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%.
Greedy When Fearful 