Saul’s portfolio at the end of July 2024.
Here’s a table of the monthly year-to-date progress of my portfolio for 2024. I’ll present them as starting from 100% of my starting value and figure from there.
End of Dec 100.0% starting point
End of Jan 101.7%
End of Feb 125.4
End of Mar 127.2
End of Apr 117.4
End of May 121.7
End of Jun 121.7
End of Jul 105.7
End of Aug 110.7
Well, in July just about every company I had was down and the value of my portfolio fell about 13%. Then came August…
August was strange ! In the beginning of August my portfolio fell to a low of being just up 1.7% ytd. I sold out of ELF and I was down to just six companies. Five of my six companies were up substantially in the next couple of weeks of August (Nvidia, Axon, Nu, Transmedics and Sentinel), while the sixth, SMCI, treaded water. I was up 19% ytd on the 16th of August, and up 22% ytd on the 23rd, a week ago. Remember that that was coming from being up less than 2% early in the same month.But then SMCI hit (see below).
I had exited ELF because of the EXTREMELY rapid fall of its apparent revenue growth rate, and because while it seemed to be seizing market share, it was doing it in a shrinking market, which is not an exciting position to be in.
I know a lot of people stayed in Crowdstrike in July when I got out, but I exited because of what seemed to me to have been gross incompetance and carelessness. I’m sure that they will take action to correct all that, but there is still so much uncertainty as to how much they will be affected by lawsuits by affected companies, by stockholder lawsuits, by companies reluctant to add to their modules, by other companies reluctant to jump in feet first with a company that showed so much carelessness, etc. I’ll stay out for a while.
Then, this last week, came the SMCI catastrophy . When the stock sold off after its earnings report, I had added a bunch to my position at $498, which seemed like a hugely low price (after all it had hit $926 on July 12th) and it was back over $620 two weeks after my purchase.
I didn’t pay attention to all the talk about Nvidia’s delay affecting SMCI (it would be the same business a month or two later), and I pretty much ignored the short attack.
But then when SMCI announced, the day after the short attack, that it was postponing filing its 10-K, I sold out. You don’t get many such clear signals in investing. Granted, it may turn out to be a false alarm, but that’s just a wish and a guess. I’m not in this to gamble, so I sold out of my entire position.
So here’s what my postions looked like a month ago (end of July):
ELF 21.5%
Axon 20.9%
Nvidia 16.5%
Nu 10.2%
SuperMicro 9.9%
Sentinel 6.0%
Transmedics 4.5%
And here’s what they look like now, at the end of August: I’m giving them now as clean percentages of my invested positions that add up to 100%
Nvidia 29.4%
Axon 27.6%
Nu 21.8%
Transmedics 11.9%
Sentinel 9.3%
I’m down to just five positions for now. But I’m an old guy and each month I take more and more money out of my investing portfolio and put it into our **permanently-**out-of-the-market pool . This means I’m constantly investing less and less of our total assets, so its dividing a much smaller pool into five, and if one position is 27% of my portfolio, for instance, it’s a lot fewer dollars than 15% of my portfolio, for example, was a couple of years ago, because I’m investing less. Therefore I worry less, and am more comfortable.
How did the stocks I’m holding do this last month. Well… Here’s how each did since July 31st !
NU rose 24%
AXON rose 22%
TMDX rose 18%
S rose 3%
NVDA rose 2%
And even after two unexpected crashes (Crowdstrike turning off the world’s internet by mistake, and SMCI having questionable quarterly results, a serious short attack, and then having to hold off on filing its 10-Q), I feel glad that that I’m still up almost 11% for the year, although I’m sure lots of others on the board are doing better.
I keep adding to NU. Some people say “Oh, it’s a bank in Latin America. Not interested.” However I find it hard to imagine anyone actually seriously looking into Nu and not investing in it, but that’s just me.
PERSONAL REFLECTION
[This is just a personal reflection and has nothing to do at all with the action in the past few weeks].
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Some of my good friends watch valuation carefully and sell and go into cash when the price goes up , thinking they can guess the top. I tend to buy more as the price goes up, as I see the price rise as a verification. Both methods have their advantages, but I feel that selling when the price goes up works in a weak market, but in a market taking off it doesn’t work well at all.
Consider 2020, the Covid year, when my portfolio rose by 233% in one year, to 333% of what I started with. That was more than tripling in one year. If I had taken profits and gone into cash after the first 20% rise, trying to catch a top, I would have missed the last 213%.
And my portfolio was down with the onset of Covid to a loss of 16% in March of that year (to 84% of what I had started with). If you figure from where I was in March I ended the year at 394% of that low, quadrupling, in nine and a half months.
And what happened the next year, in 2021? well I was up another 93%, compounded on top of those huge numbers, before the market started down in November. What that means is that I was at about 640% of what I started with less than two years before, and 760% (more than seven and a half times) of my what I had at that March 2020 low, just a year and eight months before.
Even if I hadn’t gone into cash when I was up 20%, if I had waited until I was up 30% or 40%, trying to guess tops and going into cash would have meant a huge opportunity loss of hundreds of percentage points. And then when the market had dropped 20% or 25% in late 2021, I would have probably finally “put my cash to work”, gotten in, and tried to catch a bottom, and then ridden it all the way down in 2022. Guessing tops and bottoms is not for me.
Yes, in retrospect , it would have been nice if I had stayed all in, and then sold out at the very top, but if I was going to sell out, why wouldn’t I have sold out when I was up 60% from the covid bottom in just five and a half WEEKS? I had no way of knowing that I’d reach a high of up 660% from that bottom. Anyone trading in and out would probably have exited even before that up 60% in just five and a half weeks.
Yes, there are no easy answers that fit all the circumstances.
Besides which , from a practical point of view, it’s hard for me to sell in and out to try to catch tops and bottoms, hard both psychologically and financially.
I hope that this discussion was helpful.
I have kept a permanent safety fund out of the market that I could live off for several years if necessary, and I feel everyone who does not have a secure regular source of income should do the same. I have gradually added to it over the last sevaral years, moving some funds gradually from my investing pool to my out-of-the-market pool. Given our advanced ages, my wife and I probably have enough to live for the rest of our lives with our out-of-the-market pool, with a little left over for our children. I add a little to our out-of-the-market pool almost every month.
I have learned long ago that sticking with great companies wins out in the end, and beats market timing, even though living through the 2021/2022 decline was very difficult.
FINISHING UP
Let me remind you first, that I have NO IDEA what our stocks will do next month. I’m terrible on predictions. But I know that the businesses of our companies will do just fine for the most part.
When I take a regular position in a stock, it’s always with the idea of holding it indefinitely, or as long as circumstances seem appropriate, and never with a price goal or with the idea of trying to make a few points and selling. I do, of course, eventually exit. Sometimes it’s after months, and sometimes after years, but I’m talking about what my intention is when I buy.
I do sometimes take a tiny position in a company to put it on my radar and get me to learn more about it. I’m not trying to trade it and make money on it, I’m just trying to decide if I want to keep it long term. If I later do decide that it’s not what I want, I sell it without hesitation, and I really don’t care whether I gain a dollar or lose one. I just sell out to put the money somewhere better. If I decide to keep it, I add to my position and build it into a regular position.
You should never try to just follow what I’m doing without making up your own mind about a stock . First of all, you may have a completely different financial picture than I have. Different age, different income, different assets, different debts, different expenses, different financial and family responsibilities, etc.
Besides, in these monthly summaries I’m giving you a static picture of where I am currently, but I may change my mind about a position during the month. In fact, I not infrequently do, and I make changes in the position. I usually don’t announce these changes until the end of the month, and if I’m busy or have some personal emergency I might not announce them even then. And besides, I sometimes make mistakes, even big ones! Don’t just follow me blindly! I’m an old guy and won’t be around forever. The key is to learn how to do this for yourself.
THE KNOWLEDGEBASE
Since I began in 1989, my entire portfolio has grown enormously. If you are new to the board and want to find out how I did it, and how you can try to do it yourself, I’d suggest you read the Knowledgebase , which is a compilation of my “words of wisdom”, and definitely worth reading, (a couple of times), if you haven’t yet. It’s on the panel to your right.
I hope this has been helpful.
Saul
