Like many of you, I’m impressed and learning not only from this board, but also from Saul. I decided to track his actions, not to copy them, but to see what his trading looks like. I did this for myself, but then in looking at it, I thought others might be interested.
Saul’s been in 16 stocks the first 3 months of 2018. He’s closed out 5 positions and started 5 new positions. But what was most interesting to me was that he typically executes trades in each stock each month. Only for two stocks in one month each did he not sell nor add (NTNX in Jan & AYX in Mar).
Here’s the summary of Saul’s portfolio, with percentage allocations and my summary of his stated actions during the month:
**Ticker Dec 29 Jan Action Jan 26 Feb Action 28-Feb Mar Action 30-Mar**
SHOP 14.70% Vsmall sell 14.70% Trimmed 15.30% Added 12.80%
ANET 12.60% Vsmall sell @$271 13.30% Vsmall add @$253 11.90% Small adds $245 11.20%
HUBS 12.20% Vsmall @$91 12.20% Reduced 5.20% Sold Out 0.00%
AYX 12.10% Added @ $25.5 13.20% Added @ $27.5 & $24.95 14.70% *No trades* 14.10%
NTNX 11.90% *No trades* 9.80% Small add @$31.25 & $33 10.60% Added 13.90%
SQ 10.10% Trimmed @$42 10.50% Trimmed 10% Added @$46.60 10.50%
TLND 6.90% Trimmed 6.10% Added a bunch @$36.25 7.30% Sold Out 0.00%
LGIH 5.50% Trimmed 1.00% Sold Out ($75 to $71) 0.00%
WIX 4.90% Trimmed 3.30% Sold Out ($69.2-$61.8) 0.00%
NVDA 4.80% Trimmed @ $235 3.60% Bought a lot 10.50% Sold some, then Big Add 7.40%
NKTR 2.60% Added 5.10% Sold Out $(59.7-$76.0) 0.00% Started anew @ $103 8.80%
PSTG 0.00% New position @$16.75 3.30% Added up to $21 4.90% No trades 4.40%
TWLO 0.00% New @ 26.15 1.40% Added a bunch 5.90% Added 7.20%
MIME 0.00% New @$32.3 1.30% Sold Out $32.34-$30.85 0.00%
OKTA 0.00% New @$29.85 1.50% Probably added 3.40% Added 4.20%
MDB 0.00% 0.00% 0.00% New @$38, then sold 1/2 0.90%
**Totals 98.30% 100.30% 99.70% 95.40%**
What I see is that I move much more slowly than Saul, and I tend to not fiddle with allocation sizes. I will add or reduce, sure, but not in practically each and every stock I own. And my results aren’t as good: Is there an actual correlation? To be determined.
What I see in Saul is an investor who is constantly analyzing what he owns and what he should own. He doesn’t buy and forget. I don’t know how much he devotes to investing (outside of posting here), and I don’t know if that would be practical for me with a full time job and family.
What I think I’ll do next is build a sample portfolio and run it through the 3 months to see what the volume looks like. This doesn’t match my own trading patterns, so I’m looking to see how to improve there. Let me know if this is useful, or you think I should abandon this train of analysis.
58 Likes
Let me know if this is useful, or you think I should abandon this train of analysis.
I think that’s for you to decide. I found your post interesting mostly because it made me do some thinking. It is generally thought that excessive trading is bad for your wealth. Traders, obviously, disagree. I just ran some momentum trading simulations and the trading lost out to both buy and forget and to dollar cost averaging. When I review my trading, often less trading would have been better. Yet…
What I see in Saul is an investor who is constantly analyzing what he owns and what he should own. He doesn’t buy and forget.
Keeping in mind John Boyd’s OODA loop, Saul is like a fighter pilot in a dogfight. There is no letup in such a situation. Constant analysis can be a good thing if it leads to great results. The only way to know if Saul’s trading is beneficial or not would be to compare his actual results to a Saul who trades less but I don’t see how that can be done. In other words, what contributes the most to Saul’s success, picking good stocks or trading good stocks? Conventional wisdom says it’s the picking but one cannot argue with results. I’ve mentioned Louis Navellier before, he too traded quite a bit based on “What is working on Wall Street now,” a quarterly backtest of his stock screens.
For the longest time I’ve been trying to define “buy and hold.” Buffett does a lot of that but he admitted that he held on to Coke for too long. I think now that buy and hold is a frame of mind, you buy a stock because you think this is a great stock, not to flip it on the next uptick. But constant analysis keeps you on your toes and you sell when there is better place for your money. How often are you right? That’s the hard part, how do you compare what was against what could have been? You would have to run parallel portfolios because it’s not just what you sold but also what you bought in its place that needs to be evaluated. How many parallel portfolios would you have to track?
You need to evolve your own style based on your strengths. I’ve always been a fan of studying successful people, they can teach you a lot, but I don’t think we can mimic them. We need to evolve a style of our own based on the lessons learned.
Denny Schlesinger
24 Likes
how do you compare what was against what could have been?
Hi Denny, I truly believe in “It doesn’t matter how the stocks you sold are doing, just the ones that you are holding in your portfolio.” If you think about that there’s a lot of wisdom in it. There will always be stocks you sold that did well, and other stocks you looked at but never bought that did well, but so what? What counts is how the stocks you are holding are doing.
Saul
19 Likes
Hi Denny, I truly believe in “It doesn’t matter how the stocks you sold are doing, just the ones that you are holding in your portfolio.” If you think about that there’s a lot of wisdom in it. There will always be stocks you sold that did well, and other stocks you looked at but never bought that did well, but so what? What counts is how the stocks you are holding are doing.
I agree entirely! But how do you evaluate trading vs. not trading? You need to compare “what would have been” to “what was” which is very difficult.
Denny Schlesinger
1 Like
But how do you evaluate trading vs. not trading? You need to compare “what would have been” to “what was” which is very difficult.
You are exactly correct Denny. You must know 2 additional pieces of information and without these 2, the information is near worthless (see below).
Keep in mind that Saul trades largely for 2 reasons:
- He has to sell something to buy something since he is retired and has no new money coming in
- He “tries on” stocks in small portions before fully committing to them.
These two issues are not everyone’s situation foe sure.
Smorg:
I think your effort is a noble one but lacks specificity. First off, you used just 3 months sample size. The project should go back to the inception of the monthly reports…they are all there and you can go back to track them over a longer sample size.
Four main issues otherwise are:
-
What were the tax implications of selling and churning a portfolio (doubt Saul is reporting post tax returns but not sure).
-
What would happen to the investments that he sold…what were those returns (they should be pretax if they had ever been sold).
-
You have been in midst of a great bull market…there is no indication of how the Saul portfolio does in a bear.
-
Tax implications have not been addressed.
So IMO, the short sample size along with these 4 items makes your initial project impossible to draw any conclusions.
6 Likes
But constant analysis keeps you on your toes and you sell when there is better place for your money. How often are you right?
Roger that. And how often does frequent turnover result in tax liability which sucks the life from your gains… better to hold an index than hop from stock to stock.
1 Like
What were the tax implications of selling and churning a portfolio (doubt Saul is reporting post tax returns but not sure).
This is the main reason I avoid selling and taking capital gains frequently - trading much less frequently than Saul probably. Short term capital gain tax rates which are ultra high for me take a huge chunk of any gains. Long term capital gain tax rates aren’t exactly low either. So I tend to hold positions longer term if I’m sitting on a sizable gain. And I try to sell losers to cancel out any winners that I sell.
It’s unfortunate that tax implications distort investing decisions in this manner
dave
“…Constant analysis can be a good thing if it leads to great results.”
What does ‘Constant analysis’ really mean? You get a snapshot of financials data once a quarter. In between often time you cannot really know what news is really material to the business in question. Even at the quarter mark, there are numbers accelerating and numbers slowing. It is always hard to know if it will be significant in the longer run.
The time constant get faster and faster but it is not that fast. The stock can go south or north fast based on some whiff of news sometimes but if there isn’t anything behind it, it will go back to where it was in the longer run.
Even if things change very fast. I doubt that one can see a direction in the frenetic activities of the moment. There need to be sometimes several quarters to several years to see something really rising definitely from the noise.
Sometime ‘constant analysis’ could just mean a state of tension or stress that one puts him or herself in. and for what? in many cases not for much.
tj
4 Likes
What does ‘Constant analysis’ really mean?
…
Sometime ‘constant analysis’ could just mean a state of tension or stress that one puts him or herself in. and for what? in many cases not for much.
"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. "
Winston Churchill
https://www.brainyquote.com/quotes/winston_churchill_103739
Denny Schlesinger
5 Likes
it s not about optimism or pessimism. It’s about effective methods. Sometimes getting excited and jumping up and down (or doing the opposite) drains your energy for not much returns (or realized downside) that you would get or not get if you were not to expand that energy.
tj
t doesn’t matter how the stocks you sold are doing, just the ones that you are holding in your portfolio."
I think that is mosty very wise, we should certianly not wallow in our past, but I believe we can learn if we avoid the pyschological risk of looking back.
I have been using the Motely Fool Scorecards to track everything I sell, year by year. So if I sell 100 shares of XYZ, I will “buy” it in my “Sold2016” scorecard. Then if I buy it back in the real world, I will sell it out of the “Sold2016” scorecard. It is a pain that I don’t condone for anyone, but it is interesting. I think I will stop after 2018.
Anyway, my Sold2015 scorcard is underperforming the S&P by 10.5%
Sold2016 is outperforming by 13.4%
Sold2017 my is about even.
On the buy side, I have my “David Gardner” strategy. I put the same fixed amount in his 2 RB and 1 SA pick each month. I plan to do this for a couple years and then let them mostly ride. That is currently outperforming the S&P by 15.5% (So DG is a slightly better stock picker than I was a bad stock seller in 2015!)
MNy IBD strategy is outperform by about 5%, but I have not reconcilled all my 2018 trades for that yet, so it could go either way.
My “SAUL” stocks are also beating the S&P, buy not by nearly the results on this board. This is also a lot of overlap, Some Saul stocks I have bought before or after following my DG strategy rules. Also, if I buy Stock X for my DG strategy than buy more as a Saul stock, I keep it segregated on the scorecards. I often buy stocks with IBD breakout rules that are on the Saul board. I buy both because it is a breakout and because it is a strong Saul pick, but I don’t always put that in my Saul scorecard. It gets messy. Sual has it “easy”, all he has are Saul stocks. And he crushes it. Hmmm.
P.
2 Likes