Temperment

Investment Analysis Clubs Saul’s Investing Discussions
1

This is a follow on to Bear’s post above but thought it would be best served in a different thread. Most of the investors here have very different risk tolerances, experience levels and investing temperaments. I clearly do not have Sauls’s, or Tinker’s, or Duma"s or Denny’s or Bear’s or Dreamer’s, Mauser’s, etc. returns and experience. Most of you don’t. These guys teach us how to think along with others on this board and NPI.

I have my own. I do not have these guys returns and probably never will because my temperament and timing are not the same as theirs, but I am ok with that. I like what I like and I have a reason I am comfortable with. I usually try to have a couple of high growth stocks that have cleared the hurdle of profitability and also have a well established moat. Hence I own NVDA and ALGN. I may not get Saul’s returns with these two but I know they will beat the market handily year in and year out and they have technology advantages and patent protection to keep the moat full.

I also try to include several high growth stocks that are disrupting macro wave markets (right now cloud) with a path to profitability. I want these stocks to have superior customer acceptance, high gross margins and solid FCF. Hence I own AYX, PVTL, MDB, ZS.

I also feel compelled to keep a couple of high growth “people facing” stocks that that are continually innovating. Hence I own SQ and SHOP ( I have sold over 75% of my original SHOP position).

My point is to find what you are comfortable with and lets you sleep. Listen to the wise ones but make your own decisions. Learn to live with the results of your decisions.

58 Likes
2

I usually try to have a couple of high growth stocks that have cleared the hurdle of profitability and also have a well established moat.

Me too Hydemarsh. I have expressed my concern about getting cornered into only investing in hypergrowth companies that are a million miles from profitability when there are plenty of outstanding very fast growing companies that are profitable. I’d like that to be at least 1/3rd of my holdings in terms of value if I could. That is why I am happy to still hold Nvidia, Arista Networks and I celebrate when companies like Pure Storage cross into that category rather than sell up because they are only offering 30-40% growth rather than 50-75% growth. I’d be willing to bet they survive better in a downturn (market of economy wise).

I think this is what the prior post was concerned with - about exiting Arista or Nvidia (even though ironically they both made all time highs) just because on the day some shooting star stock rises more on a given day.

I’m all for ruthless allocation etc as well as live and let live but I think there has to be a role for fast growing profitable companies that are making all time highs with long term growth records in a Saul like strategy. Otherwise, we can scrub the whole “modified long term buy hold” description and bin it in the same place the investing in profitable companies went to as effectively we are then just looking for the next jet plane ride without any regard for profitability potential. Any company could grow revenues at triple digits if profits is dropped from the business model plans but that sounds less like investing and more like a game of chance and whether you can exit in time before it all goes to hell (like that moviepass business was or whatever it was called).

Ant

18 Likes
3

Hence I own NVDA and ALGN. I may not get Saul’s returns with these two but I know they will beat the market handily year in and year out and they have technology advantages and patent protection to keep the moat full.

The proof is in the charts

http://softwaretimes.com/pics/algn-nvda,sp500.gif

BTW, NVDA made a new all time high yesterday, Friday, August 24, after spending about three quarters in a slowly rising trading channel. I have kept a fast growth watch list for some time. It includes a variety of industry sectors from high tech to retail, to pharma, to finance, and to trucking. There are two requirements to be on the list, fast stock price growth and my liking the business model. One interesting aspect is that it highlights sector rotation. While the stocks on the list individually tend to beat the market by an ample margin they take turns making new all time highs. Sometimes these stocks are frustrating because they have the bad habit of being volatile which means big drops which are bad for my mood. Try as one might, it’s hard to keep emotions out of investing. As I look back, more often than not, doing nothing would have been better than trading. Patience is not one of my gifts but it should be.

I posted this list elsewhere

Fourteen stocks on my fast growth list made new all time highs today, that’s about one third of the list.


 **Ticker Company                                     Close   Change     %**
 1   ^GSPC  S&P 500 Index                            2,874.69   17.71   0.62
 2   ^IXIC  NASDAQ Composite                         7,945.98   67.52   0.86
 3   AIEQ   AI Powered Equity ETF                       29.55    0.18   0.61
 4   ANET   Arista Networks, Inc.                      308.58   25.97   9.19
 5   APPF   AppFolio, Inc.                              80.90    1.95   2.47
 6   BCPC   Balchem Corp.                              105.95    1.86   1.79
 7   IRTC   iRhythm Technologies, Inc.                  90.90    3.13   3.57
 8   ISRG   Intuitive Surgical, Inc.                   541.52    4.31   0.80
 9   MDB    MongoDB, Inc.                               70.23    1.98   2.90
10   NEOG   Neogen Corp.                                88.78    1.24   1.42
11   NVDA   NVIDIA Corp.                               272.22    5.38   2.02
12   PSCT   PowerShares S&P SmallCap IT Portfolio ETF   88.01    0.43   0.49
13   PSTG   Pure Storage, Inc.                          26.55    0.03   0.11
14   ROST   Ross Stores, Inc.                           95.09    0.06   0.06
15   TTD    The Trade Desk, Inc.                       138.35    1.65   1.21
16   V      Visa Inc.                                  144.22    2.12   1.49

I’m not going to criticize this board’s approach to investing, Saul’s results speak for themselves. But in the spirit of this thread, “Temperment,” without Saul’s guidance, will you be able to trade like Saul? Each one of us needs to learn from the best and develop our own strategy that fits our temperment.

Denny Schlesinger

PS: I’m removing APPF from the list, I don’t like the business model.

21 Likes