Saul's Historical Results

Hi Saul.

I’m new to this site, but started reading your New Knowledge Base post.

As would be anyone, I was impressed by your results. However, unless I’m doing the math incorrectly, your results for about the last decade (I started with 2006 and went through your recent results for the year, so not quite a decade) seem completely average. Specifically, based on the numbers provided, it would seem that you turned $1000 into $2174 over that decade, whereas SPY would have left you with about $2100, and Berkshire would have put it at $2430.

Am I mis-calculating this? If so, please correct me. If not, then your method no longer seems to be working so well (for a decade of such poor results is a bit long to attribute to mere bad luck). Unlike the 3Oish percent you had previously, you’re now at about 8.5%…matching the market, but with far more inherent risk.

Am I missing something??

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Am I missing something??

Hi commoncents,
You started counting in 2006, so you of course picked up the economic and market meltdown of 2008, in which I was down 62.5%, enough so that a gain of over 110% the next year wasn’t enough to bring me back to even. Certainly I was down lots more than the S&P in 2008. But there hasn’t been an economic, banking, and market panic like that in 80 years (since the great depression of the 1930’s). If you want to base your investing on the results of 2008, and think it will recur in the next year or two, be my guest, and if you don’t think you’d benefit from the knowledge and discussion here, you certainly don’t have to stay.

I have been perfectly transparent about my results, and included that disaster year as well as other years in which I didn’t do well. Yet I have over a 300 bagger on my entire portfolio. If you are not satisfied with that kind of results, I don’t know what more I can offer you. (For comparison, the MF was recently incredibly excited when one of their stocks, out of hundreds of recommendations, hit a 100 bagger).

One additional factor I can guess at is that, as the amount of money I had to manage got much more large, it became increasingly difficult to turn on a dime, and more like turning a battleship instead of a speed boat. I have tried adjusting to that, this year especially, by streamlining down to 10-15 stocks again, like when I was much smaller, instead of going up to 20-30 stocks and spreading out too thin.

Hope this helps,

Saul

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CommonCents:

Love that name!

I had calculated for all money invested prior to 2006, his results would have not returned to his baseline after the 2008 stock plunge until 2012…some 4 years later.

I also got $1527 from the original $1,000 invested in 2006 through end of 2014.

Keep in mind that his stocks have pretty high beta’s so a down market really zaps the capital but quick.

I am not sure what affect taking 2008 out of the spy or the Berkshire would have had on those investments, but it is very difficult to recover from a -62.5% in a single year.

Hence, several posters on this board including myself offering some caution with “going all in” on this investment approach as well as querying when to sell decisions. When the market is up, Saul is up big but when it is down, it is down big.

In just 2008, the SPY was down 38% vs Saul’s 62.5%.

I think this is a very worthy discussion and I hope Saul and others chime in for a constructive conversation. I do think Saul’s principles are all pretty sound and many have been previously suggested elsewhere…with a few caveats.

However, he does start with a stock selection bias that is FOOL generated and many would suggest high risk/high reward. I also think FWIW, the “sell” part of his Knowledgebase might be a little lean and perhaps along with his stock selection bias to high risk stocks…maybe the reason for big downs?

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Yet I have over a 300 bagger on my entire portfolio.

Saul:

How can that be from the results you have shown in your knowledge base?

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%)
2009: 110.7%
2010: 0.3%
2011: (-14.5%)
2012: 23.0%
2013: 51.0%
2014: (-9.8%)
2015: 35.0% YTD

$1000 invested in 2000 is not worth $300,000 now based on these annual results.

How did you calculate that?

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How did you calculate that?

I’m not Saul, but, perhaps, because you are missing 19 years.

From the Knowledge-base:

From 1989 to 2007 I averaged about 32% per year compounded.

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I’m not Saul, but, perhaps, because you are missing 19 years.

LOL…if that is the case, then I should be much more interested in how he invested prior to 2000 than after :wink:

Don’t think the numbers add up but I would prefer we not get into this sidebar and distract from the core discussion of the risk related returns of Saul’s investment approach.

Let me also emphasize that this is NOT an attack on Saul whom I think has been incredibly gracious with his time and education of many a reader with very sound investment guidelines.

But everyone can always get better and tweak approaches that might result in better risk adjusted returns…Saul’s Digest may have more yet to be added/gleaned.

I threw out my two thoughts on why his returns have only matched the market since 2006…both issues are one’s that would not require a change in methodology other than contemplate where one culls for investments and when/if/how one sells if ever.

Confounding this a bit is also that I suspect Saul himself has tweaked his approach over the years so each year’s results may have been different had he used the approach he takes now.

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For fun … 300 bagger …


		1.00	
89	0.3	1.30	estimate
90	0.34	1.74	estimate
91	0.3	2.26	estimate
92	0.34	3.03	estimate
93	0.3	3.94	estimate
1994	0.214	4.79	
1995	0.154	5.53	
1996	0.434	7.93	
1997	0.294	10.26	
1998	0.049	10.76	
1999	1.155	23.18	
2000	0.194	27.68	
2001	0.469	40.66	
2002	0.197	48.67	
2003	1.245	109.27	
2004	0.167	127.52	
2005	0.156	147.41	
2006	0.086	160.09	
2007	0.225	196.11	
2008	-0.625	73.54	
2009	1.107	154.95	
2010	0.003	155.42	
2011	-0.145	132.88	
2012	0.23	163.44	
2013	0.51	246.80	
2014	-0.098	222.61	
2015	0.35	300.53	

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Lego:

OK then, we have to presume that since Saul
said this was his "entire" portfolio return, 
that he has NOT added any new money to this portfolio since 1989 or 
over 26 years....to get his 300 multiple on entire portfolio.

Perhaps another message here among others is that
time heals all especially if you can beat the market
77% of the time and mightily at that:

	S&P	Saul
1989	32	30
1990	-3.42	34
1991	30.95	30
1992	7.6	34
1993	10.17	30
1994	1.19	21.4
1995	38.02	15.4
1996	23.06	43.4
1997	33.67	29.4
1998	28.73	4.9
1999	21.11	115.5
2000	-9.11	19.4
2001	-11.98	46.9
2002	-22.27	19.7
2003	28.72	124.5
2004	10.82	16.7
2005	4.79	15.6
2006	15.74	8.6
2007	5.46	22.5
2008	-37.22	-62.5
2009	27.11	110.7
2010	14.87	0.3
2011	2.07	-14.5
2012	15.88	23
2013	32.43	51
2014	13.8	-9.8

Except for 2008I would take those results any day.

Much of the 2008 loses could have been avoided by any one of many simple momentum timing methods. Knowing when it’s time to get back in is harder because momentum eliminates much of the quick gain from the bear bottom.

Saul’s greatest talent seems to be the ability to know when to sell based on things other than price alone. So since the business model of many of “his” companies didn’t change during the Great Recession he probably kept a lot of them. They seem to tend toward high Beta so being invested in them exaggerates general market swings. Up and Down. Which is OK if you don’t need the money for living expenses and have s job unlikely to be seriously impacted a lot by a recession. And the recession doesn’t turn out to last longer than your lifespan.

If you don’t know the company well enough to judge it’s prospects a few years ahead,it’s best be somewhere else during s full fledged bear. In a 20 stock portfolio it is hard to have real conviction about more than 3 or 4. For me at least. So you having to depend on published second or third hand data, or earnings that you never know in advance of everybody else.

Total monthly or annual dollars value of the portfolio (adjusted for inflation) is a far better way to measure it’s success than annual percentage gains. You can’t spend percents. Theoretically return should be adjusted for risk but real world that there is no even close to perfect way to do that.

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Perhaps another message here among others is that
time heals all

I’m pretty sure that is not the message duma - if you back to some posts a few days ago (thought of the day), there was a discussion about Microsoft and Yahoo. Time has never healed those stocks which are still <50% of their peak despite in MSOFT’s case quadrupling of the business.

Hence this is more about stock selection and methodology than time.

Cheers
Ant

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I’m pretty sure that is not the message duma - if you back to some posts

Hey Ant:

It was a bit of tongue and cheek really but it does point to the fact that if we cherry pick timeframes, we can make all kinds of conclusions.

This can be done with the market as a whole by choosing any 5 year timeframe and trying to extrapolate that to the years to come.

As Commoncents pointed out, if one looks at Saul’s returns the past 9 years, pretty mediocre at best especially for the effort, time and risk involved. But if one goes back to 1989 for the Berkshire vs. Saul…Saul beats out the “Wizard of Omaha”.

Back 26 years, then one sees pretty impressive returns beating the market 76% of the time and many times utterly destroying it. But Saul really needed those early returns before 2006 to achieve those numbers.

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But Saul really needed those early returns before 2006 to achieve those numbers.
Yeh maybe - just as Warren needed his investment returns back in the 50s and 60s for his long term record.
Who knows the next generation maybe consigned to deflation and they will look at our gains today as being extraordinary.
Cheers
Ant

What I like about Saul’s returns is that it proves that no year makes a portfolio and that if you keep learning and improving you can beet the market. While some of the years were down a lot more were up. I would take all of his returns including 2008.

Andy

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since Saul
said this was his “entire” portfolio return,
that he has NOT added any new money to this portfolio since 1989 or
over 26 years…to get his 300 multiple on entire portfolio.

There seem to be some dubious assumptions here. Return can be calculated just fine even though one is adding money or taking money out. In particular, adding money just before up events will tend to improve return overall because … well return is improved.

And, I wonder what your columns of numbers are supposed to mean since 13.8 for the S&P and -9.8 for Saul does not sound like Saul’s 2014.

And, what is the point here? Saul isn’t trying to sell himself and his services. If you think he is a blowhard with bad ideas, don’t pay attention. If you think he is half right, filter his ideas. Why are we having discussions about whether his historical performance is what he thinks it is?

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And, I wonder what your columns of numbers are supposed to mean since 13.8 for the S&P and -9.8 for Saul does not sound like Saul’s 2014.

It may help you to re-read Saul’s Knowledgebase…there you will see Saul’s results. Hopefully that clears up your confusion.

As to the other assertions regarding money additions, each year will have differential return so the timing of the additional investment money DOES affect the multiple return. It is rather simple math you can see better if you care to. In the “for fun” spreadsheet, the multiple is 300 ONLY for money invested before 1989, but if you invested money after 2000 that portfolio is NOT at a 300 multiple.

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Saul has commented many time that not only is he not adding new money (of any material amount) but in fact is withdrawing from these accounts for living expenses.

So, the “real gain” is much more than a 300 bagger, all things considered.

-FrickNFool

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And, what is the point here? Saul isn’t trying to sell himself and his services. If you think he is a blowhard with bad ideas, don’t pay attention. If you think he is half right, filter his ideas. Why are we having discussions about whether his historical performance is what he thinks it is?

This.

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And, what is the point here? Saul isn’t trying to sell himself and his services. If you think he is a blowhard with bad ideas, don’t pay attention. If you think he is half right, filter his ideas. Why are we having discussions about whether his historical performance is what he thinks it is?

Totally agree!

Let’s keep it simple and focus on the stocks, ideas, and reports.

Anirban

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Am I mis-calculating this? If so, please correct me. If not, then your method no longer seems to be working so well (for a decade of such poor results is a bit long to attribute to mere bad luck). Unlike the 3Oish percent you had previously, you’re now at about 8.5%…matching the market, but with far more inherent risk.

This wasn’t meant to be disrespectful nor insulting.

It’s just an observation that over the past decade, your record has been drastically different than earlier. Besides having an overall result that basically matched the market, all three of your losing years were during this period. And even if you just look at 2009-2014 (as if we can just ignore the Great Crash happened), the results still lag far behind earlier results.

That is the fact. The question is why. I’m sorry if you or others would rather ignore these facts, as if they did not matter.

I’m simply curious as to what your opinion is as to why. Some possibilities: 1) the earlier years involved good luck (for even you realize that sometimes one can get ten heads in a row or have a royal flush), 2) the recent decade just was bad luck (converse of #1), 3) you have changed in some way, 4) your method is less successful in the type of market we have had for the past decade vs. earlier…

Makes me think of some of the superstar investors from the recent past like Miller, Nygren, Berkowitz…even Eddie Lampert. They all had these amazing records for quite some time, then they all hit on very prolonged rough patches. That doesn’t necessarily mean that any of them are no longer great investors. Yet, if you were interested in their mutual funds (or hedge fund), it would behoove you to try to understand what happened. Same here. I am certainly interested in your record and your approach…but there’s just a big elephant in the room that seems stupid to ignore.

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Sorry, everyone. Being currently in the European Time Zone I was asleep for most of this discussion.

Apparently some people didn’t bother to thoroughly read what it was they were discussing and criticizing. It’s all clearly spelled out in the Knowledgebase. Here is the pertinent section:

## My Historical Results

I started keeping track of my results yearly in 1989, because my wife and I had a baby and I wanted to retire in about 7 years (I did). My wife panicked (“You can’t retire! We have a new baby!”), so I decided I had to get serious about investing. In Jan 1993, I increased my record keeping and started keeping track of my results weekly, and not just annually.

You should know that my wife and I and my family have been living off what I make in the stock market since my retirement in 1996. That’s 19 years! I have no pension or other source of income except Social Security.

From 1989 to 2007 I averaged about 32% per year compounded. This produced a rather amazing overall multiplication of my total portfolio, In fact, if you sit down with your calculator and multiply 1 by 1.32 (since I averaged a 32% gain) 19 times, you’ll be amazed too. (It’s the power of compounding). You’ll note that this was not a large multi-bagger on one stock, but on my entire portfolio, the whole works!

32% a year compounded doesn’t mean you make roughly 32% every year. For example, here’s a string of the gains of my entire portfolio for twelve consecutive years starting in 1993. Numbers are percent gain. In other words 21.4% means every $100 turned into $121.40, and 115.5% means every $100 turned into $215.50. Here they are: 21.4%, 15.4%, 43.4%, 29.4%, 17.4%, 4.9%, 115.5%, 19.4%, 46.9%, 19.7%, 124.5%, 16.7%.

I lived through the Internet bubble of 1999-2000. I sold out of amazon, Yahoo, and AOL one day in January or February after Yahoo, as I remember, had gone up $30 to $50 per day for three days in a row. I said to my wife, “They may keep going up, but this is insane. I’ll let someone else have the rest of the ride.” The bubble broke about 3 weeks later. Sometimes selling can be the most important thing you can do. I didn’t get out of the market. I just bought non-internet stocks and was up 19% for the year. Sure I could have held through the decline, and 10 years later amazon came back, even if Yahoo and AOL never did, but why?

I got killed in 2008 like everyone else. Probably worse than someone who was in defensive stocks. It was my first negative year after 19 positive years in a row. I stayed 100% in stocks, selling anything which hadn’t gone down much to buy more of the ones that were down the most.

Finally, I was down so much that even I got scared and started to think of selling out and going into cash. All the talking heads were saying, “Sell! Sell! Sell! Get out! Get 100% in cash!”

I said to my wife, “If everyone is shouting ‘Sell!’ and even I am scared enough to be thinking about selling, there’s no one else left to sell… This must be the bottom.” And it was (Nov 2008).

In 2008, in the big meltdown, I dropped 62.5%, which was pretty terrifying. In 2009 I was up 110.7%. The way percentages work though, after dropping 62.5%, gaining even 110.7% doesn’t get you back to where you started, but I sure felt better.

Annual Results since 2000:
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%)
2009: 110.7%
2010: 0.3%

At this point I have a little reminiscing: I remember in 2010 there was a lot of talk in the media about the “Lost Decade” for the stock market, which apparently had finished roughly unchanged after 10 years. At this point I was up 570% in those same 10 years, in spite of 2008, so I was wondering what they were talking about.

2011: (-14.5%)
2012: 23.0%
2013: 51.0%
2014: (-9.8%)
2015: 35.0% YTD

We are talking 25 years from 1989 to 2014 and that’s a lot of time for compounding to accumulate. As of the end of 2013, I had a 273-bagger on my entire portfolio. As of the end of 2014, with my 9.8% loss, that had fallen to a 246-bagger. Now, in June 2015 it has risen to over a 300-bagger.

A number of people were very skeptical when I first said I had made 30% per year in ordinary markets. In fact some even implied that I was lying, that even Warren Buffet couldn’t do it. (But he was investing billions of dollars, like piloting a battleship instead of a speedboat. He had to buy whole companies!). And that my policy of selling positions that didn’t pan out was sacrilege, as it was opposed to the hold-forever principles of MF (although I made clear that I always bought with the idea of a long term hold, and only sold when a position didn’t work out, or I lost faith in it).

Well, this is a very ordinary market (the first six months of 2015), not the dot-com craze. The S&P is up about 3% so far this year, which is a fairly ordinary gain, and my portfolio is up 31% as of todays close (up ten times as much as the S&P). Others on this board, following the principles that we have discussed, are up even more. And it hasn’t been magic. I’ve been transparent and given all my positions and their relative size each month, and basically told exactly what I was doing. You’ve followed along with me. It’s real. It takes some work, but you can do it too. I know there will be pullbacks and I may end up the year with more or less gain than I have now, but it can be done!

Stock picking does work (obviously). Especially if you are lucky, as I must have been. Some people say you can’t beat the market in the long run. They are wrong.


And here’s how you calculate returns:

## Calculating Portfolio Returns

I retired in July 1996, so I’ve actually been taking out money to live on ever since, instead of adding money.

Here’s how to calculate your overall returns ignoring cash flow in or out. Say you start the year with $14,000. You want to equate that with 100% and calculate gains and losses from there. So you ask yourself “What number (factor) would I multiply $14,000 by to get 100?”

By simple arithmetic we have 14000 x F = 100

And thus F = 100/14000 = .0071428

Sure enough 14,000 x .0071428 = 100

Now say three weeks later you have $14,740 and you want to see how you are doing, you multiply that number by .0071428 and you get 105.3 (so you are up 5.3%). If you don’t add or subtract money, that factor will work for the whole year.

Now say you add $2300 of fresh money, but you don’t want that to screw up your estimate of how well you are doing.

You add the $2300 to the $14,740 and get $17,040 which is your new balance that you are investing with. That’s your new starting point. It doesn’t affect how you’ve done up to here. You haven’t suddenly done better because you added money. You can’t still multiply by .0071428 because you’d get 121.7 and it would look as if you were up 21.7%, when you are really only up 5.3%.

So you need to change your factor to make it smaller so it will still reflect the 5.3% gain you’ve made so far. You figure: “What would I multiply my new balance ($17,040) by to get 105.3, to reflect my 5.3% gain so far this year?”

F x 17,040 = 105.3

F = 105.3/17,040 = .0061795

And that’s your new factor. If you multiply it by 17,040, sure enough you get 105.3. Now you continue to see how you will do for the rest of the year.

If a little later you are at $18,000, you multiply 18,000 by .0061795 and you get 111.2, so you know that your investing is now up 11.2% for the year.

Same, if you take money out. You don’t want it to look as if you lost money. You calculate a new factor so you start from the same percentage where you were.

On January 1st of the next year, you write down how you did for the year and start over at 100 for the next year.


As far as results without 2008, which some people were speculating about, as I have made clear I averaged 32% per year compounded up to 2007. That included the recession in 1993-94, the bursting of the Internet Bubble in 2000, the 9/11 market drop in 2001, etc.

Then on the other side of 2008, from the beginning of 2009 to today I’m up 335.1%. That’s six and a half years. Let’s call it seven years. That comes out to about 23.5% per year, held back by the year of the Chinese companies, as I described, and by having so much more to manage. Not quite as good as before 2008, but I’ll take it.

I’m not going to post any longer on this subject if I can help it.

Saul

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