Sorry, Boredom is Dead Wrong!

Sorry, Boredom is Dead Wrong!

I think the main thesis of the boredom article is just dead wrong! While he does talk about not paying attention to all the gab about market timing and what the Fed is doing, which I certainly agree with, it seems to me that the author’s main point is basically that people make changes because they are bored, and thus you should do nothing and change nothing, and that that is the way to get 100 baggers.

First of all, if you put a few dollars into every stock in the market you’d pick up ALL the 100 baggers that happened in the market, and you could brag that you have, say, fifteen 100-baggers, but your portfolio results would just mirror the results of the market as a whole. The goal of investing isn’t to be able to brag that you have been holding a 100-bagger in your portfolio. The goal is to have a 100-bagger on your WHOLE portfolio.

In order to do this, one of the key things you have to learn is to admit mistakes and correct them, and to get out of losers whose story has changed. Look at Nutanix. It was at $56 in mid-2018. It’s now at $23, almost two years later (even after a recent large bounce from March lows), and those who held on have not only lost 60% of their money but have suffered a huge opportunity loss. Most of us got out long, long ago, and reninvested the money. For example, my portfolio is up 67.5% year to date, just these five months, which wouldn’t have happened if I had left the money in Nutanix, which is down another 25% year to date. That’s what I mean by opportunity loss.

Bert, for example, is very good at analyzing and finding good stocks, but he can’t bear to admit he was wrong and get out of a mistake. Here’s what he wrote today:

We have held Nutanix shares in our high-growth portfolio, seemingly forever. The shares have been one of the worst performers so far in 2020. The shares, even after today’s pop, have lost 25% so far this year-and that is very painful given the performance of both the IGV index and the cloud stocks, and so far as it goes, the performance of our own high-growth portfolio. The shares are up about 85% since the low they set in mid-March, but that was a panic driven price, not indicative of much besides the initial reaction to the Covid-19 virus and its impact on the economy.

That’s sad, and speaks for itself.

Besides, 100-baggers are meaningless. If you have a 75 bagger that has slowed down, but you hold for another three years so you can brag to yourself that you have a 100 bagger, that’s just a 33% gain in three years. If you had switched the money into a new company that gave you just a piddling little 2-bagger, that would have been a 100% gain on the same money – three times as much gain!

Again, it’s what your entire portfolio has done that matters, not what one stock has done, that matters. If I go back 25 years to mid-May of 1995, I see that my ENTIRE portfolio has had a 342-bagger as of yesterday’s close. And that captures the 2000 dot.com bubble bursting, the 2008/2009 Super-Recession, and this year’s pandemic market crash.

For comparison, the S&P Index has a little less than a 6-bagger in the same time. The Dow Jones Index also a little less than a 6-bagger. The Nasdaq a little less than an 11-bagger. Compare with a 342-bagger reached by intelligent stock selection and getting out when you see that things have changed or that you made a mistake in the first place, and reinvesting the funds in a higher confidence company!

Best,

Saul

A link to the Knowledgebase for this board is in the Announcements panel that is on the right side of every page on this board.

For some additions to the Knowledgebase, bringing it up to date, I’d advise reading several other posts linked to on the panel, especially “How I Pick a Company to Invest In,” and “Why My Investing Criteria Have Changed,” and “Why It Really is Different.”

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Besides, 100-baggers are meaningless. If you have a 75 bagger that has slowed down, but you hold for another three years so you can brag to yourself that you have a 100 bagger, that’s just a 33% gain in three years. If you had switched the money into a new company that gave you just a piddling little 2-bagger, that would have been a 100% gain on the same money – three times as much gain! – Saul

Oh my gosh, Saul!

I had to copy that comment again for emphasis because it seems most people DON’T UNDERSTAND this basic mathematical concept. Thanks for mentioning it. People will hold unto a company that has transitioned from a grower to a plodder because of PAST growth… and “it’s done so well for me”.

You don’t “owe” anything to a company that has done well for you. If a company fails to meet your investment objectives, it’s probably time to take it out back and shoot it. Then buy something that meets your expectations. Be “Ming the Merciless” with your stocks. Perform or else!

Rob
Rule Breaker / Supernova Starshot Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Saul,

This invaluable post you just made is priceless and honestly belongs in the knowledgebase (if it isn’t already).

Evaluating my entire portfolio’s performance is all that I focus on and much of it is because of what I have learned from you and this Board since the Board started 67K+ posts ago. I now think of each stock in my portfolio in terms of mutibagger potential within 3-5 years. If I don’t feel an individual stock’s multibagger potential is 5X or higher within that timeframe, then I usually do not buy it or hold it.

I am now up 50% YTD (within one of the worst recent markets) with some very different stocks than you Saul but all pass my near-term multibagger criteria in my own personal opinion.

Fool on and thank you again for these important points of portfolio emphasis.

-Rockleppard
(Long, in order of weighting: TSLA,LVGO,TTD,OKTA,AYX,DDOG,TDOC,MDB,MELI,ZM)

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Hey Saul,

I agree with your statement about 100-bagger on the whole portfolio. I am thankful that I learned that lesson last year, when I discovered your knowledge base.

Still, one can understand the lesson - “Don’t Get Bored”, teached by the author of the book section I posted, differently. I see that you understood it from the fool.com point of view: Buy many companies, hold all of them, also the ones which turn out to be losers, to just get a few 100-baggers.

Through my statement at the end of my post about, not getting bored about Alteryx, I tried to make clear that there is a fine line between getting bored for the right and wrong reasons.

The wrong reasons, why one should get out of a company, might be fundamentals suffering due to poor execution by the company, competition gaining share through better products, disruption etc. = Thesis is broken.

But in case a company like Alteryx there are good reasons to not get bored (and sell). I won’t repeat why Alteryx, the undisputed leader in its space, deserves to be held through these hard times, even though revenue growth slowed down. It has been discussed extensively.

The main reason to not do anything: The thesis is not broken. The world temporarely is. The market opportunity is still huge. I am sure they are executing the best they can. They announced more product innovations in the next 4 quarters than they had in the last 10 years. They are working on cloud solutions for the product to make it even easier to sell and adpot. Nothing, but the current revenue slowdown, is telling us to sell. Still there are investors who sold out completely - shifting the money into better performing stocks.

Obviously these investors seem to think they have to do something, because Alteryx had one poor quarter. But again, they don’t suffer poor execution, it is about a temporarily broken world. These investors clearly think, they are able to time the market by jumping out of the stock to get some gains elsewhere and hop back in, once Alteryx will re-accelerate, which it most likely will. But is this a wise move in the current enviroment? Alteryx price is still going up, because the market seems to see its opportunity.

My whole point - with Alteryx as an example - is to make clear: It might be boring to stay invested in a company which most likely will have 1-2 poor quarters and push us “to do something”. Which (at least we assume) will not have suprising price explosions after next earnings, because of the temporal COVID-19 tailwinds. But it is certainly not boring to still see its price rise, because the market as a whole seems to understand the true long-term value behind this company. This is not a ZScaler, which had a strong revenue slow down in a healthy enviroment while its CEO said “They are coming to us”. Or a Nutanix, which obviously has several issues since two years now.

But for AYX, In my opinion, it’s not the right time to get bored.

At least this is how I see it. I won’t argue with you, this is not my point. You are without a doubt the best teacher I had since I started investing in 2019. But I think, one should also make up his own mind, find his/her own stlye, not be a copy cat of your investments. Really think about if, what and why one should do something. I really try to think independently, but still I feel like I know nothing. My 20-Stock Portfolio is up +41% YtD thanks to your knowledge.

Let me take this chance, to express my gratitude once again:
Somewhere you wrote, that you won’t last forever. I hope you will be with us for many years to come. Not only because you are one of the best investors out there to learn from, but also because I think you are a great human being.
I base that statement not only on all the posts I have read from you, but also on a video interview I have seen. In the end you mentioned the achievements which you are most proud of. None of them were about making money or the stock market. It was about your books, your passions related to your work and your wife. Thank you.

mooo

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So to each his or her own, but there is more then one way to attain wealth. Some do it through real estate, others through art. Yes I have a friend that still owns a Basquiat that he paid less then 5k for and has been offered 25 million for a year ago. I own a Mark Ryan, and two Banksy’s, and not selling.:wink:

So when I first started making money, that is enough money to invest, I remember walking into the Apple Store on University in Palo Alto and seeing an iPod for the first time. I marveled at this amazing product. I also noticed the reaction of everyone else that touched one. This was different, this was going to change an industry.

I went home and decided that the next day I was take my 50k in cash and buy AAPL stock for the first time. I also decided to buy two other stocks, AMZN and NFlX which had just gone public the following year. I bought 25k worth of AAPL, 10k each of AMZN and NFLX, and kept 5k left for a bit of a cash cushion. I’ve held all those shares since, adding a bit along the way on big dips, but selling finally one third of my AAPL stock earlier this year, which brought my cash way up. I mean way up.

So just looking at my original purchases and calculating their average annual returns and what those original stock purchases grew into, its quite amazing to look at now. It’s also why I will never worry about money now, live a wonderful life. All the times I could have sold when things apparently were going to slow, when things might have become soft, or unknown, or slowed down. I could have sold at the perfect time and entered a better investment, made a better choice, maybe. Probably not.

These three stocks are the bulk of my portfolio today. I did buy a lot more of AMZN along the way as it now neck and neck with the other two holdings. Below are the calculations for my just original purchases. Not bad for a boring buy and hold your winners strategy, and I can only thank MF for their guidance on these three stocks as they have allowed me to take a portion of my portfolio and purchase new ideas like the cloud names and not ever worry about making huge mistakes.

Note: I own AYX, OKTA, LVGO, CRWD, DDOG, ZM, TTD, ROKU as well. Hopefully I still will in ten years.

May 21st 2003.

Bought 10k AMZN. Today. 768,915. Average annual return. 29.11%
Bought 10k NFLX. Today. 2,922,178. Average annual return. 39.66%
Bought 25k AAPL. Today. 9,115,301. Average annual return. 41.49%

TMB

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it seems to me that the author’s main point is basically that people make changes because they are bored, and thus you should do nothing and change nothing, and that that is the way to get 100 baggers.

Wonderful board and a very insightful post as always. I am usually just follow the board but thought I might highlight one aspect of the post you may not have considered but have often highlighted in your own portfolio. Sometimes the right answer is to “do nothing”. There have been months when you had virtually no activity because you analyzed your companies and found they were exactly where you wanted to be at that time.

I only point that out since the key point is you “analyze your companies” along with perhaps comparing them with new opportunities. What I think the article is also pointing out is that sometimes “bored” people are not comfortable taking no action since the additional time on their hands makes them want to introduce change or over analyze things leading to potentially poor results.

So I think the take away might just be to stick to your process and don’t let “boredom” influence you to change for the wrong reasons just to make things interesting again.

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TMB,
If Saul (or any of us) had purchased $25K of a basket of stocks on the same day that you bought Apple (and great purchase, btw), and managed to record a 41+% CAGR for the basket (assuming in and out of stocks, as warranted) over the same time period, would the results have been equal to yours?
P

“TMB,
If Saul (or any of us) had purchased $25K of a basket of stocks on the same day that you bought Apple (and great purchase, btw), and managed to record a 41+% CAGR for the basket (assuming in and out of stocks, as warranted) over the same time period, would the results have been equal to yours?
P“

Hi JP
Well that’s a big assumption as that a lot of work to get a 41% return over 17 years buying and selling stocks. Quite a feat in fact.

I’m not an accountant but assuming commissions for most of those years would have taken a small chunk. Assuming that it’s not a tax exempt account, which my holdings are not in, no one would have lost a big chunk to taxes along the way, some probably short term higher tax rates. So no the results would have not been equal to mine.

Is there another answer I’m missing? I tend to miss a lot when it comes to numbers. :wink:

TMB

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“in, no one would have lost a big chunk to taxes along“

Should read “one would have lost a big chunk to taxes along”

TMB

I think you bought 3 amazing companies with visionary leaders that were able to adjust their companies over the course of a long period of time. When you had the iPod experience in your hand you couldn’t have envisioned the future being the iPhone and the entire ecosystem. (the same can be said for AMZN and/or NFLX…both of which gave you opportunities to bail a bunch of times along the way).

It’s hard, at this point in time, to think of your list of companies growing into $1T companies. So, buying a small cap and growing with it to a large cap has to be a replacement strategy to your buy and hold for those 3 companies.

Hmmm. What company/companies in the ~$5B to ~$70B range can grow to $500B over the next 10-15 years? Shopify?

Or, is Coupa growing from $15B to $100B good enough? (which I can easily see)
P
PS great point about taxes and transactional costs…not to mention the amount of time spent studying earnings reports and listening to concalls, etc…

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Hi Moo,
Thanks for your kind words. I totally agree with you that Alteryx is a keeper. I just thought that an over 20% position was too much for a company that made it so clear that it was experiencing the pandemic as a headwind to be navigated, rather than a tailwind like others of our companies. The 12% position that I kept isn’t piddling though. I do think that they will double their revenue estimates and that that may give it a boost after earnings (except that “everyone” is probably expecting them to double their estimates already).
And it’s important to remember that I sometimes make mistakes too, both in taking positions and in reducing or exiting them.
Best,
Saul

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Note: I own AYX, OKTA, LVGO, CRWD, DDOG, ZM, TTD, ROKU as well. Hopefully I still will in ten years.

I’ll bet you won’t own half those stocks by the end of 2023. You bought 3 change-the-world stocks in 2003, two of which are now over a Trillion dollars in valucation

Which of that list will change the world and be worth a Trillion dollars?

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I own AYX, OKTA, LVGO, CRWD, DDOG, ZM, TTD, ROKU as well. Hopefully I still will in ten years.

I’ll bet you won’t own half those stocks by the end of 2023. You bought 3 change-the-world stocks in 2003, two of which are now over a Trillion dollars in valucation

Which of that list will change the world and be worth a Trillion dollars?

Isn’t that the whole thing though, you don’t know?

Because if you knew which little company was going to be worth a trillion all you’d need to do was buy that one to become fabulously wealthy.

Because if you knew which little company was going to be worth a trillion all you’d need to do was buy that one to become fabulously wealthy. – fdoubleol

I think Saul’s point is being lost in this discussion.

The point is: You DON’T NEED that fabulous trillion dollar company to become fabulously wealthy. a series of excellent companies… individually with lesser returns… can accomplish the same thing!

Example: A series of seven two baggers exceeds the returns of a 100 bagger (ignoring taxes…should use a tax sheltered account). Two to the seventh power is a 128 bagger.

Rob
Rule Breaker / Supernova Starshot Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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“Example: A series of seven two baggers exceeds the returns of a 100 bagger (ignoring taxes…should use a tax sheltered account). Two to the seventh power is a 128 bagger.“

Very good point Rob.

It’s why I have positions in most of the names discussed here. I don’t believe any of the names I’m holding in the space are the next trillion dollar company, just like I didn’t think AAPL and it’s ipod, NFLX and it’s mail order dvd business and AMZN and it’s online bookstore we’re going grow into the behemoths they are today.

What the three did have in common for me were that they had dynamic CEOs. Probably why I shouldn’t have given up on TSLA a year ago. Love investing in visionaries.

TMB

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“Example: A series of seven two baggers exceeds the returns of a 100 bagger (ignoring taxes…should use a tax sheltered account). Two to the seventh power is a 128 bagger.“

Just wondering about one’s liklihood of success picking 7 consecutive 2 baggers. How good are you at picking. If you get it right 80% of the time then the chance of getting all seven is about 20%. TMF
often says that it makes a good pick a bit more than 50% of the time and that is considered good. But if your chance of getting a 2 bagger is 50% then the chance of hitting 7 is about 5%.

Of course if you consistently pick 3 baggers things improves things a bit. The key point however is that comparing improbabilities is problematic. It demonstrates nothing.

Besides not all folks have the option of using tax sheltered accounts.

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Just wondering about one’s liklihood of success picking 7 consecutive 2 baggers.

Who said anything about them being consecutive. They just need to happen. TMB happened to make a spectacularly good initial set of purchases and happened to keep holding them to spectacular returns. Clearly, TMB has invested in other things since that initial purchase since he/she has given us a list of 9 current investments. We have no idea how the rest of this investing has gone or is going. The 2^7 observation is not time dependent. It could happen over 17 years or happen in the last year. Doesn’t matter. Still the same amount of gain.

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Who said anything about them being consecutive. They just need to happen. – tamhas

tamhas gets it. It’s just high school math people.

And it doesn’t have to be 2 baggers. It can be interspersed with other returns.

The bottom line: You don’t need to find “The Holy Grail” of investing. You just need to keep a focus on companies with exceptional futures… and be prepared to move on to ones with better futures as the more mature ones slow down.

It’s really basic, basic stuff. No magic. No overcoming of incredible odds.

It’s how I went from near bankruptcy in 1993 to retiring early in 2010.

Important
This might blow your mind. In that 17 year period, I also had setbacks. Including an unfortunate investment where I had a huge allocation dedicated to one company. An FDA drug approval was expected… and it didn’t come through. I was sitting in a meeting at work with my laptop as that news came through and in a blink of the eye, one third of my portfolio value disappeared. I blinked… and thought: “I can make it up.” And by the end of the year, I had reached the old peak value. A few years later, I retired a millionaire.

Don’t give up. Don’t think you can’t do it. Just go out and do it… and don’t be afraid to take an investment out back and shoot it if it can’t keep up…

Rob
Rule Breaker / Supernova Starshot Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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The 2^7 observation is not time dependent.

It would be a pretty great streak if one could roll one 100% gain right into another 100% gain without ever losing any money in between. That is what it would take for the 128x gain (7 doubles either in a row or without losing any money in between trades).

If one invested $10k in Severn different stocks and each one of them doubled, the total would be a double or $140k of course. So, in essence, the mythical septuple double does have a time element in that the trades have to roll into on another to create the sought after 128x.

Sorry for the OT post.

A.J.

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“TMB has invested in other things since that initial purchase since he/she has given us a list of 9 current investments.”

Yes many other companies. Very early on when MF was preaching 30 stocks or more, I was never comfortable with that strategy. I was always a 8 to 12 holdings guy. Never made sense to me to hold dozens of stocks. I met guys on MF that owned over 100 stocks, so many that they couldn’t name all that they owned. I thought that was crazy.

So yes there are plenty that I sold along the way. I can tell you that the ones I sold, probably 70% were too early when I looked back over the longer term. Just thinking of the ones that this board is familiar with. Most of us can say we got out of NTNX without any damage, I hear that one a lot as the example of why you need to get out of names gone bad. For very one of those though there are the TWLOs, the WIX’s, the FSLY. Seen FSLY’s returns lately? A lot better then ZM’s

I’m not here to tell people what to do with their portfolios, just giving another example that holding great companies through their slow downs, hiccups, bumps in the road, can also work out very well.

Clearly there are many ways to do this. Do what’s right for you.

TMB

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