Ysdrasill's 2023 Year-in-Review

Investment Analysis Clubs Saul’s Investing Discussions
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Hi everyone,

I have been following this board since the day I started investing, 1st of November 2020, so a bit more than 3 years ago today. I also get information from other sources, like twitter and my own screeners on Koyfin.

Saul, I will not touch on individual company metrics, since a lot of people do; and I don’t think numbers are the differentiating factor in this board. With that, I mean that they are the first and most important thing, but you have created a exceptional community of analysts here, and so I don’t think this is where I have most value to add - despite my job being to run teams of analysts, devs and data scientists. If you feel this is off-topic, please delete, I will not take offense!

As my third year in investing comes to a close, I wanted to provide an update, that I thought may be useful for other investors in my situations. It will also help me reflect whether I want to continue applying myself, with a relatively low time investment (a couple hours a week).

I am 33, I work 2 jobs (a full-time director of strategy job at large luxury fashion retailer + my own company consulting in AI/ML and strategy called beaucoupdata) - so currently I am quickly accumulating saving, however I have not added any money to this portfolio in 2023 (I consider it for now my gambling portfolio) and little in 2022, as I want to prove to myself I can achieve the returns I want on top of my already quite packed work schedule …
… And so far, not so good! Here are my time-weighted returns for each year since I started:

  • 2020: 2.23% (2 months) vs NDX +48.8%
  • 2021: -8.01% (with a peak at +47%) vs NDX +27.51%
  • 2022: -67.7% vs NDX -32.38%
  • 2023: +41.32% vs NDX +55.13%

Which means I am still -50% on my initial investment, and have lagged the NDX every year since I started. Every year, I made core mistakes that I corrected partially or fully the next year. Here are the biggest ones:

  • Chasing story in turn-around stories or unproven market-fit companies: NIO, APPS, HAAC, MGNI, SKLZ -2021 was disastrous, 2022 still bad, 2023 good
  • Trading too much: should not do so if I can’t invest at least an hour per day. I still trade too much as of 2023 for the time I invest:
    • 2020: 12 transactions
    • 2021: 157 transactions
    • 2022: 124 transactions
    • 2023: 150 transactions
  • Poor entry / exit timing: this is the big one - I still haven’t found a good framework for entering and exiting positions. On my last estimations, this cost me about 30% return in 2023

Despite all of this, I find that I’ve learned an enormous amount in the past years, and I would venture that some of this came from actually taking significant risk. Coming from a family where investment, and personal finances were pretty much never discussed, I had, and still have a steep learning curve.

Here is my portfolio as of today. I am generally, and for the first time this year at a state where I am happy with the companies I invested in, and the number I have (between 10 and 20 is good for me, with the top 5 making 40-50% of the total):
Capture

Each of these stock (with the exception of RELY) is part of a greater story that I understand and want to participate in. I had some really amazing investments this year, where for instance bought NVDA in the 140s and sold in the 300s … to re-enter at 440.

For 2024, I would like to:

  • Beat the Nasdaq for the first time
  • Make progress on the my entry/exit timing, using first all actual business numbers when we get quarterly earnings, but also RSI, EV/NTM sales and drawdowns from ATH.

Now, I would be remiss to say that I haven’t thought about entirely stopping this portfolio, and moving it to indexes, like the NDX. But, I have this nagging feeling that I can get this very right, and that it also provides me with extra economical knowledge of the market and companies I am interested in.

I would love to receive any comments (even if its to tell me I should really stop!), tips, other mistakes you think beginners makes, and I otherwise hope that this provide support for investors that might have started this type of investing in the worst years we’ve seen since 2008.

I wish you all a fantastic new year 2024, filled with many successes and quality time - as investing is just a that - a tool to create more of these moments that make life so wonderful.
Cheers!

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Hi @Ysdrasill -

Thanks for the thoughtful post. If nothing else, 2020-2023 was an interesting period to cut your teeth in the market. Historic highs to historic lows in one fell swoop. At least you have the tough stuff out of the way. :smirk:

While no one here can tell you what to do, I see a lot of valuable reflection and lessons in what you wrote. The reality is we all need to find our own style based on experience, risk tolerance, and the time we have to manage our accounts. You seem to be well on your way to finding yours.

As for your early results, very few investors beat the market their first few years for all the reasons you state. Heck, even some of us oldsters still struggle with those things (just look at the 2022 returns for almost anyone here).

I’ve come to view losses as the tuition we pay for our market education, even if that education eventually tells us contributing to index funds is the way to go. In this case, even in your limited time you seem to have not only found a way to identify companies but have stated some clear, measurable 2024 goals. I wish I had been that detailed at 33.

Regardless, building our investing toolkits is the only part of this we really control. Returns are simply the side effect. The point is to set financial goals early enough to give yourself ample time to figure out how to get there.

Good luck in 2024 whatever you choose.

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One comment would be that a year where you’re up 40%+ is never a bad thing. You beat the S&P 500 pretty handily this year. To paraphrase what Saul has said in the past, the only thing that matters is making enough over time to pay for your needs and maybe some wants.

Sure you don’t want to go to the trouble if you’re not beating the indices, but comparing to the Nasdaq 100 seems like cherry picking to your detriment. The Nasdaq composite did ~43%, so not much different than you did. Sure if you look at the top 100 it did better (this year), and heck, looks like the top 10 did much better than the top 100. Would you put your whole portfolio in the top 10 or even top 100? And what will they each do going forward? Not 50% per year, I’ll tell ya that!

That said, your 2021 underperformance is a good thing to learn from. I very much agree with this:

It’s so important not to get over-excited about unproven stories without track record. That’s a great lesson.

In 2022, everyone got crushed. You probably learned a lot about your risk tolerance. Keep that in mind at let it inform your style.

I think you’re well on the way. Good luck in 2024 and thereafter!

Bear

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Thank you both for the valuable insights. I do indeed have a very high risk tolerance as I didn’t lose much sleep even at -60% drawdown, but that is also because I have I believe a solid financial framework with 3-6months security fund + right now retirement money in “safe” index investing, until I can prove that I can do better myself.

I think there was very little chance that I would have stopped this early, but your comments helped me reinforce the learning by trying mindset :slight_smile:
My main concern is the time necessary to do this well - I would be very curious how much time successful investors do spent on it; I see for instance Jonah Lupton or Shay Boloor on twitter really get serious success, but I believe they’re both either full time or 3h+ daily on it.

How much time do people dedicate to this style of investing on a daily basis ? I think this question could also be super helpful for the guides that Saul provides.

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For me, the time allocated fluctuates greatly depending on how busy I am with work and life. I have a full time job and a wife and 4 grown kids - so, there are times were I can not keep up with research and following stocks. That is a major part of the reason I am not highly concentrated in growth stocks - when I was, I felt like I had to be on top of the news every day.

I will also caution you to be careful about putting too much trust in people on Twitter or Stock Twits (or any message board). I don’t want to disparage anyone in specific, but I recommend you always keep in the back of your mind that the people you are following could have ulterior motives for saying the things they do and promoting the stocks they do. And they may not be as knowledgeable/experienced as they portray themselves to be.

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I can’t speak for others, only myself. For me the rhythm revolves around the earnings calendar. Between reports I don’t do much beyond tracking press releases from our holdings. You can easily automate this by signing up for electronic updates with each of your holdings’ IR departments. I have an old email account I use that I usually check daily with my morning coffee to see if anything shows up. When earnings dates are announced I set a calendar reminder about a week before the report. When the reminder goes off I’ll usually review my info and create my own set of earnings expectations based on guides and past reports (maybe 15-30 minutes). Upon release of the report, I’ll immediately dump the numbers into my tracking sheet and double check the performance against my expectations (maybe 15 minutes). If things are off, I’ll make a point to either listen to the call or read the transcript first chance I get. If the numbers are strong, I can take my time on the follow up. If needed, I adjust our portfolio from there.

Yes, there’s a time commitment involved, but I was always able to fit it in even when I was working full time (I’m more half to 3/4 time now depending on what I have going on). I also travelled a lot for work which made it easier to stay up to date while killing time at hotels. The point is over the years I was able to space it out in a way that it mostly became part of my normal routine rather than being something requiring huge amounts of carved out time for cram sessions.

Hope that helps.

I’ll second this, even going so far as to say it applies to everything I just wrote above. The purpose of these boards (or any info source really) is not to blindly follow anyone or allow anyone else to make your decisions. It is only a place to ask questions and/or exchange ideas in hopes of finding something that works for you.

At the risk of sounding overly hokey, it’s basically this :point_down:

“Absorb what is useful, discard what is not. Add what is uniquely your own.” -Bruce Lee.

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Hey Ydrasill, thanks for the write up. As someone who is in a similar stage of life as you, I related with a lot of what your wrote. I had a few thoughts on your goals I figured I would share.

First and foremost, beating the market is not easy. I would argue beating the Nasdaq specifically is even harder. As a reminder, the vast majority of fund managers are unable to beat their benchmark index.

With that being said, I still think it is a worthy goal and one I am shooting for each year. I personally compare my performance against QQQ as this is the fund I would likely plow most my capital into if I were to throw in the towel on stock picking. However, Bear makes several good points in his post and it is worth remembering you beat the S&P 500 by a solid margin this year which is what most would consider ‘the market’.

Ultimately, my goal is to achieve 20% CAGR over a long period but I admit this is a high bar. But Saul showed us that it can be done!

The last point I would make on this, is that comparing your performance versus one year is too short of a time frame. I would even argue three years is still too short. To get a clearer view on your true performance versus the market, I would suggest giving it at least 5-7 years. This should give enough time for your investments to compound and grow and give you a real representation of your performance.

My point is, you had a great year and are certainly on the right path and I am confident that you will bear the fruit if you keep with this for the next few years.

As for your second goal, I personally believe this is the most challenging aspect of investing in growth stocks. It is what I have struggled with the most and have written about in detail in the past. I have been tinkering with my strategy with regards to selling/trimming positions this year but admit I still have a lot to learn.

As it stands today, this is how I am going about it -

When it comes to entering a new position, I find this to be much easier, albeit still challenging at times. If you have done your research and found a stock you like and want to buy, I would recommend purchasing a small amount. This way it is now firmly on your radar and you can feel at ease now that you pulled the trigger.

The biggest thing I see that can hold me back from entering into a new position is the valuation. This is a byproduct of 2022 where I was crushed like everyone else. It made me realize the importance of valuation and now I am more hesitant to buy into a company if I think the valuation is out of hand. I want to see a reasonable valuation so that I can expect a solid CAGR from the business going forward.

Personally, I never invest more than 3-5% of my portfolio into a new company until I have owned it through at least one earnings report (except for on rare occasions). This is just how I handle it which is different than how most likely go about buying a new position but it helps me to warm up to a company before I invest a larger sum of capital into it.

One of the most important and valuable things for an investor to learn is the power of no. Ultimately, there are thousands of stocks to choose from and investors inevitably have to say no to most. But once you have found one you feel confident about, I would not hesitate over saving a few percent as Saul has taught. After all, you won’t care if you bought at $52 instead of $48 if the business does well and the share price jumps to $100.

As for exiting a stock, that is a much different beast in my opinion. I have been struggling with this for a long time and resonate with you here. I don’t have any perfect answer for you but this is my current strategy -

I like to group my investments by conviction and ideally, they are positioned accordingly by allocation with my top conviction companies with larger weighting. For me, these are companies like TTD and CRWD (my top two holdings). Because I have owned these for several years and have built up a stronger conviction, I tend to give them a longer leash. If they slip up one quarter and come in below my expectations, I am likely to give them a bit of a hall pass, if you will. I might trim them, but I am very unlikely to dump them and move on. After all, what company can execute perfectly every quarter of its existence? If the long-term thesis is still intact, I will elect to ride it out.

For my lower conviction holdings, I keep these on a tighter leash. For me, these are companies like AEHR, ELF or CELH. I am newer to each of these, and none of which are in my SaaS ‘wheelhouse’ so I don’t have as much confidence in these businesses. If they were to come in with a stinker of an earnings report, I will almost certainly trim but likely exit altogether. Put another way, when in doubt, get out.

Personally, I have been burned holding on to weaker performers far too often as it is admittedly very challenging to know when to give a longer leash versus exiting a position. It is a fine line that I am still coming to terms with.

Then there is the point of selling due to valuation. I have never sold out of a stock only because of the valuation, but this is something I am tinkering with as well. 2023 was the first year I started to seriously trim companies due to the valuation. I trimmed CRWD, DDOG, NET, SNOW and TTD all because I thought the multiple had expanded too far, although there is no exact equation for this.

I don’t ever anticipate completely exiting a stock due to valuation alone. Ultimately, I believe this will hurt you more than holding on to your losers. To really beat the market, you have to hold on to the best businesses and let your winners run. I know it can be hard wanting to take a quick win at times but I find that the best business tend to keep winning and selling due to the share price rising is likely to do more harm than good in the long run.

I am not suggesting this is the perfect strategy for either but it is how I handle buying & selling. And it is important to keep in mind, you will be wrong on occasion. It is impossible to be right every single time you decide to buy, hold, or sell a stock. But what I have learned is that when you have lost confidence in the company, it is generally better to exit than to hold on and hope for a turnaround. Your money is better off somewhere else.

Sorry for the long post - hopefully you can take something of value out of it. In the end, I think it really comes down to conviction - knowing what you own and why you own it. Your outlook will be different from mine and that is what makes it a market. You have to find what works best for you.

Lastly, I would also highly recommend reading Saul’s knowledgebase if you haven’t. I like to revisit it from time to time as there is a countless amount of wisdom in there, much of which addresses the topics above.

Best of luck in 2024 and I hope you achieve all your goals along the way!

Rex

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Thank you Rex for the thorough answer; it is very helpful. I don’t want this post to veer too far off from the focus of the board; but I’d be super interested to have an example, or more details about your (or some of Bear’s / Stocknovice or anyone else) strategy to look at valuation for entry and exit, and general exiting criteria - so don’t hesitate to reach out via message.

I do feel this is an area of the board that is very lightly looked at in Saul’s knowledgebase (which is awesome and I re-read often) and could really benefit starting investor ? I know for me it would be a tremendous step forward!

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Saul, Knowledge Base Part 1:
“The goal is not to have the best record. Not even to beat a benchmark like the S&P. The goal is to be successful, to make enough money at investing to support your family eventually and be able to purchase the goods and services that you need in life. I have never dreamed that I’d be the best investor in the world, or the most successful. Worrying about that will make you crazy. I just want to be a good, successful, investor.

You can think of possessions the same way. There will always be someone with more money, a bigger and better house, a nicer wedding ring, a more exciting vacation, whatever. Don’t sweat it. It doesn’t matter. Happiness isn’t getting what you think you want. Happiness is being content with what you have - on the way to possibly getting what you think you want. It’s today you want to be happy, not in the future. The future never gets here. It’s always today.”

It’s these bits of wisdom that keep us focused on assessing the quality of our companies and IMO keeps me willing to spend the necessary time reading, reading more and then calmly processing the information needed to be proactive rather than reacting and getting wagged.

We all want to think we are above this “common sense”. I don’t see it as common in any way.

Thanks Saul!

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