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Archive for the ‘Sell Sell Sell!!!’ Category

NFLXGOLD

Everyone should own some individual stocks for one reason: They will give you freedom.

My goal is to get my expenses down to the poverty level. Most people spend more the more they make. I am on a path to do just the opposite. I want freedom. I want the freedom to pursue a career where passion is the only deciding factor, not a paycheck. I want my wife to have the freedom to continue to stay home with our kids and then pursue her passions as they grow older. I want our kids to have the freedom to follow their passion (my 3 year old son already has 6 months of college paid for thanks in part to his Netflix shares). Thankfully in America, money will give me this freedom. How do I know this? Because every step I take fighting against my consumerism, every day I’m a little more free. Ironically, my strategy to fight consumerism is to invest in it. But, this is much better than being a slave to it. A small $2,000 investment in Netflix two years ago is now worth $16,000. Turning a knife into a massive sword to slice those expenses into pieces. Is that $2,000 TV really worth the $16,000 it could turn into? When you start thinking of money as a seed to grow a tree, it really changes how you value a dollar. Everybody has the money to invest. I’ve watched my family members turn a measly $50 a month into massive gains over the years.

Two years ago I wrote How I’m Going To Sextuple My Money By 2016. Thankfully, my remaining investment in Netflix (NFLX) has octupled two years ahead of schedule. 2013 was a record year and Netflix has incredible content deal followed by incredible content deal. Though my timeline is different, my strategy stays the same.  When Netflix was on fire, I got greedy. Warren Buffett’s strategy of buying great brands when everyone hates them has by far been my most successful strategy leading to this eight-bagger. However, his wisdom of being fearful when others are greedy is even more important. Over the past year, I have been trimming my Netflix position as it continues to grow. I have paid off two cars, paid off a cash birth, and spent an incredible week in Disneyland. Markets and companies boom and bust, and the only way to truly lock in gains, is to do something with them that can never be taken away. I had a week with my family I will never forget in the Magic Kingdom. By permanently saying goodbye to our car payments (only cash car purchases from here), we are one step closer to freedom.

I’ve been waiting for a huge surge in Netflix to write this article. When friends and family would ask me my opinion on Netflix, I would say anything above 15 billion (market cap) is time to sell half. We are now at 23 billion thanks to incredible subscriber growth.

My strategy is to sell half of a position when I think it’s almost impossible to double. Then, because I know predicting the future is impossible, let the other half run forever.

I think it’s going to be incredibly difficult for Netflix to reach 46 billion dollars unless it drastically evolves into something different.  Here’s  a few valuations I am using (Using the most under rated, market cap):

  • Blockbuster’s valuation peaked in 2002 at 5 billion. We are 4 times that when Blockbuster owned the world (and charged a massive premium on movie rentals)
  • Time Warner (TWX) is valued at 58 billion. Time Warner is over a hundred years old and owns content Netflix only dreams of.
  • You know how Netflix wants to become the next HBO? Well, HBO is 20% Of Time Warner. So, that values HBO at 11.6 billion. Time Warner also owns TNT, TBS, and CNN, Fortune, People, TIME, Warner Bros.  If Netflix doubles from here, can it become all those things that took Time Warner over a hundred years to become?

I think it’s highly unlikely. Which, is why I’m suggesting selling half to those of you who haven’t trimmed. However, if Netflix mutates into something more, like how Amazon mutated from a simple book seller to a company making tablets and drones.  How Apple became a phone maker and music seller, you want to let those other shares run forever.

That’s my second favorite investment wisdom from Warren Buffet. How long do you hold a stock? Forever. This removes the arrogance and impossible task of market timing. But remember, Mr. Buffett constantly trims his “forever” positions as well. Holding forever means always holding a core position, but also taking advantage of greed and fear.

Monty

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PROJECTMAYHEM

After calculating last year’s investing returns, including re-invested dividends, I am into year five of an average annual return of 17.7% (Here are my active investments and my total moves). Destroying what that money would have done if invested in an index fund by a whopping 4.4% per year. If I can keep up this performance, our total assets will double every five and a half years. Out of my 52 holdings, almost 90% of them are in positive territory.  Peter Lynch says all you need is 60% make money. In 2012 I had:

Two triple baggers: Netflix (NFLX) (as I write this, it’s now almost a quadruple from when I doubled down), First Solar (FSLR, doubled down here too)

Four double baggers: eBay (EBAY), Euro-trash Lloyd’s Group (LYG), Cedar Fair (FUN),   Bank Of America (BAC)

I haven’t invested this well since 1999 where I sold a tech-heavy portfolio in February of 2000 to raise capital to become self-employed. The following dot bomb would have erased my portfolio if it wasn’t for dumb luck. Since the best investors in the world only hit in the low twenties annually, I have been awoken in a cold sweat at midnight with thoughts of:

I am Jack’s investing genius.

I am Jack’s complete lack of fear, with no worries in the world.

Tyler Durden is starting to take over with his over-confidence and this scares me. Everyone looks like a genius when stocks only go up. Individuals are coming back to the market, which means everybody is talking about Fight Club now. The amount of gains don’t worry me, it’s the speed of the gains. Tyler says “The market has been flat for a decade and not to worry, we are just making up for lost time. There’s always a bull market somewhere.” The narrator says “We have a recession every five years on average and I have just had an incredible five years. We are at all-time highs.”  What to do? I’m going to kill Tyler Durden and trim my portfolio by half. I’m going to be almost 100% playing with the houses money which means I can’t lose (Thanks Jim Cramer!).  If I was anyone else, I wouldn’t be so aggressive, and make sure I had 30% in cash to prepare for the next crash. Maybe its next month, maybe it’s in 2017? It’s impossible to know but disaster is always just around the corner.  Now that the low-hanging stock fruit has been picked my focus this year is to become 100% debt free so we can buy a house in 2015. I think I can get larger returns by reducing my monthly expenses. This is also the first time I have trimmed everything, and the reason I’m doing this is because I like the size of my allocations and I like all of my 52 investments. I want the same portfolio, it’s just going to be half the size.

I’ve been trying to find something to worry about for weeks that’s going send the market lower, and I can’t think of anything. !!! That terrifies me. I told myself in 2009 that if we get back to the 2007 highs, I wouldn’t get greedy. So, as Warren Buffett says, ”Get fearful” and kill Tyler Durden before he blows up our portfolio with Project Mayhem.

Monty

P.S. Scroll down below to see what I’ve been up to since my last article (My Facebook updates)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2/15/2013

After verifying a report I heard that said one thousand invested in tobacco maker Phillip Morris would turn into 3.5 million dollars over 40 years (primarily due to massive reinvested dividends of a hated stock) I wanted to find a similar investment that doesn’t prey on children and poor people. I turn to alcohol for a simple, high margin business model that’s consumed daily worldwide that I’m a big fan of.  About a year ago BEAM was spun off from Fortune Brands to be a pure-play spirits company. That means I get focus, strong brands (Jim Beam, Skinny Girl, Courvoisier, Pucker, Maker’s Mark, Pinnacle, etc.) a small market cap (9.8 billion), with a 1.46% dividend that I believe will be constantly raised throughout the decades as the company grows and compounds. PEG 2. Starting with 1.3% of portfolio.

http://www.beamglobal.com/brands/view-all-brands

2/8/2013

Everywhere I go I see rave reviews of Tesla’s Model S. Normally I avoid the auto-industry as an investment because it’s cyclical, but TSLA is only a 4.5 billion company. Ford? 50 billion. Now, this is because TSLA currently bleeds money, has a huge amount of debt, and only makes one (mainstream) car. However, Elon Musk is the closest CEO I can find to a young Steve Jobs. People that invested in everything Steve Jobs eventually made money. I want to be an Elon Musk investor before he turns TSLA into a 10 billion+ company. I expect massive future temporary declines so I’m starting with a small position, 1.1% of portfolio. But, I’m tired of watching this incredible story unfold without me.

Dunkin Donuts has no public stores in California. This is incredible. It’s just starting it’s west expansion, with plans to open over 300 new stores this year. DNKN K-Kups just saw a 30% increase in sales comps. They also own Baskin Robbins which I love. Nigel Travis, the CEO since 2009, also announced a dividend increase of 27%, so it now yields 2.1%. At only 3.9 billion (Starbucks is 42 billion, which I also own), PEG 1.55, and a brand everyone knows, I’m ready to start 1.1% position. I also want to tell my son he owns shares of Baskin Robbins when we start going there, so I trimmed 20% of his NFLX position in his ESA and bought DNKN with it so he can ride that re-invested dividend for 16 years.

1/29/2013

Computer hardware (Intel, AMD, Nvidia, Seagate, WD, etc.) is being killed by virtualization, and the current titan is VMware. VMW lowered projections and announced layoffs of 900 people today. I’ve been waiting for bad news to hit this company for years, and I’m taking advantage of a 22% one day drop as this stock hits a new 52 week low and started ¼ of a position to make up 1.6% of the portfolio @ 33 billion. PEG 1.40. Hopefully this knife will continue to fall so I can buy more.

1/24/2013

Most people have a hard time of figuring out when to sell. Today is a great example of how I make my sell decisions.

A cash birth at St. Mark’s is 65% less than an insured birth. However, if we pay the entire balance within 2 days of birth they give us another 30% off. We decided this deal was too good to pass up so I trimmed 20% off of our top 12 holdings to raise cash to buy a baby. Also, I have had so many major winners recently this could be thought of as rebalancing. Though, even after trimming 20% Netflix still represents 16.9% and is my largest position and I’m not going to take the chain saw to it until the company hits above 16 billion (double from here). Here is how trimming 20% affects the weight of each of my positions. The positions are still large enough they can continue to add massive gains to the portfolio.

NFLX @ 8 billion (from 18.1% to 16.9%), DWA @ 1.5 billion (from 5.7% to 5.2%), DDD @ 3.97 billion (from 5.2% to 4.8%), ARCO @ 2.9 billion (from 3.5% to 3.1%), LULU @ 9.7 billion (from 3.3% to 2.9%), SAM @ 1.87 billion (from 3.2% to 3.1%), CHK @ 12.6 billion (from 2.9% to 2.5%), BNNY @ 625 million (from 2.6% to 2.2%), SVU @ 753 million (from 2.5% to 2.2%), UA 4.81 billion (from 2.5% to 2.2%), NOK @ 15.75 billion (from 2.2% to 1.6%), MAKO 505 million (from 2.6% to 1.9%).

I also started a position of Konami (KNM) to be 1.3% of the portfolio at 2.6 billion. Though the video game industry is in a weak phase, Konami was one of my favorite companies growing up and I’ve wanted to add it to my portfolio for a long time. Though it may not end up being a great investment, I couldn’t resist as it hit a 52 week low yesterday.

1/8/2013

MAKO hit a new 52 week low yesterday, a 10% drop from just two weeks ago, so I increased position from 1.9% of portfolio to 2.4% @ 478 million. MAKOplasty procedures are up 29% from a year ago, which is the number I’m interested in, but only hit guidance in RIO sales which is why it dropped. More info here http://www.fool.com/investing/general/2013/01/07/why-mako-surgical-shares-dipped-then-rebounded.aspx.

1/2/2013

Why is Zipcar up 50% today? Avis just bought them. Didn’t see that one coming at all! I’m selling the entire position at 490 million as I’m not interested in owning Avis and the stock is trading at the purchase price. Though this locks in a total 12% gain for me on the investment, I would have much rather preferred ZIP to stay independent and rack in multi-bagger returns over the decades. If I didn’t buy when ZIP shares were at their 52 week low I wouldn’t have a gain at all. Oh well, hard to be too upset with a huge one day pop.

12/31/2012

Following billionaire T. Boone Picken’s lead and starting 1/4th a position (1.4% of total portfolio) in gas titan DVN. Devon just hit a 52 week low @ 20.8 billion and hasn’t been this cheap since 2009 thanks to greatly increased production which lowers gas prices.  The fourth largest natural gas producer in in America, 29% of their current production is oil, 19% is NGLs, and 52% is natural gas.  I’m a 30 year long term bull on fossil fuels, and have been wanting to add DVN to my energy basket for 3 years now.  1.50% yield, PEG 4.87. High PEG because of low earnings. Decreased my position in BP @ 131 billion from 2.9% to 1.4% to raise cash for the purchase.

12/27/2012

I believe that a surgeon controlling a robot doing hip and knee replacement surgery is far superior to just a surgeon. So, I’m taking advantage of MAKO being near its 52 week low (1/4th of its 52 week high price!!) and adding another ¼ position @ 526 million. After doubling down, it now represents 2.1% of my portfolio (up from 0.8%). Turned a -34.4% loss into -16.% loss. Decreased my position in BAC @ 123 billion from 2.6% to 1.4% to raise cash for the purchase.

12/20/2012

Starting with ¼ position (1.4% of total portfolio) in Stratasys (SSYS) as I believe this is 3D Printing’s Pepsi to DDD’s Coke. 3D printing I believe is going to be the biggest game changer over the next 20 years and I want to own the top players as it’s impossible to know who the winner will be in 2022. SSYS is right at its 52 week high and it was on my watch list all the way up. No more watching. Since it’s only 1.73 billion company however the high price won’t matter in decade, it will just look like a minor blip on the chart. PEG 2.53 which is normally too high for me, but that’s why I’m only buying 1/4th.

12/17/2012

Sold my entire position in RIMM @ 7.3 billion for a 97% gain in 4 months. Ironically this beat my Apple investment  by a percentage point.  I’ll only be buying back RIMM shares if Blackberry 10 lights the world on fire but I think the Mayan calendar has a better chance.

12/10/2012

Preparing to cash in on my dead cat bounce of Blackberry maker RIMM before earnings are announced December 20th and everyone remembers how bad things are again and the stock has to claw its way back on Blackberry 10 hype in Jan.

RIMM is up 67% for me and this is a trade so I will be selling the entire position. I’m using stop loss, which I don’t use to prevent losses, but to sell a stock while squeezing out a bit more profit. It may run until earnings so if it does my order won’t trigger unless it hits $10.50 (the lowest it’s been in 3 weeks). If it doesn’t trigger, I’ll be selling with a market order on December 19th because stop losses don’t help if a stock opens down huge. I use stop losses when a stock is running as it’s already too late when a stock falls off a cliff.

12/10/2012

Adding another quarter position to Annie’s (BNNY) turning a 12% loss into a 6% loss. Annie’s is growing sales aggressively but margins are falling. The company hasn’t even been public a year, is valued at a mere 625 million, so it’s still a baby learning how to walk. I believe the organic trend will eventually become mainstream so the upside is huge here. They currently offer over 125 products in over 35,000 grocery stores. PEG 1.97, increased position from 1.4% of portfolio to 3.0%.

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Imagine baskets full of cash instead of trash

The crisis in Europe seems endless. I started buying into the panic in 2010 with the National Bank Of Greece (NBG) to take advantage of a turnaround. Fast forward two years later, and my original investment is down a massive 89% and I’m still waiting. Thankfully, this kind of pain I am numb to.

During the crisis of 2009, I was at the gym thinking “This collapse is a GREAT opportunity! But, I’m not prepared for it. What’s the secret to landing massive gains during a crisis?” I think I have come up with the correct answer, and I believe it’s cash and baskets. Much like the picture above but replace debt with cash. Thankfully here I am two years later and I realize I missed the baskets part. But, I do have more cash than I did in 2009 ready to be deployed.

Some of the smartest minds I follow won’t even invest in banks as they are black boxes that could contain cash or atomic bombs and it’s almost impossible to know which one. Take the most recent story of best-of-breed CEO Jamie Dimon and his loses that could pile up to 5 billion in JP Morgan Chase (JPM). He runs the company, is one of the best in the business, and billions in loses slipped past him! What most people don’t talk about though is that banks are immune to becoming obsolete. Yes, they could go bankrupt from bad loans, but money is going to be here a hundred years from now. Everyone is a potential customer. These two reasons are why I will always be invested in the banks.

My investing thesis here is that I’m going to pick six of the cheapest banks in Europe, one for each country (though most overlap), and bet they all don’t go bankrupt. They are cheap because they are weighed down with huge amounts of debt and uncertainty. But, if I have just one or two successful turn-arounds in my euro-trash basket, I’ll make money. I can wait decades. If they all go bankrupt, it won’t hurt much either as each position only represents only 0.4% of the entire portfolio. I also prefer making my own baskets over ETFs so I have 100% control over allocation. If a bank runs 600%+, I would want to sell that position but not the position that’s down 89%. You can’t do that with an ETF.

Euro-Trash Basket

Bank Country Price Price To Book Value
Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) Spain 31 Billion 0.59
The Governor and Company of The Bank of Ireland (IRE) Ireland 4.12 Billion 0.31
Lloyds Banking Group plc (LYG) UK 29.64 Billion 0.40
National Bank Of Greece SA (NBG) Greece 1.16 Billion
The Royal Bank of Scotland Group plc (RBS) Scotland 20 Billion 0.18
Banco Santander, S.A. (STD) Spain And Latin America 57.65 Billion 0.53

Who will survive?

Monty

P.S. If you haven’t been following my page on Facebook, here is what I have been up to since the last article.

6/8/2012

Buy more 52 week low, sell less 52 week high. Under Armour (UA) hit 52 week high on 6/8/2012 @ 5.39 Billion. PEG 2.07. Sold 20% of position to lock in a gain of 73.7% on those shares. UA now makes up 4.5% of portfolio instead of 5.5%.

6/6/2012

Buy more 52 week low, sell less 52 week high. Since the 52 week low list has been full of my stocks, picked up more of:

First Solar (FSLR) @ 1.10 billion. Increased from .5% to 1.0% portfolio. PEG .17

Zip Car (ZIP) @ 4.12 billion. Increased from 1.1% to 1.4% of portfolio. PEG .73

JP Morgan Chase (JPM) @ 32.77. Increased from 2.8% to 3.7% of portfolio. PEG 1. Jamie Dimon losing 5 billion? BUY!! He’ll make it back.

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Groupon Falling For 4 Months After It’s IPO

Groupon Falling For 4 Months After It’s IPO

On Friday, May 18th 2012 Facebook (FB) will be making over 1,000 millionaires. Early employees, private investors, etc. have shares they bought for around $1 a share (or less). With Friday’s price probably easily hitting $41, this will be an instant 4000%+ gain. Forget Farmville, Friday will be Facebook Hot Potato.

Those insiders that are allowed to sell, will instantly sell their shares in the aftermarket to someone like me for $40. I’m going to buy a small position (about 2% of our total portfolio) to see if I can pass the hot potato to another sucker for around $60 or even higher.

Facebook reeks of Dot Com hysteria. Senior citizens, my friends, family, co-workers, everybody is talking about the Facebook IPO. Bubbles are a great way to make quick gains if you sell before the POP! This is a trade, something I rarely do. My strategy is to buy in the after-market at market open, then put in a stop loss market order right before market close price. What this means is, if Facebook opens at $40, closes at $60, I put in a stop loss at $55. If FB ever falls below $55 the eject button is automatically hit and I’ll easily have a 30% gain. Sure, this is nothing compared to the 4000% gain the insiders are getting, but, it’s still a possible 30% one day gain. Then, I’ll watch it for a year or so, wait for Facebook to come crashing back down to earth and be hated, analyze the fundamentals,  and find out if it’s an investment or not.

Now, I tried this strategy with Groupon (GRPN) and it completely failed because the stock went down after the IPO. I only lost 10% on GRPN before I hit eject so no big deal. But, Facebook is much more loved than Groupon.  Will Facebook really go DOWN after the IPO? Will I be the only person to lose money on the Facebook IPO because I was a sucker and bought in the aftermarket? All of the professionals say this is a fool’s game. But, I know I’m standing on top of a bubble, I think that makes it a Fools game.

Monty

5/21/201 ****UPDATE****

I never thought the peak of the Facebook bubble would happen before the after-market sale. I was initially excited that I was able to buy my shares at $42, thinking, it’s only 10% above the IPO price of $38. To my surprise the stock ended FLAT, at $38. It was a bad day for the whole market (S&P down almost 1%). But, the good news is, the public is smart. I was the sucker! They knew Facebook shouldn’t be worth half of Microsoft. They knew that if they were rich enough to have 100 billion to buy the company outright, it would take them one hundred years to make their money back. Right after market close a 15 billion lawsuit was announced against Facebook stating that they were tracking user’s activities even after users have logged off the site. Then, on Sunday, Jim Cramer on Meet The Press yelled that Facebook was a  “Sell! Sell! Sell!” even at the IPO price. I was hoping for an up market day which would hopefully boost Facebook but decided to be cautious and put in a $35 stop loss market order just in case it tanked. Well, today the S&P is up 1.6% and Facebook is down 11% to $34 and even further in the after-market. I lost a quick 15% but thankfully had some free referral trades to ease the pain. It’s only down from here! I wouldn’t be surprised to see Facebook at a 10 billion valuation over the next decade which would put it’s stock around $4.

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Apple Stock Entering It’s Golden Years

Apple Stock Entering It’s Golden Years

From all my research on investing, the most important lesson I have learned, right next to the quote this blog is based on, is:

Corporations are people. They live and die just like people. Buy the babies, sell the grandparents.

Steve Jobs became a proud parent in 1976 and started a family. In 1985, his family wanted a separation. In 1996, the parents got back together and raised dozens of beautiful, successful children. But now, I think the Apple (AAPL) family is moving to Del Boca Vista.

Don’t get me wrong with my cheesy metaphor, I think Apple the company is going to live on strong for decades. The stock however, is a different story. Here’s why I think AAPL is entering it’s golden years and why I’m selling:

1)     Steve Jobs was forced once again to leave his baby. Though the general consensus (at this time) is this doesn’t matter because he laid a strong foundation.  I think it’s impossible to argue that Steve Jobs raised Superman. From the days he was lifting cars as a toddler to when he reversed time. In investing, this period of growth is the most important. Steve returned a 9,000%+ gain at his time with Apple.  This was no fluke either.  In 1986 he bought Pixar for 10 million from Lucasfilm and sold it to Disney for 7.4 billion in 2006. That’s 740 times the original investment compared to the measily 90 times he gave Apple shareholders. I’m amazed that most people underestimate his contribution to Apple and I believe history will tell otherwise. Has there been another Walt Disney? Michael Jordan?

2)     Apple is valued as the largest company in the world at 382 billion. It has increased by a Disney (60 billion) and a Sony (20 billion)  in just the past 3 months.  For Apple stock to double from here, it would have to give birth to quadruplets named Pfizer (142 billion), Wells Fargo (130 billion), Amazon (105 billion), and Nordstrom (10 billion). Pangea is going to have to drain the sea to conquer the rest of the world. The upside vs. downside risk is just not worth it.

3)     I have no edge. In 2001 I paraded my brand new iPod (that I got for Christmas) around to friends and family preaching the revolution and convinced my father and mother-in-law to buy shares when Apple was only worth 11 billion (I stupidly was completely out of the market starting my own business.  Mental Note: Never be completely out.) During the March 2009 bottom I also stupidly suggested to a friend that they not buy Apple because people wouldn’t buy expensive computers and phones in a recession. Wrong! The rich were doing just fine. However, in January of 2010 everyone thought the iPad would be a flop and I thought they were wrong. Having an edge like that is how I caught a double.

4)     There is no negativity. People scared of the market are actually buying Gold, and….Apple? “United States Of Apple” on Jim Cramer a couple of nights ago. What? Analysts have 55 buys and only ONE sell. There is only one factor that determines stock price. Supply and demand. The stock market is an auction house.  Apple stock price will only dramatically increases if a bunch of new buyers come in. If everyone already loves the stock, where do the new buyers come from? This is why contrarians make so much money. You want to buy a stock before everyone loves it.  Because of it’s massive size, I wouldn’t be surprised to see multiple contraction either despite it’s low P/E. Remember, we are in record breaking territory here.

5)     The stars are perfectly aligned. I discussed with my wife when we should sell our largest holding, Apple. When it’s the largest company in the world or when Steve Jobs leaves? We decided when Steve Jobs leaves. He just left. Yet, Apple is still the largest company in the world. It just blew through its 52 week high because people are excited about iPhone 5. Amazing! The stars are perfectly aligned to sell.

Now, I could be wrong and I might be making a mistake. Apple could be broken up into small pieces (which can be great for investors as smaller companies are babies which can grow) or start paying a massive dividend with that 80 billion cash hoard they have.  If you look at the valuations below, Apple is “cheap” by traditional metrics like PEG or Cash Flow, especially if you back out cash.  I also want to own a part of the first trillion dollar company in history if Apple makes even more history.  So, one of my new rules is to never sell an entire position. I’m only selling 75% of my Apple position, and letting the other 25% float around forever like coins in the bottom of Grandma’s change jar never to be touched. The beauty of Jim Cramer’s “Playing with the houses money” strategy that makes it impossible to lose.  Even if the remaining 25% of my Apple position goes bankrupt, I’ll still have a permanent 70% return on this investment.

I can’t believe it, but a decade after the best call I have ever made in 2001, Apple is now a SELL.

Monty

Stat

AAPL

Price (Market Cap)

382 Billion

FPE

12.8

PEG

.66

Dividend And Yield

N/A

Price/Cash Flow

15.20

ROE

34

Motley Fool Caps Rating

3

Size of Position In Portfolio

Moved from 9.2% to 2.5%

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Happy New Year!  Another year in the books. Though, as I wrap up last year, I’m shocked that 2011 opened with an atomic money explosion. My average annual return increased from 16.6% to 18.6% just today thanks to Bank Of America (BAC) rising 6.37% today. Though I wish I could put this on my 2010 score card, I’m happy that I’m not a hedge fund manager who started the year in 100% cash and missed such a huge move.  Just another example of how it’s impossible to time the market.  

 This is my second year investing on record and I’m excited to have another year of S&P 500 (SPY) beating performance.   Even  by taking major risk and having my biggest loser, Blockbuster (BBI), which was at one point 10% of my Portfolio, drop 80%, I’m still ahead of the market.  Through diversification it only took a few heavy lifters to raise my portfolio back from the dead. These 2010 Schwarzenegger stocks were:

1)      CIT Group Inc. (CIT), (Jan-Dec, still holding), up 70.59%. Fresh out of bankruptcy. Lending money to small businesses will never be obsolete.

2)      Apple (AAPL), (Jan-Dec, still holding), up 56.6%. My bet that the iPad would be a success was right.

3)      Ford (F), (Jan-Nov, sold entire position), up 51.8%. Ford is one of the greatest turnaround stories in America’s history. “The best time to sell a turnaround is after it’s turned around” (Peter Lynch)

Thankfully, the winners made up for my losers, because I took some massive beatings. Here are my 2010 biggest losers:

1)  Blockbuster (BBI), (Jan-September, sold entire position), -79.2%. I knew this was a long shot, and I missed. I’m a Netflix addict and shareholder so this was no surprise. My son was in NICU and I was selling my Blockbuster shares from the hospital via iPhone as they declared bankruptcy. My worst week to date.

2) Orthovita (VITA), (Jan-Dec, still holding), -47.1%. The product I was betting on, Cortoss, is currently a huge flop. It’s such a small position it’s not worth selling though. I would sell if I had more money invested.

3) National Bank Of Greece (NBG), (April-Dec, still holding), -34.4%. The PIIGS haven’t turned around yet. But, I wouldn’t be surprised if this is my biggest winner in 2011.

My latest buy update was five months ago because of my son being born. I completely underestimated how much my life would change and fell behind. Because of this, I launched a twitter feed and a Facebook page for GWF so I can quickly send out my buys/sells in between articles.

If you’re interested, please follow me here:

Greedy When Fearful On Twitter

Greedy When Fearful on Facebook

Here is how I’ve been putting new money to work since September. Since I’m so behind, I’m going to keep my reasons extremely short:

12/23/2010. Bank of America (BAC) @ $13.27. Tripled down to make it 10% of the Portfolio. It was the most beaten down bank in my bank basket so I made a big bet. I’m a huge believer in buying in “wide scales” or “pyramid investing.” “A stock get’s less risky the cheaper it gets.” (Jim Cramer) or “It’s better to fall through the basement than the ceiling.” (Motley Fool analyst). Eventually California will turn around and people will stop defaulting on their mortgages.  

12/2/2010.  Activision (ATVI) @ $11.97. What’s bigger than Michael Jackson’s Thriller and James Cameron’s Avatar? Call Of Duty:  Black Ops. Activision had the biggest entertainment launch in history by bringing in 360 million in one day. Yet, the stock is priced where it was during the heart of the recession. Why? Because Wall Street thinks app store and social gaming (like Farmville) is going to kill the industry. They are wrong. Call me when You Tube viral videos kill Hollywood Blockbusters.  

11/2/2010. Microsoft (MSFT) @ $27.03. Windows 7, Xbox Kinect, Bing, Windows Phone 7, Office 2010, etc.  It took Microsoft 20 years but they are finally getting it right. The stock is exactly where it was a decade ago. It pays a 2.29% dividend. Is Wall Street crazy? Yes, this is a goldmine. Cloud computing is being built on the back of Microsoft (Server/SQL/Exchange), it’s not replacing Microsoft. Ask anyone who’s installed VMware (VMW) how many Microsoft products are running on their ESXi servers.

10/11/2010. Google (GOOG) @ $538.48. Android is the most popular smart phone platform. Google’s mobile searches have increased 500% from 2008-2010. You Tube has 50% more weekly views than last year.  Google is the same price it was in 2006 yet revenue and earnings have doubled.  Wall Street will eventually catch up, and so will the price.

09/10/2010. BYD Company (BYDDY.PK) @ $12.65. What’s the most challenging aspect of electric cars? The battery.  Wang Chaun-Fu, a peasant farmer orphan (I’m not kidding) in China started making batteries when he was 29 (1995) and became the richest man in China in 2009. He did this by making batteries and electric vehicles which grew revenue at a compound annual rate of 48% over the past 5 years.  If that’s not enough reason to like BYD, Warren Buffet also owns 10% of the company.

09/03/2010. BP (BP) @ $37.01. “Don’t catch a falling knife. Let it hit the ground and vibrate for a while” (Peter Lynch).  After getting cut by buying in April, I let BP vibrate for a while and then doubled down. BP is America’s #1 producer of oil and brand image doesn’t matter here. Even if you are mad at BP you probably have bought their oil and just didn’t know it. Also, T Boone Pickens invested right along with me so I must be doing something right.

08/03/2010. Intuitive Surgical (ISRG) @ $271.25. Robotic Surgery is the future and it’s just getting started. Imagine a doctor with infinite arms, infinite tools, and eagle eye vision. This is a reality and thanks to da Vinci, can be used on hundreds of operations. At my son’s last hospital visit, the hospital was bragging about their da Vinci system. If you have never heard of da Vinci visit http://www.intuitivesurgical.com/products/ to see the present and the future.  

Happy New Year!

Monty

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Locked in gains of 450% and how to NEVER give your gains back to the market (F, EL, LTD, LVMUY.PK)

Locked in gains of 450% and how to NEVER give your gains back to the market (F, EL, LTD, LVMUY.PK)

When most investors “take profits” or “lock-in gains” they are simply selling one stock for a gain and reinvesting the money back into the market for a worse investment. Why do I say worse? Because study after study has shown it’s impossible to time the market, and this strategy fails. That’s why I believe in letting my winners run and my preferred strategy is rebalancing every few years. Warren Buffet says his favorite holding time is “forever” and by going really long you are “getting a tax free loan from the government” while your investment snowballs. Selling too early is the biggest mistake in investing. You simply can’t beat a stock that’s compounding for you tax free. You only pay Uncle Sam when you sell. So, why I am selling? Because unlike a hedge fund manager, I am REALLY locking in gains.

The only way to permanently lock-in gains is to take your profits out of the market.

I know this is obvious, but many people don’t do this! Friends and family aside, I watched my personal Yoda, David Gardner, turn $2,000 into a half a million dollars through his America Online investment, only to lose most of it as America Online became Time Warner which then became obsolete. David learned his lesson though, and he recently bought a house by taking some off the table from Netflix (NYSE: NFLX) and Priceline (NYSE: PCLN). Everything is perfect in the world right now with Netflix and Priceline which is exactly why it’s time to really lock in those gains. When the market goes down again, David’s house won’t be going with it.

I believe in this strategy so much, I’m making it an annual family tradition to take some profits from our biggest winner of the year, and go on vacation with it. I can tell my son, “Disney (NYSE: DIS) is actually paying for our vacation to go to Disneyland!”

I have been working extremely hard over the past two years to hit my current annual return rate of 15%, which really hits home why you shouldn’t invest if you have debt with an APR over 10%. However, I was stupid in my twenties. So, I’m locking in these gains to pay off some high interest debt and to take my wife out to celebrate. She did just pick three triple-baggers in a row with the very Lynch-esque strategy of “Buying the stocks of the companies women were holding the bags of in the malls” during the great recession.

The GOP just took the house and the Fed is about to pump gold into the veins of the economy. Economy solved! What could go wrong?

I like to browse the NYSE 52 week low list for potential buy opportunities and I like to browse the 52 week high list for potential sell opportunities. As Jim Cramer puts it, “selling into strength.” Lately Mr. Market is Arnold Schwarzenegger. Here is how I really locked in gains of up to 450%.

11/3/2010. Sold entire Ford (NYSE: F) position @ 14.61 as it hit a new 52 week high and locked in a 450% gain. From the advice of my other Jedi Master Peter Lynch, “The best time to sell a turnaround is after it’s turned around.” In One Up On Wallstreet he even talks about Ford as a turnaround play, and this was in 1989! We’ve seen this movie before. With CEO Alan Mulally at the helm, I actually think Ford is going to beat it’s all time high of $37 within the next 5 years, he is doing an amazing job. But, that’s going to require a perfect economy. The easy money has been made here, and I’m looking for the next Ford. Maybe Tesla (TSLA) or BYD (OTC: BYDDY.PK)?

10/28/2010. Sold Estee Lauder (NYSE: EL) @ $73.31 after earnings blew out expectations with strong guidance and it hit a new 52 week high rising 14% in just one day. I locked in a 194% gain. Women are buying lots of makeup and skin care products in Europe and the Middle East! This is the highest the stock has EVER been (public since 1995). I sold entire position. Since this stock yields a dividend of .80%, I’ll eventually buy this again, on weakness, but this time it will be a much larger position and be in my Roth-IRA for tax free compounding.  

10/07/2010. Sold Limited Brands (NYSE: LTD) @ $28.55 as it hit a new 52 week high (even though the overall market was down) thanks to a strong back-to-school season (triple than what they expected) and locked in a 225% gain (not including dividends). Hasn’t been this high since November 2006 and has only been this high twice in the history of the company (over 30 years!) I sold entire position since this stock yields a dividend of 2.17%. I’ll eventually buy this again, on weakness, but this time it will be a much larger position and be in my Roth-IRA for tax free compounding.  

8/2/2010. Sold LVMH Moet Hennessy Louis Vuitton (OTC: LVMUY.PK) @ $25.00 as it hit a new 52 week high and locked in 100% gain. I sold entire position since this stock yields a dividend of 2.59%. I’ll eventually buy this again, on weakness, but this time it will be a much larger position and be in my Roth-IRA for tax free compounding.  

As always, you can see all of my buy/sells here. Cheers!

Monty

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