Question for Saul on 2008

Investment Analysis Clubs Saul’s Investing Discussions
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Hey Saul,

I have been scouring your knowledge base to the full Monty how you think about investing and one thing really catches my eye, particularly on this rough day. Am I reading this correctly - that in 2008 you saw 62.5% of ALL of your gains, from 1993-2007 wiped out? You talk a little bit about this in the knowledge base but I’m wondering if you might have any additional insight into how tough that was to go through and exactly why you were able to hold on through the worst of it, when many were losing their minds, and the temptation to protect the gains you had must have been massive.

In my experience, holding onto large gains which are in decline - and being in the midst of a full on bout of wicked loss aversion - is the single hardest part of investing. Was it your conviction in your companies? Your valuation work and method? Knowledge of their leadership and potential? Certainty the market would rebound? Faith in humankind? All of the above? Did you get down on yourself at all for not seeing the drop coming? I know we don’t talk dollars but that must have been a brutal, brutal year. Any thoughts greatly appreciated.

1993: 21.4%
1994: 15.4%
1995: 43.4%
1996: 29.4%
1997: 17.4%
1998: 4.9%
1999: 115.5%
2000: 19.4%
2001: 46.9%
2002: 19.7%
2003: 124.5%
2004: 16.7%
2005: 15.6%
2006: 8.6%
2007: 22.5%
2008: (-62.5%)

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It’s easier to handle when after all of that, he is still up 21.5x the original value. Not bad at all for ‘93 to ‘08.

AJ

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Thanks AJ. That level of math eluded me.

It’s still a giant number to be down and at that time not knowing if it’s going to halve and halve that going forward.

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What have we studied so hard for on our selected Companies only to panic and sell now. This is not 2008. We are not in a recession. Just look at those numbers from NVDA!!! Not pleasant this week for us all.
But didn’t you just wonder over the last few months when we saw our portfolios gain some days by 2% and more… Each and everyday, that this was not normal, even unreal. Even had a few posters relishing in their daily figures.
I am down significantly since this slaughter began mainly due to Apple…but way up than I was a year ago.
Saul kept telling us that what we were experiencing was out of the ordinary. I think I will continue to hold the Companies I believe in. If we drop another 10% evaluate the situation at the time, but NVDA, ANET and a few others I am looking n for the long haul and will add to accordingly.

Take a deep breath… it’s all good:-))))))$

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I have been scouring your knowledge base to the full Monty how you think about investing and one thing really catches my eye, particularly on this rough day. Am I reading this correctly - that in 2008 you saw 62.5% of ALL of your gains, from 1993-2007 wiped out? You talk a little bit about this in the knowledge base but I’m wondering if you might have any additional insight into how tough that was to go through and exactly why you were able to hold on through the worst of it, when many were losing their minds, and the temptation to protect the gains you had must have been massive.

Hi Dan,
It wasn’t 62.5% of my gains. It was 62.5% of my whole portfolio. As I explained in various places, I started investing seriously in 1989 when my wife got pregnant, and I had plans to retire in 7 years or so. The first four years I only kept my annual totals and hadn’t started weekly totals, so I only posted from 1993 on in the Knowledgebase, as those were the years I could be absolutely sure of.

By the end of 2007 I had 58 times what I started 1993 with. That’s the magic of compounding. And by the end of 2008 I had roughly 22 times what I had started '93 with. It was a lot less but I wasn’t wiped out or anything. Nonetheless it was very scary.

I guess what gave me courage was that I had faith in my companies, although in retrospect they weren’t nearly as safe as those I have now in terms of recurring revenue. (You also should remember that there hadn’t been a global meltdown like that in 80 years, in spite of a world war, atomic bombs, assassinations of presidents, etc). What I described in the KB literally happened: when I finally got scared enough to think that I had better save what was left and sell out, I decided that if I was finally scared enough to consider selling, there was no one left to sell and it was the bottom, and it turned out to be the bottom.

This current drop, by the way, is nothing by comparison. The averages are down just a few percent on the year, and I’m still up 5.7% on the year, after a huge year last year.

And I’ve been mystified that, in spite of the huge rises my stocks had had, I’ve seen my portfolio fall just about the same percentages as the S&P and the Russell, and not appreciably more. I’m down 9.7% since I wrote my end of January post on Jan 26th. The S&P is down 10.2% from the same date. It makes no sense (!) I would have expected to be down a lot more than the S&P. Maybe I just have picked very good companies. And NVDA was up 12% in after hours, so I may look even a little bit better tomorrow, if it holds those gains (or any gains).

I hope that helps.

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Everything seems to be down around 10%. Except Nvidia… :slight_smile:

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Thanks a lot, Saul. Greatly appreciated.

I’d love to hear you on this excellent podcast one day - “Invest like the Best”

http://investorfieldguide.com/podcast/?sent=1

Or on the Rule Breakers podcast with David G.

Best,

BD

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And I’ve been mystified that, in spite of the huge rises my stocks had had, I’ve seen my portfolio fall just about the same percentages as the S&P and the Russell, and not appreciably more. I’m down 9.7% since I wrote my end of January post on Jan 26th. The S&P is down 10.2% from the same date. It makes no sense (!) I would have expected to be down a lot more than the S&P. Maybe I just have picked very good companies. And NVDA was up 12% in after hours, so I may look even a little bit better tomorrow, if it holds those gains (or any gains).

Great post, Saul.

My guess is that really good companies – specifically companies that are growing fantastically and sustainably – rarely enter into “cheap” territory. Even when they look a little expensive, their business performance catches the stock price in short order…so when they start to look less expensive, there are some motivated buyers. It’s the old fear vs greed tug of war.

Just my thinking. The Dow/S&P are now down 2% on the year and I’m still up 5% or so…like you said, that’s a pretty great feeling. We may have further down to go, of course, but we know that when things start going up again, ours will go faster, because of how fast our companies are growing. If we’re going down as slow, or slower even, that’s doubly encouraging.

Bear

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