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.




Price (Market Cap)

382 Billion





Dividend And Yield


Price/Cash Flow




Motley Fool Caps Rating


Size of Position In Portfolio

Moved from 9.2% to 2.5%


Why not borrow from Coke instead of the obsolete Napster?

Today Netflix (NFLX) announced its spinning off it’s DVD business into a new service called Qwikster. I think this is such a huge mistake, I have to send Reed Hastings a letter even though he will never read it, but, hopefully you will. Here’s the letter:

Dear Reed Hastings,

I am ecstatic that you do not want to follow the fate of America Online, and are self-aware that you easily could. You do not display the type of arrogance of most CEOs who think they are immune to change and this gives me more assurance of Netflix’s survival because “Only the paranoid survive.” You respect your customers enough to alert them of a rate-hike. Comcast has never given me such respect and every month my Comcast bill is slightly higher with no explanation. However, you are forgetting two extremely important points with your latest decision.

1) Brand power is your most important asset and makes it much easier to raise prices on your customers.

2) American’s have an extremely short term memory, react irrationally short-term, and don’t even realize the “new” prices are really 2005 Netflix prices but with better content.

Most customers have no idea that due to archaic movie studio laws a new release on DVD is cheaper than a new release digitally and by going streaming only they are giving up access to most new releases.  It’s $4.99 to rent one new release in HD on iTunes. You clearly understand this, and that’s why you have said you aren’t interested in acquiring new releases for streaming, but are focusing on older, back-catalogue, long-tail content. Your customers would have come back as there is no cheaper alternative for the ultimate new-release DVD combo combined with  back-catalogue streaming content.   However, by renaming Netflix “Qwikster” you have diluted your brand and made the service more inconvenient and confusing for customers. You have turned a temporary problem into a permanent one. Two separate websites? No synchronization? I want to be able to have that movie in my DVD queue until the “watch now” button shows up right next to it. I want to think about movies, not how they are delivered to me. Who cares about the type of box a package comes delivered in? These two packages shouldn’t be sold by separately branded businesses as both brands sell the same product, video.

The beauty of the name Netflix was it worked two ways. It explained that you could rent DVDs (flix) over the Internet. It was forward looking,  because it also worked even better for streaming flix over the ‘net.

As we all know, physical media is obsolete but due to horse and buggy content owners, I’m sure in 2021 we will be saying the same thing just like we did in 1999. Physical media was your largest Warren Buffet Moat. If it puts Netflix into a better economic strategic position by having two separate companies, I understand. But, why not borrow from Coke instead of the obsolete Napster and separate the DVD business into “Netflix Classic.” You already share the same color scheme and I always drink Coke with my nachos while watching movies. Please keep your strongest asset, your brand.

I, along with my friends and family, are extremely excited that video games are finally coming to Netflix, err..Qwikster. Just imagine if you would have announced that you are increasing prices because video games are now included as part of the service. Customers, like myself, would have actually felt as if they are getting more for their money.

I am an extremely happy Netflix customer, shareholder (along with my 1 year old son), and have yet to find a better alternative to Netflix. I’m not cancelling, and I’m not selling, but your initial instincts were right, and you should have stuck to your guns. It is a marketing problem, not a pricing problem. But, Qwikster only makes it worse. Please bring back the classic brand everyone loves. Netflix is the perfect name, Netflix is Coke. Qwikster is 2011’s New Coke.


Monty Singleton

With a Roth-IRA, you can withdraw $10,000 tax free for your first home purchase.

I was originally going to write an article called “Banks are un-investible. Time to buy the banks.”  Jim Cramer was telling people to stay away from the financials almost daily. The Motley Fool analysts on Market Foolery were just as negative.  Just last week, my investments in financials were down huge. Wells Fargo, down almost 20%, JP Morgan Chase, down  15%, Bank Of America (BAC), down 50% (78 billion)! I started buying the major banks in August 2009 so this is from those levels. Remember how great things were during the boom times of August 2009? Exactly. Gold just hit a new record of $1900/oz (gold currently trades to a ratio of fear). Yes, the market is that fearful right now.

There were only two people that I followed who were making sense. Warren Buffet was adding to his position in Wells Fargo. Warren Buffet is Wells Fargo’s biggest shareholder (owning 7% of Wells Fargo, and making up 20% of Berkshire’s entire investing portfolio), and the stock was trading almost exactly at Warren’s cost basis! Then, the Motley Fool Money Podcast sound engineer, Steve Broido bought Bank Of America because he “Thinks it will still be around in 5 years.” Steve joked about it probably continuing it’s free fall as everyone else in the room laughed but I thought “Steve, this one will probably work out for you, it’s just way too cheap here.” My plan was to add to my bank basket (which is way more fun than a financial ETF) and buy more WFC, JPM, and BAC. I knew that BAC had the most upside but it also has the most risk. They just announced up to 10,000 layoffs, they are being sued by AIG for 10 billion for massive mortgage fraud. The market is questioning if they are even solvent.

Then, Warren Buffet announced a 5 billion dollar investment in BAC. This is 10% of Berkshire’s cash, a major investment. Warren wanted to inspire confidence in the market, and he sure did with me. But, I wanted BAC to pay for it’s (Sleazy)slegal ways. Main Street runs parallel to Wall Street. If you own who you pay, you add balance to the system.  My family is young (we can wait decades), and we can handle a lot of calculated risk (we can wait decades). I recently read about people foreclosing on BAC. All this news lead me to the idea:

What if I could get Bank Of America to pay for our down payment on our first home purchase? The irony would be great!

With a Roth-IRA, you can withdraw $10,000 tax free for your first home purchase. With this in mind, I doubled down on our BAC investment at the price of 78 billion bringing it from 5% back to 10% (since it fell 50%) of our portfolio. Banks typically trade above book value, and for BAC, book value is 200 billion. If it makes it back to book value, it will be a 150% gain. That’s Bank Of America paying a huge chunk of our down payment. Now, the pros will say don’t follow Buffett because I’m not getting the same deal he is. Warren is getting a 5% yield, I’m not. But, I’m not here for yield. I just bought Waste Management a month ago for the 4.68% yield, not hard to find big yields right now. Warren has warrants for $7.14 that expire in 2021. What that means, is within the next 10 years, Warren has the option (but not the obligation) to buy 700 million common shares of BAC at $7.14. So, if in 2015 BAC trades at book value, 200 billion (or $20 a share), Warren can buy the shares at $7.14 and they would immediately be worth $20, a 200% gain. The pros talk about how sweet the warrants are but they are only sweet if they are exercised. I’m making a 10 year bet that Berkshire exercises those warrants at least at book value. If BAC goes bankrupt, I’ll lose. But, Warren would lose his sweet, sweet warrants if that happens and his 5 billion in preferred stock investment. By listening to the pros you would think Buffett’s preferred stock is shielded from loses and there is no risk. Not true.

The mortgage market used to be the most stable investment out there. People used to make their mortgage their #1 obligation. They would rather pay than be homeless. What madness! With BAC owning the majority of the mortgages, I’m betting the future rhymes with the past.  I’m betting on the side of the greatest investor of all time and plan to profit right along with him.










Market Cap

78.64 Billion

Dividend And Yield

0.04 (0.50%)

Price/Cash Flow




Motley Fool Caps Rating


Size of Position In Portfolio


From This

I love cars. I nostalgically remember drooling over my former employer’s 1997 Corvette. Like most teenage boys, I had pin-ups of sports cars in my room next to the hot chicks and posters of Depeche Mode, U2, and NIN.  I had a miniature model of a Porsche Boxster on my dresser.  I still long for the day when I can own a 1950s Cadillac.  So, when I heard of a company going public in April called ZipCar, I laughed at how stupid it was. American’s “sharing” cars? Zipsters? In Europe, sure. But not AMERICA! Then, the following happened:

1)  I was dropping off some papers at the University Of Utah and noticed a car sharing automobile parked in the stall. It was U-Haul’s version, but it was still the first shared car I have seen.

2)  The Motley Fool recommended it as a Rule Breaker  in June so I added it to my watch list.

3) I read about how car sharing can be used for company fleet vehicles. This was such a great, money saving idea I talked to one of my clients about it.

Then it clicked. This contrarian idea may not be stupid at all. It could be revolutionary. It could be the future.

Two weeks ago, ZIP reported massive revenue growth of 34% and an increase of its members by 29%. Yet yesterday, it hit a 52 week low (25% decline in the past 5 days and 39% drop since its peak! When it recovers, it will be an easy double).  Great company, broken stock. My favorite.  So, I just started a partial position (my wife said “It’s not done falling.” which I responded “Exactly. Wide scales!”) in ZIP at 684 million (market cap).  I’m an optimist, but I’m not stuck in the past. This is why I’m betting America’s auto love affair peaked in the 1900s:

1) Cars are uglier than ever. They remind me of the toy cars at our nearby theme park, Lagoon. If we loved our cars, would we really drive a Smart Car?

To This

1) The middle-class is shrinking and the cost of gas is increasing. People are driving less because of the cost of gas. According to AAA, the average person spends $10,000 a year for the privilege to drive (add up your car payments, insurance, repairs, and gas costs. What do you pay?). More people are car-pooling and taking public transportation.

2) Renting music, movies, books, and houses is more popular than ever. Unless you’re rich, owning is becoming passé.  The green movement is stronger than ever (each Zipcar shared takes at least 15 personally-owned vehicles off the road.)

3)  Dean Kamen, inventor of the Segway, once mentioned in an interview that it’s stupid to move a 200lb person with a multi-ton machine. That point has stuck with me. So has the thought that we dedicate huge portions of our houses to storing these beasts.

4) Anyone who has traveled to France will most likely testify to the efficiencies of the Metro and how nice it is to not have car. On my last trip I felt this exact same way, except when I went grocery shopping. ZipCar is perfect for this situation.

5) Ever borrow a pick-up from your parents? I did last week. You can reserve pick-ups or a swanky BMW without the bother or the budget.

Then, I realized Zipcar has my favorite type of business model, subscription! Members pay an annual fee of $60 and around $8 an hour (which includes insurance, cleaning, maintenance, AND gas!) when they are driving. You swipe the windshield with a smart phone or ID card to get into the car. Instead of being like Hertz or Enterprise, this business model could be more like Costco or Netflix. Costco makes almost all their money from membership fees, not product sales (which are sold almost at cost). Ever pay an annual fee to rent a car from Enterprise? Me neither.

I posted a Facebook update about car sharing, and only one person responded. I’ve only seen one car-sharing automobile in Utah. Zipcar isn’t in Utah yet, it’s still a baby. Buying babies and holding until adulthood is how you get rich. In the US (they own UK’s version called Streetcar) they are only in 14 cities and 230 universities. A decade ago I was testifying to friends and family about the revolutionary iPod and the game-changing Netflix. Investing in strong trends early is key to building wealth. This may be the next strong trend.

Zipcar has built their own new world and it could easily implode. This is an extremely risky investment. Alternative energy or cheap gas, a rising middle-class, population shrinkage, cultural trends, flying cars, competition from the big boys, etc. Also, you still have to get TO the car. Right now, this model works much better in Manhattan than in Texas. But, when companies invent their own world take a look at your feet, you may be walking on a yellow brick road.










Market Cap

684 million

Dividend And Yield


Price/Cash Flow




Motley Fool Caps Rating


Size of Position In Portfolio


Since my last post, I also did the following (you can always follow along with every buy/sell on Facebook)


Sold entire position of #VITA @ $3.82. After terrible sales of Cortoss, last August, Jedi David Gardner said sell. I agreed but wanted to sell into strength. Today Stryker announced they are buying VITA. I held VITA for 1 year and 3 months. A 40% one-day increase is the moment I have been waiting for.


*click**click* RELOAD of #UA @ $65.64 (5% of portfolio) and @LULU @ $89.49 (5% of portfolio)


Taking advantage of the S&P USA downgrade. Picked up #MAKO @ $22.43 making it 1.6% of my portfolio. MAKO Surgical has been delivering on their promise to change the world through robotic knee and hip surgery and is the 905 million little brother of Intuitive Surgical. Picked up #WM (Waste Management) @ $29.14 making it 1.7% of my portfolio. With a 4.68% yield and decades of trash to come I love picking this up at a 52 week low. MAKO reports earnings tonight. Normally I wouldn’t buy right before earnings but MAKO sold off almost 10% today making it worth the risk IMO. August 9th, Got really LUCKY here! MAKO closed up 35% from yesterday after blowing away earnings. That’s a record for me! Usually 1 billion companies never have days like this. WOW.

Note: This applies to my limited interest in trading, not investing

Peter Lynch describes buying a plunging stock as trying to catch a falling knife. I know exactly what he’s talking about as I’ve bought stocks on their way down to zero. I was hoping for a recovery, like in the case of my five-bagger with Ford (F), only to be greeted with bankruptcy. For every Ford I find I can have four losers and still break even. Not bad. But, these losers can take years to turn around (like my current trade with National Bank Of Greece (NBG)) and take nerves of steel.

I’ve got a new strategy I would like to try for my trades (I still love buying falling stocks for my 30 year investments). Buying The Right Of The V is an attempt to buy a recovery story near the beginning of its recovery. The advantage of buying a stock on its way down is its always on your radar. When good/bad news hits the stock, you know, because the stock will swing in double-digit percentages. With this new strategy, I’ve created a watch list called “Bankruptcy Watch.” In this list, I keep track of turnaround stories I’m interested in. The trick here is when a stock gets hammered, I edit the cost basis on my watch list as if I were doubling down on the stock. If a $5 stock rally’s 50% to $7.50, that’s a huge move and probably means the fundamentals have improved. If it was on my watch list at $10, it would look like a 25% loss. A loss might slip under my radar, but, a 50% gain? I won’t miss that. Adjusting the “virtual cost basis” on the way down is a crucial component to this strategy. Another crucial component is to find out what caused the massive move. I’m waiting for the moment the fundamentals change. Stock price alone won’t tell you this, but it’s a great alarm system.


I’m trying this strategy today with the hated, worst-of-breed discount grocer, SuperValu Inc. (SVU). You probably know them as Albertsons, Cub Foods, Jewel-Osco, Save-A-Lot, Shoppers, or Acme. Since 2007 their sales have been on a steady decline, and their debt increased to a massive 7.4 billion. The market has punished SVU with a 80%+ decline which is why it’s been on my “Bankruptcy Watch” list for the past 8 months. But, I think the stock bottomed in January because things are getting better. SVU beat analysts’ expectations and gave positive 2011 guidance with their latest quarter. They are paying down another 500 million in debt with their improved cash flow. SVU is less bad than it was a year ago and was rewarded with 55% increase in share price since it’s January bottom. Motley Fool Hidden Gems analyst Seth Jayson 8 months ago mentioned this story and its been on my radar ever since. He has recommended it and purchased it three times already for his Hidden Gems service. I have been watching and waiting for that quarter that signals SVU is off life support and ready to fight. The one major disadvantage of waiting for the company to improve is you miss the bottom and some of it’s easy money. But, Seth Jayson is a brilliant analyst, and extremely conservative. He thinks SVU can reach at least $16-$20 a share by just becoming mediocre. I agree with his logic.

Even though I missed the first 55%, I think I can still land a double-bagger trade here with less risk because the fundamentals are finally starting to improve after 4 years of pain. I’ll be selling SVU after a double. I typically avoid grocers like the plague and only like this company as a recovery play. That’s the strategy of Buying The Right Of The V.










Market Cap

2.41 Billion

Dividend And Yield

$.35 (3.07%)

Price/Cash Flow




Motley Fool Caps Rating

3 Stars

Size of Position In Portfolio



Anyone who invested $1,000 in Nike (NKE) in 1980 would be sitting on at least 120 times their money ($120,000, not including dividends). Any parent who would have purchased just $100 worth of Nike stock with their kid’s $100 Air Force 1 sneaker would be sitting on $12,000 for college.

Nike was born in 1964 and was a household name in 1980. I’m sure many people thought they already missed the Nike train in 1980. But, “Nothing succeeds like success.” Only investing in the cream after it’s risen to the top has proven to be a great investment strategy over the decades. Look up the charts from the companies that made your favorite products when you first discovered them and you may be surprised at their massive gains.

Since Doc Brown hasn’t invented the Flux Capacitor to send me back to 1980, my strategy is to find the next Nike, and invest like it is 1980.

Only about 1/8th the size of Nike’s market capitalization, Lululemon Athetlica (LULU) and Under Armor (UA) are both 13 year olds that look like they might grow up to be Nike some day.  Jim Cramer would say I should only own one to stay properly diversified. But, when trying to predict the next 30 years, I have no idea which one will do better or even exist in 30 years. Great investors sketch the future, bad investors try to photograph it. I’m going to sketch the future by buying both.  

Lululemon Athletica

This is a company I didn’t even know existed a month ago. My wife confused it with Gap’s Athleta brand when I asked her about it. Jim Cramer mentioned it a couple of times on Mad Money. Then, Motley Fool’s David Gardner suggested it as not only a Rule Breaker but a Rule Breaker Core. Rick Aristotle Munarriz called it “The Hottest Retailer in 2011.” Lulu launched their first store in 2003, IPO in 2007, and their online store in 2009. No wonder I haven’t heard of Lulu, she was just a baby!  OK investing universe, you have my attention. I LOVE babies.

Though plenty of Americans still tie their ego to the price of a product, most men I know follow Tyler Durden’s advice (“You aren’t your f$#@% khakis”) when it comes to gym clothes. I wear the same decade old t-shirt and shorts to work out. Women are the polar opposite in this category however and that’s what gives Lulu an edge over Under Armor. Lulu was created to fill the void in athletic wear for women. Do you think of women when you think of Nike or Under Armor? Me neither. Lulu has invented a world where women rule the gym. When companies invent their own world take a look at your feet, you may be walking on a yellow brick road.

$350 for True Religion jeans, $200 haircuts at Lunatic Fringe, and shopping 399 hours a year is why women rule the shopping universe. Lulu is bringing Women’s fashion to the gym and now they’re sweating gold. Net revenue increased from 40 million to 459 million from 2004-2009, an astonishing 60% compound annual growth rate. They increased cash from 3.8 million in 2006 to 159 million in 2010. No debt. 31% growth in comparables in 2010. Lulu only has 100 US stores, only a few per state. They plan on growing to 300 US stores. If they can successfully execute growth to 300 stores expect the stock to soar. As Cramer says, “Growth is rocket fuel for stock price.”

A primary concern of mine is the mainstream appeal of exercising. With record obesity rates in America, exercising isn’t trendy like it was in the 80s (Thanks Schwarzenegger and Stalone!). I also typically avoid retailers like the plague as most middlemen can be easily replaced. They have no moat. However, when the retailer makes the product they are selling, brand loyalty becomes their biggest asset (think Victoria Secret, Starbucks, Apple).

In my next update, I’ll cover why I like Under Armor. Here are my purchase stats for both stocks:

Price $71.87 $59.41
FPE 38 30
PEG 1.56 1.70
Market Cap 5 Billion 3 Billion
Price/Cash Flow 32 33
ROE 30 13.20
Motley Fool Caps Rating 1 Star 4 Stars

I also purchased more NFLX @ $205.00 because I think the fears of Facebook and Amazon are over-blown. Doubled down on BYDDY @ $9.06 to turn a -28% loss into a -12% loss. Only 3% of China owns cars and I think China’s biggest home grown automaker will eventually be able to compete with GM and Ford. View the entire portfolio here:

Off to the gym….


There’s a saying, “The biggest risk is not taking risk” that applies to our investing youth today. Headlines everywhere are talking about how twenty-somethings are shunning stocks and staying with terrible CDs. This is a major mistake that’s going to prevent Generation Text from ever breaking the chains of their day jobs. What they don’t realize is now is the time to take the most risks in their life. If they fail, they have more time to recover than they ever will. Nothing is more valuable than time.

This philosophy is why I like to start the year with my most risky investments first. I’m younger in January than I will be in December. I also like to pretend I’m a professional hedge fund manager, and have to hit a yearly target. I have an entire year for my thesis to evolve. If one of my risky investments tank, I have more time to adjust accordingly before the year ends.  

The majority of people chase performance. They think the stock that did the best in 2010 will also do well in 2011. Though this is true for the best growth stories in their early stages, overall the facts prove this is wrong. Peter Lynch, one of the greatest investors of all time, beat Warren Buffet from 1977-1990 with a 30% annual return running the Fidelity Magellan fund. To understand what amazing performance this is, $30,000 becomes a million in just 13 years when it compounds at 30% (and yet it’s legal for credit cards to charge this rate). Instead of buying that SUV, you could take a flux capacitor, give the money to Peter, and come back a millionaire. Simple enough, right? How lucky his clients must have been to be in the right place at the right time? Unfortunately, no! The majority of his clients tried to time him and pulled their money out of the fund after a bad year and poured money in after a good year. They missed the huge gains and got the big losses. Because of this, they actually lost to the market.

I don’t chase performance, I do the opposite. I look at my biggest losers of 2010, find out why they are losing, and see if my investing thesis still holds. If it does, I like the stock more because it’s cheaper. That’s exactly the case with National Bank Of Greece (NBG), and that’s why I doubled-down. My investing thesis on NBG hasn’t changed and it’s almost been a year. I still don’t think Greece is going to default, and agree with Dr. Bob Froehlich position on the PIIGS. The French and Germans won’t allow defaults because everyone would fall together.

I believe Greece will turn between 2012-2014  because of this data and will sell the position after it’s recovered. This isn’t an investment, it’s a trade.

This is a volatile stock. I bought more of  NBG on January 6th  when it hit its 52 week low. Thanks to DCA (Dollar Cost Averaging), it turned my 38% loss to a 19% loss. It dropped another 8%, only to rally 16% from its bottom in just three days because of a successful Porteguese bond auction. Portugal is the P in PIIGS, and the market figures if people are still buying their bonds then they won’t need a bailout. NBG is cheap because the market thinks of the PIIGS the same way it did about American banks two years ago.

This is an extremely risky stock. Though buying a stock on its way down can be a great way to lose money, I only need to find one Ford (450% gain) for every four bankruptcies to break even. Those are great odds!  NBG still only represents 7% of my portfolio.  Enough to where it has already helped boost my annual return by 4% in the past 3 days, but it won’t kill me if they default.

If a stock goes to zero you want it to break your leg, not put you in a coma.


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!


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!



Sam Adams takes up 1/6th of the Beer Rack space at the Sugarhouse state liquor store in Utah. Nice rack for only 1% market share!

Sam Adams takes up 1/6th of the Beer Rack space at the Sugarhouse state liquor store in Utah. Nice rack for only 1% market share!

In 1999 when I was practically living at the bars (more specifically, Salt Lake’s Port-O-Call (R.I.P.)), I would always order a Red Bull and vodka. Energy drinks were the latest fad, and you couldn’t go anywhere without seeing a Red Bull or Monster drink on the shelves or in the hands of a college kid. The universe was screaming “Buy energy drinks!!” and due to my most recent obsession with tech stocks, I ignored the maker of Monster Energy drinks, Hansen Natural (HANS). I missed a gain of 6,000%, a gain dreams are made of. Had I just invested one month of my bar tab ($1,000), I would be looking at $61,000 right now.

Watch for trends everywhere. When the universe screams, listen!

I missed the early years of craft brewery revolution too. 840 micro breweries started in the USA since 1980, 470 still exist. I noticed an increase of craft beers at parties but didn’t notice in an investing sense. Then, the universe screamed to me again, and this happened.

1)      Motley Fool’s Stock Advisor David Gardner picked Boston Beer as their stock for June.

2)      A few days later, while at the gym, I stumbled across “Beer Wars” on Netflix and watched it. Boston Beer’s founder Jim Koch was interviewed and made me realize “I’m living through the rebirth of the microbrew revolution.”

3)      My brother-in-law brought over Sam Adam’s Boston Lager to dinner. It’s his favorite beer.

Even though this revolution is well on its way (and has had a lot of casualties), I would rather jump on a moving train that hasn’t reached its destination than miss the entire ride.

As I type this, I’m drinking Samuel Adam’s Coastal Wheat brew (I’m out of my favorite Blackberry Witbier) to celebrate our starting position in SAM for $66.67 a share. You can see our entire portfolio here.

Here’s is why I think the universe is right and why I love Boston Beer (the company):

1)      Motley Fool’s Tom Gardner says insider ownership is the most important factor in the success of a company. I completely agree. When a company is a person’s baby instead of a paycheck, the company will probably grow to be a grandpa and outlive the father.   Common stock holders of SAM have no voting rights! Only class B shareholders do. Jim Koch owns 100%  of the class B shares and therefore controls most the company.  He owns 33% of the total company. Mr. Koch is a Harvard educated lawyer and MBA that gave up his consulting job to follow his passion.

2)      Boston Beer is younger than me, only 26 years old. It went public the year I graduated high school, 1995, and currently only employs 780 people. Production has only doubled since going public, from 1 million barrels to 2 million barrels. Even though SAM is the largest indie brewery in America they only make up 1% of every beer sold (the two majors Miller-Coors and AB make up 94% of sales). Craft brewers have been growing for five years straight since 2004. Plenty of room for growth! Corporations are people. They live and die just like people. Buy the babies, sell the grandparents.

3)      SAM’s Beers have won 1,424 awards in the past 10 years. First American beer sold in Germany (1985) and they invented the “born on date” in 1988. Named supplier of the year by Outback, TGI, and Darden.

4)      Like Coke’s secret recipe, SAM has a proprietary, protected strains of yeast it uses. SAM has a wide variety of great drinks including: Samuel Adams beers, Twisted Tea, Longshot contest beers, and Hardcore Cider. Also teamed up with the world’s oldest brewery, Germany’s Weihenstephan (founded in 1040 AD) and has a new beer (late 2010) which follows the 1516 beer purity law, the Reinheitsgebot.

5)      They treat their employees and community right. For over 3 years, they have loaned $7,000 (on average) to over 38 New England low income small business owners in the food and beverage industry during the recession via the American Dream Program. They created an employee weight loss program where employees lost a combined weight of 1 ton. Through the Long Shot contest, Sam Adams fans/employees brew their own beers for inclusion in the yearly Long Shot six-pack combo.

Here’s is why I think the universe is right and why I love Boston Beer (the stock):

1)      SAM stock has only doubled since its 1995 IPO and is currently valued at 950 million. Though savvy investors who bought post IPO (late 90s) could be sitting on a 600% gain, there is still a lot of upside here. Anheuser-Busch (BUD) for example is valued at 87 billion, more than 87 times more than SAM. Will SAM be the next BUD? If not, even getting a quarter of the way there will lead to huge gains.

2)      SAM repurchased 211,420 shares of its own stock in 2008 and 2009 at the excellent average price of $33! Well done Jim!

3)      147 million in property assets. I love companies that own lots of land in desirable areas. 

4)      39 million in cash on the balance sheet and zero debt

5)      Increased their cash 5 fold from 2008 to 2009.

6)      From 2005 to 2009 they almost doubled their sales and their net income!

7)      Stock trades only 16 times trailing free cash flow and has a 14% annual growth rate

8)      Generates almost 25% return on invested capital

9)      Stock has had a nice 7% pull back in the past 5 days. Normally I wouldn’t buy the day earnings will be announced but I think the “sell the news” may already be priced into the stock. SAM completely missed yesterdays major rally (indexes up 2%+ on average)

10)   Forward PE of 21 and a peg of 1.73. Not cheap, but still a fair price for it’s growth.

Though this David might not be able to take down the two Goliaths that control 92% of the beer industry, I’m betting that SAM will easily be able to beat its current 1% market share which will lead to major profits. Cheers!