Saul Investing - Managing Risk!

Investing Strategies Mechanical Investing
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On 11/23/2021 I posted on a method I use to manage risk in highly volatile stocks like those followed on the Saul Investing board. You can read that in post 282200. The point of that post was to say there is a way to use overbought/oversold indicators applied to the individual stocks identified to pinpoint times of risk and times of opportunity.

The exit using that approach was on 11/5/2021. Since then I’ve been in and out for a day or two but mostly just waiting it out. Why? Those of you who know of the Bear Catchers and my posts on that theme know that when the NH-NL Bear Catcher I introduced to this forum fires, it is best to be very cautious. It went bearish on 11/18/2021 and has remained so for all but one day since - 1/4/2022.

https://www.zeelotes.org/Bear_Catchers.PNG

So here are the drawdowns from the 63-Day highs in these stocks as of yesterday’s close.

**Date** DDOG     MNDY     ZI       ZS       SNOW     S        NET      Avg All
12/29/2021  -8.57%   -30.89%  -16.63%  -12.37%  -14.35%  -33.64%  -38.64%  -22.16%
12/30/2021  -8.97%   -30.87%  -16.32%  -11.98%  -15.24%  -31.44%  -38.69%  -21.93%
12/31/2021  -9.39%   -30.58%  -17.00%  -12.87%  -15.71%  -33.83%  -39.47%  -22.69%
1/3/2022    -16.65%  -32.27%  -20.54%  -18.15%  -17.39%  -37.59%  -41.93%  -26.36%
1/4/2022    -19.74%  -34.95%  -23.97%  -23.65%  -21.49%  -38.98%  -47.08%  -29.98%
1/5/2022    -25.97%  -44.01%  -29.77%  -28.87%  -26.13%  -42.84%  -51.23%  -35.55%
1/6/2022    -26.80%  -45.78%  -29.68%  -29.44%  -26.08%  -43.20%  -52.11%  -36.16%
1/7/2022    -26.85%  -46.62%  -32.13%  -29.08%  -25.43%  -41.90%  -50.75%  -36.11%
1/10/2022   -25.55%  -45.73%  -31.17%  -25.25%  -24.67%  -39.88%  -49.02%  -34.47%
1/11/2022   -24.40%  -45.91%  -26.66%  -24.74%  -25.04%  -35.94%  -47.46%  -32.88%
1/12/2022   -25.55%  -45.38%  -28.79%  -25.71%  -23.58%  -38.41%  -47.54%  -33.57%
1/13/2022   -31.25%  -50.87%  -31.86%  -32.08%  -27.40%  -44.68%  -54.44%  -38.94%

So the average drawdown is -38.94%. Or to look at it another way, here are all the picks focused on now and their drop from their 52-Week high.

 **Based on: 1/13/2022        YTD %   52 High     Date      % Dif**
**Snowflake Inc Cl A** -14.44%      405  11/17/2021  -27.96%
**Datadog Inc Cl A** -24.40%   199.68  11/17/2021  -32.33%
**Zscaler Inc** -22.36%   376.11  11/19/2021  -33.41%
**Zoominfo Technologies Inc Cl A** -18.48%    79.17  11/19/2021  -33.42%
**Crowdstrike Holdings Inc Cl A** -14.68%   298.48  11/10/2021  -41.40%
**Sentinelone Inc Cl A** -18.83%    78.53  11/12/2021  -46.25%
**Amplitude Inc Cl A** -15.06%    87.98   11/4/2021  -48.83%
**Monday Com Ltd** -30.38%      450   11/9/2021  -51.45%
**Cloudflare Inc Cl A** -24.48%   221.64  11/18/2021  -55.34%
**Upstart Holdings Inc** -28.88%   401.49  10/15/2021  -72.79%
                                                  **Avg Drop    -44.32%**

So the average drop is -44.32%. What does it take to get a portfolio of these stocks back to their previous high? Nearly an 80% gain!

So again, I ask - is it worth managing risk? I personally think that long-term buy and hope is a fool’s errand! Tools have been presented on this forum to avoid such an adventure.

The method I’ve suggested has been doing some firing of late which you can see via this image:

https://www.zeelotes.org/Saul_BC.PNG

As of the close today I’ve down -0.60% in these picks. Could these stocks go lower yet? Absolutely. But I prefer my present state compared to an average drop of over forty-four percent!

24 Likes
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Never doubt an observation by Zee!

Just to verify by looking at it slightly differently I looked at what would have happened if someone had jumped in based on Saul’s 5/28/2021 buying the 8 stocks Saul held with over a 1% position but going to cash whenever NHNL wasn’t positive. To simplify I kept Lightspeed to the end even though Saul sold in November. I realize Saul doesn’t believe in using timing but . . .


	Hold	w/NHNL
CAGR	10.75	37.42
GSD	68.8	29.6
MDD	-40.3	-16.8%
AT	1.03	6.3

Hold: http://gtr1.net/2013/?~Saul_holdings:s20210528h5f0.35000::BC…
NHNL: http://gtr1.net/2013/?~Saul_holdings:s20210528h5f0.35000::BC…
Full disclosure, I put a little play money in Saul’s picks over a year ago and did well but decided even with timing it was too risky for me.
RAM

16 Likes
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RAMcN:

There are a lot of whipsaws using the NHNL. Did you look at using the EMA 9 or EMA 13?

Sandywater

1 Like
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I’ve put on my blog a spreadsheet illustrating the method I’ve shared here. It also includes an auto-updating component to pull stock data from Google, as well as instructions.

If there is interest, I’ll try to keep this spreadsheet updated when signals are present requiring action.

Just go to zeelotes.org to request membership if you don’t already have it.

40 Likes
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I’ve put on my blog a spreadsheet illustrating the method I’ve shared here. It also includes an auto-updating component to pull stock data from Google, as well as instructions.

Zee, thank you very much. I appreciate your extensive giving to this board over the many years you have been posting.

Craig

13 Likes
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Hi,
I downloaded the spreadsheet in message 282553 but am not sure how to use it.

First, what are the definitions for Saul-SEF, Cloud-SEF and SaaS-SEF.

To try to figure out the gains/losses using Saul’s major picks I went to the the column K “BC-2
NH-NL” and anywhere there is a Green Bull in the column, I went to column E “Saul-SEF” and added the matching results and came up with funny numbers. Can anyone be of help?
Thanks,
Elliot

1 Like
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SAUL-SEF,Cloud-SEF and SaaS-SEF are groups of stocks. Column E is the percent of stocks on “strong buy”. It appears that only 7 stocks are being evaluated in the Saul-SEF tab. Columns C,D and E are the signal columns.

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Also for each stock on the SAUL-SEF, Cloud-SEF and SaaS-SEF tabs, you must use whatever overbought/oversold indicator you have chosen to use, plus your own judgment, to classify each stock as either a “strong buy,” a “buy,” or a “caution.” Then calculate the percentage for each category and enter those values in the appropriate columns. For example, if half are “Strong Buy” then you enter 50% in the SB column. Next, add another row to the combined tab with the correct date and the lookup functions will adjust the appropriate values.

BLancaster

1 Like