They’re not hard to understand if one considers that my inordinately concentrated portfolio is 76% comprised of Enphase (ENPH). Yeppers, one stock and bucket loads of shares (most purchased at <$1) several years ago. I’ve sold well more than half of my shares since because…well…I gots bills to pay and I like to eat (and buy expensive bicycles).

Even so, ENPH remains a 76% position because the share price has appreciated to near 10-bagger status, I believe there’s still ample room for an additional 50% appreciation in share price.

The rest of my portfolio consists of small positions. I once held more shares of these companies but I cashed them out to buy more ENPH during the market correction in December I intend to add to these positions as time/conditions and opportunities permit.

Here’s what I own:

Applied Optoelectronics (AAOI) fiberoptic equipment provider…2%

Albermarle (ALB) lithium and specialty chemical producer….5% (I’m also researching Livent (LTHM) a much smaller lithium pure play)

Diode (DIOD) diode manufacturer…1% (I started nibbling after I kept reading about a global shortage of electronic components, mostly diodes and MOSFETS attributable to the fast growing electrification/computerization of cars)

ICON Plc. (ICLR) drug testing service…1% (I once held quite a few more shares ,but ICLR was VERY good to me so I harvested profits while BREXIT remains unresolved)

Infinera (INFN) long haul optical networker…2% (I think I heard a few gasps/guffaws with the mention of INFN, but I have my reasons)

Micron (MU) memory chip and solutions provider…9%

Skyworks Solutions (SWKS) radio communications…2% (this was an old board favorite until it fell out of favor. I didn’t own it before but I’m buying now)

TransEnterix (TRXZ) surgical robots…2%

Vericel (VCEL) genomic skin/cartilage maker…2%

VMware (VMW) hyperconvergence software provider…1% (yes, yes I know that Nutanix is the overwhelming board favorite)

If there is anything to be learned from my portfolio, it’s this: business enterprises that manufacture “stuff” that fill societal needs can be every bit as lucrative as software vendors. The world does not revolve around software alone. Proof of concept: two of the most profitable investments in the last decade were Apple (AAPL) the smartphone creator, and Intuitive Surgical (ISRG) the surgical robotics pioneer. These are the types of companies I wish to own.

I hope I didn’t offend anyone by choosing a different path, but I’m funny that way. I’ve got a mind of my very own and I ain’t afraid to use it.

May we all live long and prosper

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Yes! I knew I wasn’t the only one with a position in Enphase.
I have about a medium size position and it has been growing, twitch at a time.
I bought it because of all the comments and articles by T.J. Roberts, who is a solar panel installer amongst other things.

You can install Enphase panels and hold off buy the batteries to save money.
Also, I can’t remember which is which, but they use AC instead of DC, which I believe is easier to wire up.

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Thanks for your post putnid.

Firstly, well done on your excellent result.

Your portfolio screams concentration risk to me in a way that is different to many here.

A more common concentrated portfolio in this board seems be consist of around 10 companies (+/- 30% or so). Many are uncomfortable with positions over 25% in one company.

76% allocation says to me that your portfolio returns will live and die by enPhase. I know nothing about them, but that type of unnecessary risk is unattractive to me.

Buying companies that sell widgets can be be lucrative. No one is disputing that. But it has inherent risks due to the issues previously discussed. Isrg and abmd essentially have recurring revenue models that make them differentiated.

Best of luck.

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76% allocation says to me that your portfolio returns will live and die by enPhase. I know nothing about them, but that type of unnecessary risk is unattractive to me

With the rest of the portfolio divided into 2% allocations, he could just as well be 100% in that one stock, I guess. Anyway, I like a concentrated portfolio as well, but still, though, I tend to have 3-5 more or less equal weighted allocations at a time. Right now I have four stocks and considering if AYX or ESTC should be my #5. Maybe I’ll just keep it at four positions for the time being.

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Thinking slightly more about it, if I were to summarise the benefits of Saul type stocks. They are

High gross margins
Recurring revenue
Large Competitive advantage period / Category crushers
Fast growing new markets with tailwinds
Predictable revenue growth
A degree of switching costs
Less subject to cyclical behaviour

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Hi Putnid,

Infinera (INFN) long haul optical networker…2% (I think I heard a few gasps/guffaws with the mention of INFN, but I have my reasons)

I used to be a big bull on Infn but that is when I thought they could win the short haul market. I think it is clear now that Ciena has won that market. While Infn did well in the long haul and the sub sea market I think it’s big growth is over. Ciena is coming out with a 400 gig card soon and they can put a point to point link of 8.8 terrabits. When it gets the 400 gig card that link will be 35.2 terrabits. So while Infn is ahead in how big their cards are, the last I heard they were coming out with a Terrabit card, the Ciena equipment is a smaller footprint and is good “enough” for the local markets. Infinera has no chance in the Chinese market because Huawei has that sewn up, So I have given up on Infn. I am curious where you think their growth is going to come from.

Andy

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Hi Andy,

This might surprise you, but I generally agree with your comments. Yeppers, I agree that Ciena will be the dominant player in the short-haul market. But it’s a BIG market and Infinera (INFN) will be competing. The 3Q18 acquisition of Coriant was a step in that direction. Although it’s proved challenging to integrate Coriant into INFN’s operations, the work will continue. I believe INFN will grab a share of the overall short-haul market and, I repeat, it’s a huge market (particularly with the advent of 5G).

Several technical articles regarding the current state of the subsea market reignited my interest in INFN. It’s a common perception that the long-haul networks have reached maturity. They haven’t. What shocked me were the number of subsea installations that are currently in the planning, permitting or construction phases all around the globe. The long-haul market is still growing and growing significantly. This should come as no surprise to Board participants who are agog with the growth prospects inherent in “The Cloud”. I share their general belief in Cloud growth (although growth will necessarily always be lumpy) but, in essence, it’s just the transfer of data from on-site computers to off-site data centers. That requires networking, both short- and long-haul. INFN is still a “Big Dawg” in long-haul, and there’s still big money to be made. When there’s big money to be made, there will be stiff competition. I agree that Huawei will be a major player, but battle lines are being drawn. Yes, Huawei will dominate China-funded networks but the US and EU, and their allies, are looking askance at Huawei. There will be opportunities for INFN.

I’ve mentioned this before (in years past), but INFN insider trading patterns have proven to be good predictors of INFN’s business prospects. I sold shares years ago when I spotted steep insider selling. I’ve bought shares when I saw insiders buying. As a consequence, I’ve not lost money on INFN. At present, INFN’s insiders are buying.

Having said all that, given the swings in INFN’s fortunes, it’s not a great company for casual investors to own. One has to be dedicated to market research and most folks don’t have the time. It’s a good stock for swing-traders such as I (and it will never be a large position in my portfolio even though it could easily double or triple from here).

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Would you care to expound on what your reasons were for buying so much ENPH early in the game?
Great move.

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Would you care to expound on what your reasons were for buying so much ENPH early in the game?
Great move.

Not Putnid…but I had a different experience with ENPH (I guess investing even EARLIER in the game, not necessarily a good thing).

I installed solar on my house in 2011 using Enphase microinverters (relatively new tech at the time). Looked into the company, they were the leader in microinverters, so I invested around 2013-2014 I think (all prices and dates from memory, so could be off some). Built a position between $5-$10, stock went up to around $16 over the next year or so, bounced around $10-$15 for about a year, then TANKED to sub $1. I didn’t sell when it was high (my old investing practice), and bought more on way down (maybe $6, $3, and $1-$2). Got rid of it all when it recovered to around $4.

What I missed was how quickly competition, SolarEdge (SEDG) ate ENPH’s lunch! Luckily, SEDG was being discussed here, and I built a position in it around $15-$25 and later sold it at $40+.

Putnid obviously knows this company way better than I ever did, but I could never invest that high of a percentage in one stock as a catastrophic drop (which many times happens quickly, without warning, and totally out of your control) would be too much for me.

So overall, the inverter market ended up being an OK investment for me. But the best thing that came out of it was I’m pretty sure it was a thread on a board about ENPH that led me to Saul’s board as someone mentioned there was further discussion here regarding ENPH and SEDG (who knows, may have been Putnid!).

Whoever it was I can’t thank them enough!

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Hello MoneySlob,

I’ve posted often (often for me anyways, someone who doesn’t post all that much) about Enphase (ENPH), going back to the early Enphase/SolarEdge competition years ago. Given that I’m a lazy git, I simply reviewed my posts for the past year. I’ve listed the links to posts I think you may find informative as to the whens and whys. They’re listed in chronological order (oldest first).

If, after contemplating the information provided, you have additional questions just email me. I’ll always respond.

https://discussion.fool.com/hard-to-reconcile-that-with-a-penny-…

https://discussion.fool.com/enphase-odyssey-33040426.aspx

https://discussion.fool.com/enphase-earnings-33054751.aspx

https://discussion.fool.com/hello-duma-i-understand-your-questio…

https://discussion.fool.com/hello-again-hp-i39m-trying-to-unders…

https://discussion.fool.com/hi-rizzz-wellnow-you39ve-done-it-at-…

https://discussion.fool.com/hello-ed-given-that-enphase-constitu…

https://discussion.fool.com/hello-utahchris-so-i-was-out-bicycli…

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