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.”