Some changes in my Portfolio

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#1

Changes in my portfolio.

I don’t usually give mid-month updates but as I’ve made several small changes I thought I should bring you up to date. My big three, Skyworks, Bofi and Skechers, still make up 50% of my portfolio. Criteo still trails them at 9%, and Ambarella and INBK follow at 7.65%, with EPAM and XPO at about 4.8%.

But then things change a bit. I reduced WAB and CELG to raise money to take some new look-and-see trial positions, so I have a bunch of small positions in this order

Infinera 3.9%

Sierra Wireless
SolarEdge
PayCom
Celgene
Synchronoss
Wabtec

Those range from 3.7% to 1.3%. None of the new trial positions have done much since I bought them. SolarEdge has sold off some. Infinera is up some. Wabtec and Celgene haven’t moved much either.

As far as the progress of the market as a whole: at the end of May the S&P was up 2.4% year to date. Now it’s up 1.9%, so it’s dropped a half percent so far this month.

As far as the progress of my portfolio as a whole: at the end of May my portfolio was up 31.3% year to date. Now it’s up 34.8%, so it’s gained 3.5% so far this month.

This is no guarantee for the future, and I may certainly exit some of those starter positions that I’m looking at, but I just thought I’d bring you up to date.

Saul

PS – I’ve also noticed that I’ve evolved a little in my use of the 1YPEG. If a company has an unusually high rate of increase of earnings in the past year, I’ll sometimes look ahead to what it will look at at the end of the year. For example, in looking at Logmein, I wrote the following:

Logmein looked interesting and I have started looking into it. Its sudden growth spurt in 2014 though could be partly due to the discontinuation of its free service and the migration of the free users to paid. Since this pool no longer exists, growth may slow again in 2015. For example, last year in the June quarter their adjusted earnings went from 13 to 29 cents, up 123%, and up 32% sequentially. This year they are forecasting 34 cents at the midpoint, up from 29 cents. This would be up only 17%, and up 3% sequentially. Now they are probably underestimating by 3 cents, and will come in at 37, but that will still be NOTHING like last year. Meanwhile, at the current price about $64, the PE is about 50.

For the year their estimates are for $1.40 at the midpoint, which is undoubtedly underestimating, but if they make $1.55 they’ll still have a PE of 41, a rate of growth of earnings of 31%, and a 1YPEG of 1.32. I’m afraid that they are a little overpriced.

Of course, to spite me, they’ve moved up a little since I wrote that, but it gives you an idea how I’m thinking about it.

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#2

Correction:

This should read

Sierra Wireless
SolarEdge
PayCom
Celgene
Synchronoss
Wabtec

Those range from 2.9% to 1.3%.

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#3

Nice one Saul.

I’ve been in Sierra Wireless for a while now and it has done well for me. It has been recommended multiple times on SA and whilst there is some whining over on the SA SWIR board about how it has fallen 50% the company continues to grow at 25-35%. I think at the price it is at now it is a perfect fit with your investing style and doesn’t surprise me in the least you have selected it. It is totally at the heart of the IOT mega trend so should do well and is a fairly comfortable acquisition target for players too so an attractive share to own with limited downside. If I had more free cash I would be topping up on SWIR right now too.

Infinera I also hold and like and doesn’t appear to frothy at all.

I’ve been following the SolarEdge and Paycom threads and I have stronger conviction in Paycom than SolarEdge. In a rising interest rate environment it should get support as well. I am already exposed to solar in a significant way with SolarCity and a clean energy ETF as well as a energy storage with a Lithium ETF and given the debate over whether it has a any moat to speak of I think I am going to pass on that one.

I completely missed the boat on Gilead and Celgene which pisses me off given its my industry but still they are on the march.

I don’t know enough about Synchronoss or Wabtec. I looked at Synchronoss once before but I wasn’t too excited. I will go back over my thoughts on that one.

I still like and hold Logmein but I respect your discipline. I got mine a while back so the entry price was considerably lower for me. I would still recommend looking at Infoblox though as mentioned previously.

Cyber security still looks a great play that is just growing and growing. If you can find something profitable and at reasonable value it should be something to look into. SA and RB seem to have ignore it except the Fire Eye recommendation which is way unprofitable for your approach but there are some that are very profitable, growing (obviously) and more reasonable value - Check Point might be more your style. (Fortinet is also very fast growing and one of the few next gen operators actually profitable).

Healthy eating is another high growth area we have discussed recently and if you cannot choose between Kroger, Whole Foods, Sprouts, Fresh Market and NGVC then Hain who supply the lot might be the way to go.

Had I had cash last week I would have topped up on Criteo too.

Thanks for all your efforts, here’s hoping for another good week on the markets and no Greek implosion or anything such like.

Ant

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#4

Out of interest Saul have you ever looked at the cruise line operators? I hold both Carnival and Norwegian Cruise Line as plays on the worldwide ageing population mega trend. Norwegian (NCLH) is the fast growth play in the sector and very profitable. They have benefited from the low price of oil too.
Ant

#5

This may be somewhat off topic for an investment board, but I thought it might be relevant to Infinera. I came across this article in Kurzweil’s newsletter. The link briefly describes a breakthrough on all optical data transmission. What makes it especially enticing is that the report says the researchers are working with major (unidentified) company, which makes me think this technology may be close to commercial development. It holds promise for incredibly fast and dense data transmission, optical switches (computing), as well as potential for optical storage:

http://www.kurzweilai.net/a-critical-step-to-ultra-high-spee…

I’m assuming you know who Ray Kurzweil is - if not, let’s just say he’s one of the smartest dudes on the planet. I’d rank him as being in good company with Stephen Hawking. Officially, he works for Google as Director of Engineering, but I think he pretty much gets paid for just thinking about stuff. He puts out a weekly newsletter (free subscription) that reports recent science and technology news.

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#6

Saul,

First of all, thank you for sharing your mid month tweaking of your portfolio with us. I can assure you most of this board is grateful. You know the old saw: “When E F Hutton speaks…” :wink:

It has caused me to take another look at reinvesting in Sierra Wireless. I owned it for a year and took a nice profit before selling out. Can you share your reasoning as to why you are willing to place almost 3% of your portfolio in SWIR?

The price has dropped over 40% since the first of the year. This appears to be an attractive buying point if the fundamentals are still solid.

Thank you for your thoughts.

Jim

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#7

My big three, Skyworks, Bofi and Skechers, still make up 50% of my portfolio.

Saul,

I admire and am learning from your portfolio management techniques. You are way more concentrated with your holdings than I am. Several years ago you lost 60% or so…has that changed the way you manage your portfolio or do just figure periodically you will have a big loss like that?

If you did make a change, what was it?

Thank you for you contributions to this best board in Fooldom.

Jeb

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#8

It has caused me to take another look at reinvesting in Sierra Wireless. I owned it for a year and took a nice profit before selling out. Can you share your reasoning as to why you are willing to place almost 3% of your portfolio in SWIR? The price has dropped over 40% since the first of the year. This appears to be an attractive buying point if the fundamentals are still solid.

Hi Jim, First of all, since my top three positions make up 50% of my portfolio, and my top four make up almost 60%, the 2.9% I have in SWIR is a SMALL position. (It’s all relative).

It seems to me that this company has been transformed, passed a threshhold, in the past three years and people aren’t noticing. They are just focussed on how the price has dropped from $49 to $27. Here’s what I mean. These are adjusted earnings:

2012: -9 -11 04 15 = -1
2013: -2 03 11 10 = 22
2014: 02 08 24 29 = 63
2015: 22

Okay, we had yearly earnings of a loss of one cent, then positive 22 cents, then 63 cents, and trailing earnings are already 83 cents after the first quarter. If they don’t beat but just hit their outlook of about 23 cents for next quarter, they will be at 98 cents. I think an estimate of $1.20 for the end of 2015 would be reasonable (they probably will beat instead of meet outlook, etc), which would be up 90% with a PE of 22.5 and a forward end of 2015 1YPEG of 0.25.

Hope this helps.

Saul

For Knowledgebase for this board
please go to Post #9286

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#9

I admire and am learning from your portfolio management techniques. You are way more concentrated with your holdings than I am. Several years ago you lost 60% or so…has that changed the way you manage your portfolio or do just figure periodically you will have a big loss like that? If you did make a change, what was it?

Hi Jeb, I’m now starting my 27th year of keeping track like this. I had one year of a big loss, which was 2008, which was probably the biggest worldwide meltdown in the last 80 years, since the great depression of the 1930’s (certainly bigger than 1987, for instance). I don’t think I can plan for something like that, nor do I think that I should change my method of investing because of it. At the bottom, at the end of 2008, my portfolio still had an 80 bagger from where it had started. It is now at 408% of where it was at the end of 2008, so it wasn’t the end of the world.

Best,

Saul

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#10

I’m assuming you know who Ray Kurzweil is - if not, let’s just say he’s one of the smartest dudes on the planet.

He was also one of the founders of the speech recognition company that eventually became NUAN

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#11

Hi Saul, These results are just amazing. I’ve been working at applying what you are doing and I’m making progress but still a bit uncertain from time to time. My portfolio is doing well this year (up 21% YTD).

My top holdings are AMBA 22%, MIDD 8%, BOFI 7%, GILD 6%, and SWKS 6% (so these five make up about 49% of my total).

I’ve been using the graph that you have described to monitor how earnings and price are moving.

My question is about AMBA. It looks like you got back into this stock at a great time. I’ve held it since Summer of 2013 when you first brought it to my attention and it has been great. It has grown from a normal 4% position to where it is today.

The price has been skyrocketing this year. Certainly the EPS has as well, but for the first time, I’m starting to worry that the price may have gotten pretty far ahead of things.

When do you decide either to trim some or get out completely.

Thanks so much, Brian

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#12

My top holdings are AMBA 22%, MIDD 8%, BOFI 7%, GILD 6%, and SWKS 6% (so these five make up about 49% of my total). My question is about AMBA. It has grown from a normal 4% position to where it is today. The price has been skyrocketing this year. Certainly the EPS has as well, but for the first time, I’m starting to worry that the price may have gotten pretty far ahead of things. When do you decide either to trim some or get out completely.

Hi Brian, I have only a 7.9% position in AMBA so I am holding all of mine. If I had 22% in it though, I would probably reduce it to maybe 16% (NOW). And then set my next limit if it keeps growing at say 18%. As far as “getting out completely”, I don’t get out of positions just because they are doing well.

Hope that helps,

Saul

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#13

I too am wondering what to do with AMBA. Here is a blog entry from Jon Markman, who runs Markman Capital Insight, on what to do. Basically he is recommending to hold on to your shares, and add on the inevitable pull backs (last sentence of the article).

http://markmancapital.net/blog/2015/6/18/ambarella-one-of-ou…

Thought you might be interested in another perspective.

Craig

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#14

Thanks much Saul. That is very helpful… Brian