The Smelloscope is a game I created for myself to help make investing more fun. The Funkometer is a way of measuring what I’ve sniffed. I’ll talk more about this in future posts. But first I’ll introduce myself... I’m 38 and have been investing and trading for about 10 years. I’ve had solid results overall, but I know enough to know that I don’t know much. My partner and I pull in a modest income, no shiny inheritance or retirement package on the horizon. We bought our first house last year. Other than the mortgage, we don't have any long term debt. Life is good, and so here I am trying to keep it that way. The main reason I’m starting this thread is because I want to learn. Secondarily I’d like to discuss stocks and ETFs that are worth holding for between 3 and 30 years. I’m not promising I’ll be here for a long time. But unless the gods strike me down, I promise you two solid months of weekly posts. Could be more, won’t be less. So… If you’re brand new to investing- Feel free to ask me questions and I’ll do my best to answer. If you’re somewhere near my level of experience- I’m hoping we can bounce ideas off of each other. If you have outstanding knowledge and experience- I give you full permission to tell me that I don’t know what the hell I’m talking about. (Or if you’re willing to help me learn that’d be even better!)
You've described me 20 years ago, back then at age 34, when we had just bought a first (and only) house. Fanatically controlled spending and double paid the 30-year mortgage each month, so able to pay house off entirely in a little over 10 years. Fully maxed on 401k contributions and otherwise invested our savings (mix of equities, I-bonds, and CDs). Dropped out of workforce 4 years ago at age 50, sold house, and now a full-time traveler (RV'ing in North America & airbnb.com/homestay.com overseas) living off savings/investments. Our variable investment income covers our annual expenses, and our net worth has grown each year since dropping out, so not missing the pay check just yet. Having no debt in mid-30s is huge...allows you to plow as much as you can into savings/investment vehicles (of which your house is one). Not sure if that's also your plan...just wanted to mention my similarity with your current status and how I admire your setting yourself up for more options down the road. Thanks for sharing!
I hope it's more. Your posts have a pleasing fragrance. It's a breath of fresh air to exchange with someone who wants to discuss ideas. Most forum members, of any forum and any topic, for that matter, seem to be vying for alpha leadership more than open discussion. This was wildly obvious a couple of years ago when I was researching bond/debenture market mechanics. I was trying to analyze ETF tracking error and needed some fine details. People would declare their knowledge complete and absolute but they literally couldn't explain the difference between bonds and debentures. I hope I never conduct myself that way. My knowledge is available. Your knowledge is respected. Let's chat.
@Three Eyes Thank you for sharing your story! And congratulations for pulling it all off, it sounds like you're reaping the benefits of a hard-earned and well executed plan. Hugely inspiring!
Haha thanks @TomB16 !! I see that you are a very experienced investor and I'm very much looking forward to reading your posts and discussing ideas.
Lies! We all know the smelloscope was created by Prof Farnsworth and used to sniff out the giant ball of garbage! You simply stole his idea!
CRAP! I've been found out. Whelp, I guess I'll have to head to a new town where nobody knows my name.
As mentioned, the Smelloscope is a game I created for myself in an attempt to make learning and evaluating stocks more fun. The game is named in honor of my favorite scientist (who is currently scheduled to be born sometime during the early part of the 30th century). Here’s how it works: First, I wait for a new moon on a cloudless night, then I climb to my roof and setup a lawnchair. From there, I basically just start sniffing the universe until I find something interesting. Sometimes I’ll be up there until the sun rises, so I always bring snacks and a warm thermos of coffee. Ever since “the incident” I try to avoid beer or other intoxicants which could deaden my senses or cause me to fall off the roof. And rest assured, I always keep my snacks in zip-lock bags so as not to affect the readings on the Funkometer. After finding a specimen and dutifully inhaling an appropriate whiff, I then use the Funkometer to measure the results. Based on the quality of the scent, the Funkometer will produce a score between 1 and 100. Here’s scale: 1 = The smelliest object in the known universe (which as of today, has not been discovered) 2-25 = Alarmingly malodorous 26-39 = Suspiciously stinky 40-49 = Odiferously neutral (mostly ok depending on which way the solar winds are blowing) 50-59 = Refreshingly fragrant 60-69 = Miraculously aromatic 70-99 = Intergalactictably intoxicating (a smell so invigorating that an imaginary adjective was required) 100 = The best smelling object in the known universe (which as of today, has never been smelt) Outside of my imagination, the Smelloscope is a big fat checklist for analyzing stocks and ETFs. I try to evaluate approximately 50 different aspects of a company including: Fundamental value, management effectiveness, insider ownership & activity, recent company & industry news, social vibe, and aggregated analyst opinions. Each category is worth a certain number of points and is weighted according to particular peers and industry. It’s been a fun and helpful way for me to learn, but I guarantee you it’s a flawed system. Which is exactly why I’m here in this thread typing right now… because I want to learn! And I want to have fun along the way. I’m always looking for ways to improve my knowledge and approach, so I welcome your ideas and opinions. ------------------ ------------------ I’ve recently spent many cold nights on my roof here in Chicago, carefully sniffing the sky and recording the results. Thankfully I remembered to warn the neighbors this time, and no police were involved. In the coming days I will let you know what I’ve smelt!
It was January of 2010 when I first noticed a favorable scent wafting from the Semiconductor industry. At the time, INTC seemed like the best option and so I bought in at about $21. The company continued to perform well over the next few years and so I kept holding on. Fast forward 10 years, INTC is now at $57. Not taking credit for gains, I think it was a combination of beginners luck and the fact that I bought in right after a recession. But regardless, I’m wondering: Is it reasonable to keep holding? Or is it time to make a move? To help me figure it out I’ve taken a long hard sniff at: INTC, TSM, NVDA, AVGO, TXN, ASML, QCOM, and AMD. I did most of my research between 11/14 and 11/18. I’m here to learn, so I welcome your thoughts, critiques, questions, learnings, or witty insults. ----------------- ----------------- Semiconductors and Equipment Industry thoughts: Overall, the semiconductor industry still smells fresh. But I wouldn't say it’s a glorious freshly-picked-from-the-garden sort of scent. A more accurate analogy would be to say that it smells surprisingly good for having been in the fridge for a few days. I would totally still eat it, but I’m not going to take a picture and post it on Instagram. Thoughts on value: INTC and nearly all of the peers I’ve chosen have a surprisingly high ratio of current assets compared with long term debt. Most notably TSM, which is sitting on an epic frickin mountain of current assets (849,427M) and a comparatively puny amount of long term debt (40,132M). NVDA, ASML, and AMD also had notably large T.C.A. compared to T.L.T.D. My takeaway is that having strong current assets and low long term debt is normal for the industry, but it still seems impressive compared with other industries I’ve sniffed. Based on the above, it comes as no surprise that TSM has an extremely low price to free cash flow ratio. But something that did surprise me is that despite NVDA’s solid TCA/TLTD, it has a notably higher P/FCF compared with its peers. I’m sure there’s a perfectly logical reason for this, but I didn’t take the time to try and figure it out. AVGO, INTC, TXN, and QCOM all seem to have similar P/FCF clocking in between 8 & 8.6. ASML, AMD, and NVDA have concerning P/FCF. If I were considering buying one of those three I’d want to have a better understanding of what is causing the poor ratio. Of the group, INTC has the most favorable P/B ratio, it also has a steady 5 year trend. Additionally, INTC seems to be priced at a discount compared to its sales with a P/S of .82. TSM is also doing well in both areas with a P/B of 4.7 and a P/S of about 1. INTC’s P/E is 13.6, which is a slight discount compared to its 5 year avg, and significantly discounted compared to the peer group P/E of 32.9. QCOM also has a favorable P/E compared to its 5yr avg and compared to the peer group. TSM has a much higher P/E compared to its own 5yr avg, but is at a discount compared to the peer group. Thoughts on management effectiveness: TXN has an impressive ROE%, ROA%, Gross Profit, and Net Profit with positive 5 year trends in every category. NVDA and ASML also have impressive stats in all four categories with solid 5yr trends. INTC and TSM are a bit lower than the peer average in these areas. The bright side for INTC is that they are showing positive trends. Not so much for TSM, in fact, I’m seeing reasons for concern in their 5 year trends. Thoughts on insider movement and information: As far as I can tell, it looks like nothing exciting is going on recently with this group. INTC is a measly .05% insider owned and has a low volume of buys and sells over the past year. AMD has the largest share of insider ownership at .6%, however it seems to have an unfavorable number of sells compared to buys this year. TXN also appears a bit unfavorable with several recent selloffs. Thoughts on the doubters: With less than 1.25% short interest, TSM, ASML, and INTC seem to have fewer doubters compared to the peer group. AMD has an alarmingly high short interest at 13.1%. If I were considering buying AMD I would want to know why there are so many people who are betting against it. ----------------------- ----------------------- And so, taking all of that (and a bunch more) into consideration... Here’s what the Funkometer is telling me: AMD = 34 QCOM = 37 AVGO = 44 NVDA = 47 ASML = 48 TXN = 49 TSM = 49 INTC = 56 (scale: 1=stinky , 100=fragrant, for further details either ask me or see post from 11/24/19) ----------------------- ----------------------- My personal take-away (which you should not trust because I’m just a random guy on the internet): I’m a little surprised by what I’ve smelt. Since the industry has been exceeding expectations for quite awhile, I expected to detect an underlying foulness. But overall, it seems like there could be several contenders for 1-5 year investments among this group. TSM & ASML both seem to be worth a look for those interested in international semiconductor investments. While INTC, TXN, and NVDA all seem worth a look for domestic semiconductor investments. I’m not sure what to make of AMD. It does have some recent good news and other factors that could make it an interesting 1-3 year candidate. But to me, AMD seems suspiciously stinky. What do you think? I’ve decided to continue holding INTC. Hopefully for at least another 3-5 years. I might even buy a bit more, but I haven’t decided on that quite yet. ----------------------- ----------------------- Would love to hear your thoughts on the industry, the companies, and my analysis. If you’ve got it, please bring it!
well,... I certainly cant help you much on the aroma of your list of fragrances,... But I did buy into NVDA and its doing well,... AND ive given AVGO a good sniff up and down,....my smelling antics are very similar to yours.
@shaw520 It seems like NVDA has a lot of good things going for it, I hope it does well for you. What did you think of AVGO?
AVGO is showing pretty consistent swings at around the 2 month periods,... but its been at its highest swing all of Nov,.. so in my opinion, right now is not a good entry point,...some analyst are saying AVGO is over inflated right now, therefore putting it at high risk and due for a correction,. If you really want in, Id wait till the next dip on that one....but those are just my antics.
You appear to have good analytical skills and a good grasp of financial data. Anyone can learn these techniques, but very few do. You are way ahead of the game in this department for your age. The real question for any investor is.......can you turn this data and your analysis into a portfolio that as a whole produces superior returns. Even with the GOLDEN bull market that we have been in over the past 10 years, very few people come anywhere close to the returns of the unmanaged indexes. So....how do you stand in terms of total portfolio return over the past 10 years. If you are near or above the averages than you are doing fine.....just keep doing what you do and dont over-analyze. This is where people have a problem being honest with themselves, especially MEN. As I have said many times, the other issue is the inability of people to invest in quality companies and funds and than sit back and do nothing. The ACT of generating data and analysis makes siting and doing NOTHING difficult. Personally I dont do any analytical data at all.....UNLESS.......I am actively looking for a new stock. If my portfolio is performing as I wish and I am achieving my two goals...........Beat the SP500 annually, and average a minimum of 10% return long term..........than I sit back and do nothing. In the investing world there is a BIG PROBLEM with equating busy work and doing something and taking advantage of all the computational tools and data with actual RESULTS. It makes people FEEL GOOD to generate ANALYTICAL STUFF. It is a RARE investor that has the ability to just sit back and NOT screw with success. On a related topic but somewhat off topic.......Bonds. You are probably too young but all this STUFF about having 20% or 25% or 30% or 50% in bonds is fairly recent. I NEVER heard this stuff till the last 10-15 years. At least the way it is thrown around today and applied to the younger ages. At your age I, personally was 100% in stocks and funds. I NEVER would have considered having even 5% in bonds. With the power of compounding and time on the side of a person, my view is that 100% in stocks and funds is absolutely appropriate and in fact in line with the probabilities that are inherent in being a long term investor with a time horizon of 20 or more years. I continue to have absolutely NO INTEREST in bonds in my brokerage account and will remain a 100% stocks and funds investor for life. (I am 70) So here is my ULTIMATE question for you.........what is the total return of your portfolio, over the course of this historic massive BULL MARKET, since you started investing in 2008? Secondary question......are you satisfied with how your portfolio has performed over that time and has that performance met your investing goals? If your answers are positive, than just do what you have been doing for the past ten years and dont flail around with trying to change anything.
WXYZ,... I realize your question is directed @TheSmelloscope, and I too am looking forward to his response,... but while we wait (Im bored right now) Ill go over my current tactics and methods; I too am only interested in stocks and funds,.. I feel I am proactive enough to take advantage of the possibility of higher return in these sectors. I do mostly what you have described above except for one key aspect.... I DO extensive analyzing into the company before I invest,... not so much into the numbers and returns,.. but into the history of the company, I tend to favor long standing solid corporations with consistent 5-10 ascending charts. Mid to large cap companies with strong ethics. My portfolio is setup like this; Large Cap Mutual Growth funds at the top rows,... mid to large cap stocks in companies that have solid 5-10yrs stats below that, and a couple of smaller cap more volatile companies that I play with and keep strict watch on below that... and my goal is to move the gains from the bottom rows to the top rows, while leaving the initial lower level investment amount in the game at the lower rows. What I like about this setup is I really only need to watch the bottom 3-4 rows for volatility while staying confident that the my upper rows are solid ascenders. Just my mad method ! I have been using this method on and off since 1999,... my older holdings have enjoyed 35-45% gains while my newer ones are seeing 10-20%.
@WXYZ and @shaw520 Great thoughts and talking points! I am a bit behind on my (past due) responses in other threads at the moment, but I look forward to continuing the discussion in this thread later tonight or tomorrow.
Hey @WXYZ and @shaw520 I agree, and I feel the same way, I try not to do too much analysis unless I am planning to buy a new stock, or if I think one of my current holdings needs to be re-evaluated due to major events or company news. Thank you for your input on this. I've been discussing bonds and bond ETFs with @TomB16 and based on what the two of you are saying it sounds like I need to re-evaluate my position in BND. The last time I calculated my gains was mid-October, my IRA was at a 36% gain and my standard brokerage account was at a 109% gain. I have deposited an approximately equal amount into both accounts since 2008. Yes, I am satisfied, but when I first started learning I was floundering around a bit and making too many moves. My gains could have been much better if I had been more patient during the first 2 years. Also, later on, I wasn't paying as much attention as I should have been at certain points... there are certain stocks (like GE in particular) where I should have been staying more current with company news. The fact that I snoozed caused me to take a couple nasty losses. The other mistake I made was being low on disposable income between 2012 to 2016, during that four year stretch I was not able to deposit any cash into either of my accounts. Thankfully, (often in spite of myself) I have managed to mostly achieve my goals. Going forward, my main goals are: -Expand my knowledge and understanding of the market -Be more dilligent with my deposits -Be more consistant with my intake of company & industry news -Beat the S&P -Save enough to retire from my day job by the age of 70 (or hopefully sooner!)
@shaw520 It sounds like a well thought out method to me. My style is to hold on as long as possible and let the winners continue to win as long as I believe they're able. When I sell shares, it's usually because I don't believe in the company anymore, or because I feel that they've maxed out their potential. So I tend to be an all or nothing type of seller. It's worked out well for me so far, so I plan to stick with it, but I'm curious to hear more about how you do your rebalancing. How often do you move the gains from the bottom rows to the top?
I respond only because I'm enjoying the discussion, even though I see no value in consensus. In fact, with investing, consensus is mostly a bad thing. This is exactly how I do it, also. By knowing what we like about a company, we can watch for those things to change. It's way better than watching a ticker for price changes and buying or selling in a reactive fashion. I try to error on the side of holding too long but once I learn a company isn't aligned with my interests, it's time to get the funk out of my portfolio.
Its really very simple,... right now I have (6) what I call volatile stocks that I try and play the rallies,..(mostly all in Pharmaceuticals and Heath care because there seem to be a lot of movement in these sectors now) I try to ride the ascending waves till Ive made say $100-$300 depending on how well they do,... then at the first sign of a fall I sell,.. take the profits and move them up to one of my Mutual Funds,... and then I that point I'll either reinvest the initial amount back into the same stock (if I feel its going to rally again) or I'll seek out another stock that's making big moves. I have a ticker that shows top 10 moving stocks in current real time. Time frame on the buy/sells is anywhere from one day to three weeks depending upon the movement. Yesterday I made $300 on HEPA,... it was a fast moving roller coaster ride,.. but I faired well.
Shaw You appear to be doing what I call MOMENTUM TRADING. I dont know if that is a technical term but that is what I call it. I was doing the same thing for some months during the BOOM of the late 1990's during the peak of the market and the dot com mania. Like you I had a few stocks that I focused on since I was very familiar with their daily swings up and down. The stocks that I used were SBUX, COST, AMGN, and one or two more that I cant remember. I used these stocks because I could trade 1000 share lots with their price level without having a fortune invested short term and at risk. They were also companies that I was willing to hold longer term if necessary due to a big drop in price and a big short term loss. I was doing this on margin since my core brokerage account would support it. At the time it was very easy to do this strategy. At one time I had 25 successful trades in a row with an overage gain of $1000 to $2000 over usually a span of a few days to a week or so. Like you I would sweep the gains into my core brokerage account. My best gain....a short term buy of AMGN a day before they won a major lawsuit with..........I believe it was Genentech. The stock bumped up $25 per share in one day. My worst trade......I cant remember what stock it was, but I bought my usual 1000 shares on a tech stock that was going to report earnings in a day or two. Even though the earnings were good, it tanked by $65 per share. I held on for about four weeks to try to recoup some money and ended up biting the bullet and being happy to have ONLY a $40,000 loss. So I experienced the MANIA and the CRASH involved in this sort of trading. In the end I made a little money but that one bad trade took away a lot of my profit. The LESSON I learned was in spite of your confidence, knowledge, and hubris, this sort of trading is VERY DANGEROUS. With the CRASH of the dot com era this sort of stuff, along with all the people that thought they were day traders, came to an end for me personally and for many others. It was one of those times when MANY thought they were really smart traders. In reality it was just a BOOMING market doing the work. Fortunately I made a little money and did not touch my core portfolio which was set up in the normal fashion of my model portfolio that I often discuss. I ALSO learned a very valuable lesson........that many many good trades can be wiped out by one bad trade very quickly.
