Alright! After spending 2 weeks sifting through thousands of stocks. The construction of the mini growth portfolio is finally completed! I can't give away the hard work right away. Maybe I'll share the holdings after couple years.. Majority of them, 60% of the stocks, I just picked from the holding of a Vanguard Growth ETF, I think I found 100 out of 1000. For the remaining stocks,I found them myself. Today I added the last 17 stocks to the portfolio and the total number of stocks is: :
157.
What I meant by not following blindly is not just go out there and buy 150 stocks. I am VERY PICKY about what to buy for the growth fund. I am taking about picking 1 stock out of 10000 with a target long term return of at least 15%+.
To give you an example of bad stock picker, check out Dividend girl's holding, (Myfirst50000). Just google: Dividend girl. what a mess! Most of her holdings are mediocre stocks! The portfolio is very UN-organized with no effective strategy. I guess she picked stocks by feeling alone..
If fund managers pick stocks the way I do, what are they going to do at their jobs for the rest of year? As charlie Munger said something like: if university professors teach investing like Charlie does, the class will be over very soon and what are they going to do for the rest of the semester?
I was thinking about starting a blog to share my investing journey but realized majority of people should stick with indexing and not bother with picking stocks.. and my portfolio will grow to a point where blog income won't matter in a few years. and blogging will consume lots of my time and energy. So I gave up blogging and decided to share something to a small group of unconventional people. I believe MMM group is a group of very educated and intelligent people and unconventional. Still, most people are against my idea.
I've decided to share the last 17 stocks I added. I've created a tracking spreadsheet for these 17 stocks for anyone to view with the link and my comments in Column A. This 17 stocks combo will be a small part of my portfolio.(11%). It tells something about my selection style and won't match my portfolio performance 100% but should reflect the quality of the whole portfolio.It contains only 17 stocks and performance will be volatile.
It's fine to hold just 20 stocks in a blue chip portfolio. But 20 stocks is still too few to me. The risk of even one stock doesn't go as planned will severely lower the return. For me, it's far easier to use a sound selection method find a group of quality growth stocks that will turn out okay on average than say picking 10 to 20 successful growth stocks... The fewer the numbers of stock, the more it's like gambling. Right/wrong consequence is huge. Having large number of growth stocks is fine as long as they are the similar quality and have equal potential to grow at 15%+ per year in the future because not all businesses grow at the same rate. Even in a group of growth stocks, some will grow faster. Some will grow slower. Occasionally, we are wrong about some stocks.
The idea of having 157 stocks is to capture as many potential multi-baggers as possible. My picking method asks for at least 15% per year return in the long term. With that mental filter, I was able to find only 157 stocks. It's not exact science, maybe there more out there and that's okay. I avoid so many unwholesome industries: weapons, alcoholic, tobacco, cemetery. Generally, I don't buy any stocks that I don't enjoy using their product/service myself. There are many ways to make money.
To tell you a secret, I've read many investing books and I don't think books or people mentioned this. The stock price behaviour reflects the quality of the underlying business. If a business is low quality, the stock price will be very volatile and lots of big up and downs. High quality business's stock price go up surely and steadily over long term. Stock price is forward looking, if the revenue/profit doesn't increase steadily and surely, the stock price will go flat line. Then you have rate of growth to look into. I can find plenty of stocks to get 10% to 15% return but that's not the best return possible for buy and hold. Then you need to look at if there's a market demand for the stock. It's rare but sometimes, I encountered stocks with nice growing revenue and profit but no body buys it! The stock price went nowhere for years. Maybe the market knows something I don't and I avoid this kind of stock. I don't spend too much time on each individual stock. I apply the law of least amount of effort to get maximum result in life. (Pareto principle).
I used a little bit of leverage to boost the numbers of stock to 157 but all return numbers here doesn't include the leverage so the YTD return is NON-leveraged performance!. The calculation for the 157 stocks is the same as the 17 stocks tracker.
With back testing, the average return of the 157 stocks is 25% per year over the past 5 years. For back testing, it CAN and CAN NOT predict future returns depending on what moves the stock price.
If past performance is based on underlying business performance, back testing CAN predict future returns. If the past performance is based on speculation without relation to business performance, then back testing CAN NOT predict future return.
On a daily basis, the 157 stocks portfolio go down less than the index and go up more than index,so in the long term, there's a big gap in performance between a group of quality growth stocks and index. Watching my portfolio to pull away from the index return is what give me the confidence not to worry about individual stock performance and focus on the whole thing and think long term. Today: 1 stock went down 13% and 1 stock went up 20% because of earning release: 1 missing estimate and 1 beating estimate. Most of the stock are pretty calm. and the whole portfolio is up 1% as I am writing this post 12:40PM ET. Meanwhile, TSX is up 0.1% and SP 500 is up 0.5% today. Whole portfolio is up 4.42% YTD.
Here's the link to the 17 stocks:
https://docs.google.com/spreadsheets/d/1R0vNQvZCujwG8uhoPfiOo-j7CTUC5sj309NZGCuW9fQ/edit?usp=sharingThere are two tabs. 1st tab is the stat. 2nd tab is the holdings.
If you like this tracker, I think you can download it and upload to your google drive and modify to track your own portfolio. I just love google service: google keep, google drive. It makes my life and investing much easier. If you are in US, and don't need to CAD conversion, just delete the conversion formula.
I'll share more in the future.
17 growth stocks:
Note: Ticker
Revenue growth is not fast. Market is pricing in the extremely long term view. MLAB
New kid on the block. Lots room to grow. XPEL
Similation SW. High growth rate and profit. SLP
small cap fast grower. PAYS
Mid cap steady grower. NOW
Bring reputation back to mortgage. More growth to come. NMIH
plane engine leasing.. WLFC
FinTech. SSNC
Fast growing community bank. CARO
It provides service to connect lender and borrow. TREE
Fast growing community bank. NCBS
US housing is just slighly above 2007 peak. More room to grow. LGIH
US housing is just slighly above 2007 peak. More room to grow. IBP
Rare to find EU growth stock. Why not give it a try? MIME
Monopoly in Chip Lithography equipment. Mid cap. Just buy as admiration. ASML
Mid cap steady grower. AVGO
Rare to find Chinese growth stock in US exchange. Lots room to grow. TAL