The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: ctuser1 on July 21, 2020, 08:36:14 AM
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I used to hunt single stock names.
My last "successful" bets were:
1. AAPL. I got in after Jobs died, and P/E was ~10, with $80k. With dividend reinvestment, growth and P/E expansion, that position is now worth $400k+.
2. INTC. I got in @<$20 many years ago. No p/e expansion yet, but growth pushed it to $60. Not bad, not great either.
3. NSC. Railroads were relatively cheap around 2009/2010 (not as cheap as 2000, but still), so I bought $10k. It's grown 3X+ now.
Of course, may other bets I placed failed (XOM, GSK, IBM, WFC) and some others have been in the "meh" territory (BAC) so far.
Now that I am so overweight AAPL (if I count the index fund components - I have $500k+ in AAPL), I am looking to diversify that position over the next year or two.
My investment philosophy:
(Feel free to shoot as many holes in it as you prefer. "Constructive" ideas are more useful for me, and hence welcome.)
1. Investment return is driven by (exponential) growth, not linear processes. So, there is no reason to invest if growth is not the primary focus.
2. Risk of failure is magnified when an asset is overvalued. So, don't bet > 5% of net worth on single stocks with PE > 20. When a specific stock provides high conviction and compelling value (e.g. AAPL did after Job's death), going in with a much larger % may be okay.
3. Index funds minimize single stock failure risk, and yet provide exposure to all growth stocks. So, S&P 500 index is my "default" option.
4. My risk profile is very aggressive till I reach my (crazy) definition of "Lean FI" @$2M in liquid, invested assets not earmarked for anything else. After I go lean-FI, my risk stance will go down to merely "aggressive" and I will need to learn about the world of Fixed Income investing.
So, where to move the money (ignoring the default option of VOO for the time being)?
1. VOO/FXAIX? This is the default, after all.
2. VUG?
2. VOX?
3. VGT?
4. MSFT? Yes, another compelling growth name comparable to AAPL. It is much better to be diversified into AAPL and MSFT than be all in only one of them.
5. GOOGL? Similar to AAPL/MSFT in growth potential + valuation. If we are talking about diversifying among similar names - 3 is better than 2.
5. MU? Another tech name I have been following for years. It never hit my cutoff point for buying - so I have not so far. But I do expect it's profits (and hence stock price) to skyrocket 2X/3X once the memory prices come back from the slump + it has a potential growth driver in X-Point memory.
What do you think I should do?
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I am a huge fan of MSFT but I have diverted most of my investments towards higher upside plays right now.
Here are some of my high upside value picks.
PLYM - Compared to its much larger peer industrial REIT STAG, it has quite an inexpensive valuation given their FFO/Market cap ratios. I am bullish on industrial REITs as they seem well positioned in the current environment and PLYM's leadership is very tuned into the logistical landscape and how it is evolving.
MIND - Down because its fracking heyday is in the rearview, but they have strong potential to profit off their new diving and surface aquatic drone technology which is likely to be purchased by US and Western allied forces soon.
EURN/FRO/TNK - Tankers. Tankers as they are almost universally hated. But they are insanely cheap and are kind of a bet against geopolitical cohesion, as sanctions limit supply and cause rates to go up. Not to mention the historically low order book.
SI - The bitcoin bank. Not much else to say. But it's pretty cheap and crypto use seems like it will inevitably rise.
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AAPL AMZN NFLX GOOGL FB MSFT SHOP RNG ZM DOCU RNG NET ZS FSLY TWLO AVLR COUP DDOG WORK ADBE CRM TSLA NOW OKTA
That’s a pretty diversified list that should do well the next 5-10 years.
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AAPL AMZN NFLX GOOGL FB MSFT SHOP RNG ZM DOCU RNG NET ZS FSLY TWLO AVLR COUP DDOG WORK ADBE CRM TSLA NOW OKTA
That’s a pretty diversified list that should do well the next 5-10 years.
Definitely, but those are all pure growth and IMO fully valued to over valued.
But of course they will no doubt do well in the future as they'll still be overvalued in 10 years ;)
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AAPL AMZN NFLX GOOGL FB MSFT SHOP RNG ZM DOCU RNG NET ZS FSLY TWLO AVLR COUP DDOG WORK ADBE CRM TSLA NOW OKTA
That’s a pretty diversified list that should do well the next 5-10 years.
Definitely, but those are all pure growth and IMO fully valued to over valued.
But of course they will no doubt do well in the future as they'll still be overvalued in 10 years ;)
In this environment you're either growing (so expensive) or you're dying (cheap). Hard to find a company that has really good future prospects and is not 'expensive' according to a traditional value investor.
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Oooh fun! Fantasy Portfolio!
Questions: is the objective to diversify? Is this a taxable account?
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Oooh fun! Fantasy Portfolio!
Questions: is the objective to diversify? Is this a taxable account?
Yes, primary motivation is to diversify, while still keeping very aggressive/growth posture. Of course I would like to pay as little as possible for the growth potential. :-d.
I don't trade more than once or twice a year at max. I have not touched the single stock portion for almost 7 years now and it has gotten very concentrated at this point.
Tiny portion taxable (< $60k). Rest are in Roth IRA (~20%) and rollover IRA (rest). Total single stock position (without considering the index components) = $550k. AAPL = $430k of that.
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AAPL AMZN NFLX GOOGL FB MSFT SHOP RNG ZM DOCU RNG NET ZS FSLY TWLO AVLR COUP DDOG WORK ADBE CRM TSLA NOW OKTA
That’s a pretty diversified list that should do well the next 5-10 years.
Definitely, but those are all pure growth and IMO fully valued to over valued.
But of course they will no doubt do well in the future as they'll still be overvalued in 10 years ;)
In this environment you're either growing (so expensive) or you're dying (cheap). Hard to find a company that has really good future prospects and is not 'expensive' according to a traditional value investor.
I actually think the opposite. Plenty of decent grow stock that are being hammered by the virus. I think most holidays and travel stock have tanked. Some of them were growing consistently and were expensive until Covid stroke.
We all know the virus will be temporary, so the idea is to look at stock that are overly discounted now and should do well over the next 10-20 years period.
I looked at few UK stock such as NEX (coach company) or JDW (pub chain) and put small amount in it to average down. I know it may keep going down but long term it will recover and should do well.
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Oooh fun! Fantasy Portfolio!
Questions: is the objective to diversify? Is this a taxable account?
Yes, primary motivation is to diversify, while still keeping very aggressive/growth posture. Of course I would like to pay as little as possible for the growth potential. :-d.
I don't trade more than once or twice a year at max. I have not touched the single stock portion for almost 7 years now and it has gotten very concentrated at this point.
Tiny portion taxable (< $60k). Rest are in Roth IRA (~20%) and rollover IRA (rest). Total single stock position (without considering the index components) = $550k. AAPL = $430k of that.
Ok. So my impression is this is a fantasy portfolio where the investor is focused on maximum gain, is US centric, and has a tech itch. Taxes are mostly not an issue as investments coming from tax favored accounts. Minimum trading although there is some willingness to rebalance over long time periods. Fairly long investment horizon. Do I more or less have it?
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Oooh fun! Fantasy Portfolio!
Questions: is the objective to diversify? Is this a taxable account?
Yes, primary motivation is to diversify, while still keeping very aggressive/growth posture. Of course I would like to pay as little as possible for the growth potential. :-d.
I don't trade more than once or twice a year at max. I have not touched the single stock portion for almost 7 years now and it has gotten very concentrated at this point.
Tiny portion taxable (< $60k). Rest are in Roth IRA (~20%) and rollover IRA (rest). Total single stock position (without considering the index components) = $550k. AAPL = $430k of that.
Ok. So my impression is this is a fantasy portfolio where the investor is focused on maximum gain, is US centric, and has a tech itch. Taxes are mostly not an issue as investments coming from tax favored accounts. Minimum trading although there is some willingness to rebalance over long time periods. Fairly long investment horizon. Do I more or less have it?
Yes. I think you have captured it perfectly.
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How do folks feel about junior mining stocks? i have seen many go 4-12x+before being scooped up bought by major companies.
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How do folks feel about junior mining stocks? i have seen many go 4-12x+before being scooped up bought by major companies.
I am starting to think I might not be the only person familiar with the Classic Value Investor Mariusz Skonieczny :) He's the reason I invested in Mitcham.
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AAPL AMZN NFLX GOOGL FB MSFT SHOP RNG ZM DOCU RNG NET ZS FSLY TWLO AVLR COUP DDOG WORK ADBE CRM TSLA NOW OKTA
That’s a pretty diversified list that should do well the next 5-10 years.
Definitely, but those are all pure growth and IMO fully valued to over valued.
But of course they will no doubt do well in the future as they'll still be overvalued in 10 years ;)
In this environment you're either growing (so expensive) or you're dying (cheap). Hard to find a company that has really good future prospects and is not 'expensive' according to a traditional value investor.
I actually think the opposite. Plenty of decent grow stock that are being hammered by the virus. I think most holidays and travel stock have tanked. Some of them were growing consistently and were expensive until Covid stroke.
We all know the virus will be temporary, so the idea is to look at stock that are overly discounted now and should do well over the next 10-20 years period.
I looked at few UK stock such as NEX (coach company) or JDW (pub chain) and put small amount in it to average down. I know it may keep going down but long term it will recover and should do well.
I'm a little less optimistic about the virus being temporary. Or rather, the virus's effects being temporary.
Any business model that requires people to be closer than 6ft apart seems like a shaky investment right now. Restaurants and airlines already have tight margins and having their costs go up to so they can continue in a pandemic environment is not going to work very well for them.
I'm no virologist, but if Covid19 ends up being like the seasonal flu where the vaccine is nowhere near a knockout blow then we might just end up with something of a new normal in terms of distancing and business models will have to be adjusted for that. The prospect of long term distancing makes airlines and restaurants way less profitable and therefor way less valuable.
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2. Risk of failure is magnified when an asset is overvalued. So, don't bet > 5% of net worth on single stocks with PE > 20. When a specific stock provides high conviction and compelling value (e.g. AAPL did after Job's death), going in with a much larger % may be okay.
If you need a PE under 20 on a growth stock, that's a tough ask. But I did some digging and I think I found one that meets your criteria. I even bought 50 shares myself.
CGI is a Canadian IT consulting company. Trades as GIB on the NYSE.
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I believe the seasonal flu is actually 150+ different strains of virus. That's why each year's vaccine can't wipe it out - they just target several of the most popular strains for the year. With Covid-19, it's all considered one strain despite some minor mutation - the spike protein and other key features do not seem to have changed. So the vaccines will target all of Covid-19, while no vaccine has targeted all strains of the seasonal flu.
I have a spreadsheet tracking 29 different "front runner" treatments and vaccines. There's dozens more behind them - with the entire health industry focused on one goal, I think it makes sense to bet with them. Many companies are even ramping up vaccine production "at their own risk", meaning before approval. Some may fail in stage III trials, but there's so many, some will get through testing, and be approved.
I think a year from now, we'll have vaccines... but that don't last that long. Maybe 3-6 times a year, everyone needs a Covid-19 shot (technically a Sars-cov-2 vaccination). Some people will get lazy or forget, and small outbreaks will occur... but if most people can get vaccinated every so many months, it could be almost entirely over.
Maybe that just reflects how I'm investing. Any one of my deeply discounted individual stock picks would, by itself, just be a bet. But pool dozens together, and it's unlikely they all go bankrupt.. so it becomes an investment where I hope the performance outweighs the bankruptcies. In theory, during a recovery, the 3 stocks I've mentioned publicly could go up +130%, +150% and +230% (deeply discounted!).
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OK. Here is my fantasy portfolio. Since we're supposed to name these like "the Coffee House" or the "60/40" or the Golden Butterfly, I think I'll call this one the Krazy Kontrarian:
20% RSP - equal weight SP 500. Why: because I think it's a bad idea to weight cap when that results in the top 10 stocks having a disproportionate share of the $$$. Yeah sure, the FAANGS might go to the moon. I sorta doubt it; their forward potential is likely already priced in.
30% VXUS. Why: because I didn't figure I could get away with 60% for a US centric assumption. I'm fond of saying that "none of us have a crystal ball." But you don't need a crystal ball to see which way the wind is blowing in a dust storm.
20% Cash. I'm thinking about splitting that into 10% cash and 10% TIPs. Why: dry powder. Evening out the dips. And because the Gold Train looks to have already left the station. Plus TIPS are hated right now, so I'm taking a liking to them. Buy low, sell higher.
10% VOE Why: Value is a good place to be. They're beaten down. They also tend to be cyclical; as in they do well at the beginning of a recovery. And why medium cap? They tend to be ignored yet did slightly better than small cap value over the last decade.
20% scratching the tech itch. For this I could go one of two ways: just buy RYT, or take a list of say 60-70 tech stocks and pick 20, 30, or 40 at random and buy in more or less equal amounts. Let them sit and see what happens. I like RYT, but suspect it's re-allocated too frequently. And why pay a management fee if you don't have to?
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Do you know of any good ETF or mutual fund that holds TIPS?
I also have ~48k sitting in my emergency fund right now. Perhaps If I found a liquid instrument that exposes me to TIPS, I could probably dump all of my EF into that.
I know there are long threads in BH (and also here) about emergency fund and how to hold that. I have not gone through all of them so may be missing something obvious why this may be a stupid idea.
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Here’s a link. Fair warning: TIPS carry negative interest rates right now.
https://www.forbes.com/sites/baldwin/2019/07/17/best-etfs-tips/#1a84d294c809
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I am a huge fan of MSFT but I have diverted most of my investments towards higher upside plays right now.
Here are some of my high upside value picks.
PLYM - Compared to its much larger peer industrial REIT STAG, it has quite an inexpensive valuation given their FFO/Market cap ratios. I am bullish on industrial REITs as they seem well positioned in the current environment and PLYM's leadership is very tuned into the logistical landscape and how it is evolving.
MIND - Down because its fracking heyday is in the rearview, but they have strong potential to profit off their new diving and surface aquatic drone technology which is likely to be purchased by US and Western allied forces soon.
EURN/FRO/TNK - Tankers. Tankers as they are almost universally hated. But they are insanely cheap and are kind of a bet against geopolitical cohesion, as sanctions limit supply and cause rates to go up. Not to mention the historically low order book.
SI - The bitcoin bank. Not much else to say. But it's pretty cheap and crypto use seems like it will inevitably rise.
Thank you for all the names that were no in my radar.
I have a small XOM position that has lost half it's value from when I purchased it. I will probably sell that off and go into some oil tankers you have suggested.
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AAPL AMZN NFLX GOOGL FB MSFT SHOP RNG ZM DOCU RNG NET ZS FSLY TWLO AVLR COUP DDOG WORK ADBE CRM TSLA NOW OKTA
That’s a pretty diversified list that should do well the next 5-10 years.
Thanks for the good list. :-).. I will add them to my watchlist and scoop up any of them that are suddenly hated by the market without having any fundamental change.
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MIND - Down because its fracking heyday is in the rearview, but they have strong potential to profit off their new diving and surface aquatic drone technology which is likely to be purchased by US and Western allied forces soon.
To toot my own horn a little, an investment in MIND as of 7/21 would be looking pretty good only a few days later :) I only had about 3 grand in MIND so today's boost didn't quite FIRE me ;)