The Long Term Investor

LOOKS LIKE I might end up being a TESLA shareholder. Depending on earnings tomorrow, the stock might become a member of the SP500. I will not buy this company.......YET.......as an individual stock, but I would not mind.....at all.....owning it as part of the SP500.

 

I THINK this is the real message of the article:

"Given what this data shows about the regularity of market declines, it’s clear that market risk is about more than volatility. Market risk also includes the possibility of depressed markets and extreme events.


These events can be frightening in the short term, but this analysis shows that for investors who can stay in the market for the long run, equity markets still continue to provide rewards for taking these risks".

I dont think it is saying another big drop will come soon. In fact, I dont think it is trying to say anything about timing of these events......simply that they happen once in a while. Of course, they are RANDOM events with NO connection to each other and often NO connection to the markets they impact.

A NUMBER of these events occurred during my work/investing lifetime:

1. The Inflationary Bear Market.
2. The Inflation, Viet Nam, Watergate.
3. Black Monday.
4. Dot Com Collapse.
5. The 2008/2009 Near Banking collapse.
6. The Corona Virus

I DONT consider the DOT COM collapse and the ten years to 2009 as being one event (the lost decade). I experienced it as the Dot COM collapse in the early 2000's than 8 years later, the 2008/2009 Near Banking Collapse. I did just fine with my normal portfolio model in between the two and DONT consider that a lost decade AT ALL.

SO......for me......

1&2 above were in my very early investing years.
3&4 were in my middle investing years.
5&6 were in my later investing years.

 

Good post Sunshine. A nice contribution to this thread and interesting observations about those around you and in your profession. FORTUNATELY, I am far from Queens......so if you decide to come after me......I will have a head start. I have one message for anyone reading this thread:

HEY.......DONT BLAME ME! WHY IN THE WORLD WOULD YOU LISTEN TO SOME UNKNOWN IDIOT ON THE INTERNET.

That analysis that Tom did on Tesla was very nice. It even tempted me to think twice about the stock........but for now.....I have not put any money into it. AND...I dont anticipate buying it any time soon, even though it is one of those companies that seems to always do better than expected. On an anecdotal level, they are selling a lot of expensive cars. In my area I see them all the time, every day.

Pop in once in a while whenever you have time and post something about your experiences. What you have to say is valuable to others. Stay safe......

 

Sunshine mentioned my PORTFOLIO MODEL. I try to post it every 4-5 pages

HERE is a repeat of the portfolio model.......as usual:

I am once again posting my PORTFOLIO MODEL. My initial criteria to start the process to consider a business are.......BIG CAP, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, ICONIC PRODUCT, WORLD WIDE LEADER IN THEIR FIELD, LONG TERM HORIZON, etc, etc, etc.

PORTFOLIO MODEL

"Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 55% of the total portfolio and the fund side at about 45% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing.

As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a VALUE style component (Dodge & Cox Stock Fund), a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 10 stock portfolio.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Johnson & Johnson
Nike
3M
MSFT
PG

MUTUAL FUNDS:

SP500 Index Fund
Fidelity Contra Fund
Dodge & Cox Stock Fund

CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (70). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"

MY COMMENT

This portfolio is HIGHLY CONCENTRATED on the big cap side of things. OBVIOUSLY between the funds and my eleven stock holdings there is MUCH doubling and tripling up on the stocks. THAT is INTENTIONAL. I strongly subscribe to the view of Buffett and some others that TOO MUCH diversification kills returns. I do NOT believe in the current diversification FAD that most people seem to now follow.......or think they are following. I DO NOT do bonds and think the current level of bonds held by younger investors.....those under age 50.....is extremely foolish.I DO NOT do market timing or Technical Analysis.

 

It is ALWAYS important to keep in mind the basics.....that NEVER go out of style.......for long term investors:

Warren Buffett offers his 2 best pieces of advice for aspiring young investors

https://finance.yahoo.com/news/warren-buffett-investment-advice-for-young-people-120219862.html

(BOLD is my opinion OR what I consider important content)

"The best advice Warren Buffett can offer to young people who want to invest is to learn accounting. Furthermore, he warns investors against obsessing over stock price charts and urges them to focus on buying good businesses instead.

"You've got to understand accounting. You've got to. That's got to be like a language to you," Buffett told Yahoo Finance's Andy Serwer in an interview on March 10.


"You have to know what you're reading,” he added regarding accounting. “Some people have more aptitude for that than others, but that's one thing I learned by myself. Now, I took courses afterwards, for example. But I learned it myself, and largely. So, you have to do that."

According to Buffett, investors should also have an "attitude that you're buying part of a business, and not that you're buying something that wiggles around on a chart, or that has resistance zones, or 200-day moving averages, or that you buy puts or calls on, or anything like that."

Buffett is referring to technical analysis, or the study of how a stock’s price moves over various periods of time.


Source: Yahoo Finance/David Foster
"You're buying part of a business,” he added. “If you buy intelligently into a business, you're going to make money. And then you have to buy something that, in my view, which you'd do if you're buying a business, that you're not going to get a quote on for five years, that they're going to close the stock exchange tomorrow for five years, and that you'll be happy owning it as a business."

For example, he pointed to Coca-Cola, a company that he's held stock in for more than three decades while remaining a faithful consumer of its products.

"If you owned Coca-Cola, it didn't make any difference in 1920 when it went public. The important thing was what it was doing with customers,” he said. “You probably would have been better off if there wasn't any market in it for 30 or 40 years, because then you wouldn't have gotten tempted to sell it. And you just watch the business, and you'd watch it grow, and you'd feel happy."

"[Our] favorite holding period is forever," he wrote in the 1988 letter. "We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds."

He emphasized to Yahoo Finance that "the proper attitude toward investing is much more important than any technical skills.""

MY COMMENT

I LIKE that quote on cutting the flowers and watering the weeds. I ALWAYS follow that path in my own investing. I usually put it in terms of "letting the winners run as the wish". This is one reason that I usually DON'T re-balance out of wining stocks. I ALSO follow the same path as BUFFETT when it comes to DIVERSIFICATION. Obviously my portfolio is very concentrated in the eleven stocks that are doubled and tripled up by adding the funds that I also own. My personal opinion is that most investors today are WAY OVER diversified. A TOTAL return KILLER.....in my opinion.

I STRONGLY agree with his comment about learning about accounting. I had accounting education in college as part of my business studies. I was NOT great at it, but it has helped me immensely over my many decades of investing. If you understand basic accounting you will be able to read financial reports and data and will be able to evaluate the GUTS of any business from the standpoint of......BUSINESS. Like most EVERYTHING in investing.....it is the SIMPLE STUFF that makes a real difference. BUT.....humans LOVE complexity and complex systems....our brains look for and crave it. The problem is, most complex investing systems DONT WORK.

 

YEP......it is a great open today. Lets see if we can hold on till the end. Stay safe and positive everyone......

 

I have recently seen some good up-to-date summary data for home sales in my area. The data CONFIRMS what I have been seeing about this being a BOOMING, SURGING, market in spite of the virus "stuff". I GUESS people need a home regardless of what is going on and lots of people are moving to this area since we are ONE of the top 3 or 4 TECH centers in the country. DEFINITELY a sellers market. I think this is a good indicator for the general economy and the stock markets.

 

YES.......for any reading this thread, I recommend the TomB16 Investing Blog thread also in the "Investing" forum. A good long term investing thread. This forum is a GREAT site and contains many, many very good threads. From trading, to investing, to daily info and data, to everything else. The single BEST investing site I have found on the internet.

AND........HERE are the news items that will DRIVE the markets tomorrow (hopefully):

Qualcomm second-quarter revenue beats estimates, shares rise
https://finance.yahoo.com/news/qualcomm-second-quarter-revenue-beats-201740597.html

Facebook active users jump in Q1 as coronavirus crisis widens, sees 'signs of stability' in ad market
https://finance.yahoo.com/news/facebook-q1-2020-earnings-200655002.html

• "Diluted earnings per share: $1.71 vs $1.71 expected
  
  
• Revenue: $17.74 billion vs. $17.3 billion expected
  
  
• Ad revenue: $17.4 billion vs. $17.1 billion
  
  
• Daily active users: 1.73 billion vs. 1.68 billion
  
  
• Monthly active users: 2.68 billion vs. 2.34 billion expected"

Microsoft's cloud unit jumps 27% year-over-year in Q3
https://finance.yahoo.com/news/microsoft-q3-earnings-2020-193333578.html

"Revenue: $35 billion versus $33.6 billion expected

Earnings per share: $1.40 versus $1.28 expected

Intelligent Cloud: $12.3 billion, up 27% year-over-year

More Personal Computing: $11 billion, up 3% year-over-year

The company’s stock was up slightly in after hours trading."

Tesla reports better than expected Q1 sales, pushes semi deliveries to 2021
https://finance.yahoo.com/news/tesla-reports-1q-2020-earnings-results-coronavirus-153352803.html

"Adjusted earnings per share: $1.24vs. loss of 37 cents per share expected and loss of $2.90 per share Y/Y

Revenue: $5.99 billion vs.$5.81 billion expected and $4.54 billion Y/Y

Free cash flow: -$895 million vs. -$604.4 million expected“

In Q1, we reached our highest ever revenue for a seasonally slower first quarter as our total revenue grew 32% [year over year],” the company said in a statement. “Sequentially, our revenue was mainly impacted by lower deliveries, driven primarily by limitations on our ability to deliver vehicles towards the end of the quarter.”"

Fed commits to near-zero rates as US economy sees 'sharp declines'
https://finance.yahoo.com/news/fed-fomc-decision-april-2020-141824183.html

MY COMMENT

THE ABOVE is some POWERFUL stuff for the markets tomorrow. BUT......how often do we see the old phrase......."buy the rumor sell the news" hold true? SEEMS LIKE pretty often....so, who knows. GLAD to be fully invested with this sort of stuff hitting the markets this week all at once.

 

OK.......I will post the information below. At this point it is NICE to see.....but it doesn't mean a whole lot other than we have had a GREAT month......regardless of what happens tomorrow. What we DO KNOW is that we have now advanced to having multiple days in a row that are positive. We have also advanced to having whole weeks that are positive. AND......now.....we have advanced to having entire months that are positive. The next FOUR months......May, June, July, and August will tell the story.......and.....HOPEFULLY set up the markets for a year end push to FULL RECOVERY. NO DOUBT there will be various dips and even down weeks. We STILL need about 15-20% more in gains to get back to where we started this whole mess. I am confident that the worst is OVER.........but.......we have a long way to go to get the economy up and running on all cylinders again.

Stocks jump 2%, putting the S&P 500 on track for its best month since 1974

https://www.cnbc.com/2020/04/28/stock-market-futures-open-to-close-news.html

(BOLD is my opinion OR what I consider important content)

"Stocks jumped Wednesday on the back of positive data from a potential coronavirus treatment from Gilead Sciences, while investors digested a sharp drop in U.S. economic activity.

The Dow Jones Industrial Average surged 532.31 points, or 2.2%, to 24,633.86. The S&P 500 gained 2.7% to close at 2,939.51 while the Nasdaq Composite closed 3.6% higher at 8,914.71. The major averages also got a boost from the Federal Reserve, which pledged to keep rates near zero for as long as needed and provide additional help to the economy.

Wednesday’s gains put the S&P 500 up more than 13% for the month. That would be the index’s biggest one-month gain since 1974. The Dow is up 12.4% for April and is headed for its biggest monthly gain since 1987.


A study of Gilead’s remdesivir drug conducted by the National Institute of Allergy and Infectious Diseases met its primary endpoint, the drugmaker said, lifting expectations for a potential coronavirus treatment. Gilead also released the results of its own study, which showed improvement in patients taking remdesivir to treat the virus. Gilead shares jumped 5.7%.

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said remdesivir shows a “clear-cut” positive effect when treating the virus.

“Markets are going to move like this on this kind of news,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. “If we had a vaccination, then I think you would see a very different economic recovery. If we have treatments, I think you’ll see a little bit quicker of an economic recovery.”

“We’ll take these days, but we’re not investing or changing any of our asset allocation because one day,” Horneman said.

Sentiment was also lifted as Alphabet shares gained 8.9% after the tech giant reported a revenue growth decline that was less steep than forecast. The company’s YouTube ad revenues also beat expectations.

Other mega-cap tech stocks such as Facebook climbed 6.2%. Amazon gained 2.5% while Apple advanced 3.3%. The S&P 500 tech sector closed 0.3% higher for the year, erasing its earlier losses for 2020.

The Gilead news along with the strong move higher from Alphabet offset news of a steep drop in U.S. economic activity. U.S. GDP shrank by 4.8% in the first quarter for the country’s biggest contraction since the financial crisis.

Stocks have been on a rip-roaring rally ever since March 23, when they hit their coronavirus sell-off lows. The Dow is up more than 34% in that time while the S&P 500 has rallied over 33%.


“The market is signaling that by May 15 through June 1 the majority of the economy will reopen,” said Yousef Abbasi, director of U.S. institutional equities at INTL FCStone. He also noted this rally has been largely driven by cyclical stocks that were punished earlier in the year. However, he thinks the market may be getting ahead of itself.

“It’s not like the economy is going to take on the capacity that’s already there,” he said.

Fed on hold
The Fed kept interest rates at the near-zero bound on Wednesday, noting it will maintain its historically aggressive stance for as long as the economy needs it.

“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the committee said in its post-meeting statement.

Fed Chairman Jerome Powell said the Fed will likely need to do more to sustain the economy, noting the central bank “will do it to the absolute limit of those powers.”

“At the end of the day, every central bank is in the same spot,” said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. “They’re all throwing everything they have at markets.”

MY COMMENT

FOR ONCE the FED is acting with necessary and needed URGENCY. It is LIKELY that going forward there will be weeks if not multiple weeks in a row that the markets are DOWN or lingering. Investors have to digest the HUGE gains to date and set the base for more going forward. It is as much a MENTAL and PSYCHOLOGICAL situation as anything. CONFIDENCE will take a while to build back up. In the meantime the gains are NICE but SHALLOW. For LONG TERM INVESTORS these short term gains are a needed and welcome relief........I BELIEVE it is clear that the WORST is over.

DOW year to date (-13.68%)

SP500 year to date (-9.02%)

 

I LOVE these BUFFET quotes and have posted many of them over the years. Today is no exception, I cant resist them. USUALLY they are TOTALLY true:

Warren Buffett's 25 best quotes of all time

https://finance.yahoo.com/news/warren-buffett-best-quotes-154519517.html

"1. Invest in companies you believe in.
“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.— Letter to shareholders, 1989"

2. Price and value aren’t always the same: Don’t pay too much.
“Price is what you pay. Value is what you get.”
— Letter to shareholders, 2008"

3. Reputation is everything.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
— CNBC, 2017"

4. Be skeptical. If something looks too good to be true ...
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.”
— The New York Times, Oct. 16, 2008

5. Don’t invest in something you don’t understand.
“The important thing is to know what you know and know what you don’t know.”
— Haaretz, March 23, 2011

6. Don’t do a deal with someone you don’t trust.
“You cannot make a good deal with a bad person.”
— Interview with CNBC, 2019

7. Easy peasy. Don’t buy a stock unless you think it’s undervalued.
“Just buy something for less than it’s worth.”
— Lecture to Notre Dame faculty, 1991

8. Price dips are a good chance to increase your positions.
“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
— Letter to shareholders, 2009

9. The future is never clear.
“Uncertainty actually is the friend of the buyer of long-term values.”
— Forbes, Aug. 6, 1979

10. It’s usually the buyer who encounters unpleasant surprises.
“As in the case with marriage, business acquisitions often deliver surprise after the ‘I do’s.’”
— Letter to shareholders, 2016

11. Ignore short-term movement in stock prices.
Buffett is a firm believer that everyday investors park their money in index funds rather than in individual stocks.
“Wall Street makes its money on activity. You make your money on inactivity.”
— Colloquium at the University of Florida, Oct. 15, 1998

12. Use a bucket not a spoon.
“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold.”
— Letter to shareholders, 2016

13. Seize an opportunity while you can.
“Don’t pass up something that’s attractive today because you think you will find something better tomorrow.”
— Speech at Columbia University, Nov. 12, 2009

14. Cool heads prevail.
“The sillier the market’s behavior, the greater the opportunity for the businesslike investor.”
— Preface, The Intelligent Investor, 2003

15. It’s during hard times that the winners — and losers — get exposed.
“You only learn who has been swimming naked when the tide goes out.”
— Letter to shareholders, Feb. 2003

16. Read and think A LOT. Buffett spends the majority of his day — 80% — reading and thinking.
“The best way to think about investments is to be in a room with no one else and to just think. If that doesn’t work, nothing else is going to work.”
— Colloquium at the University of Florida, Oct. 15, 1998

17. Buffett has long said it doesn’t take a high IQ to be successful in business — knowledge is more valuable.
“What we do is not beyond anyone else’s competence. I feel the same way about managing that I do about investing: It’s just not necessary to do extraordinary things to get extraordinary results.”
— Fortune, April 11, 1988

18. Despite his immense success, Buffett’s still made some bad bets over the years. Nevertheless, he stays focused:
“Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.”
— Fortune, Feb. 6, 2017.

19. Keep this in mind If you’re looking for a board position:
“When seeking directors, CEOs don’t look for pit bulls. It’s the cocker spaniel that gets taken home.”
— Letter to shareholders, 2019

20. The most important quality for an investor is temperament, not intellect. If you want to work at Berkshire, you need integrity, intelligence and energy.
“Our experience with newly-minted MBAs has not been that great. ... It’s difficult to teach a new dog old tricks.”
— Letter to Shareholders, 1988

21. Buffett is a big believer in America. Don’t bet against American ingenuity.
“It’s always been a mistake to bet against America, since 1776.
— CNBC, 2011

22. With the exception of loving his private jet, Buffett is famously frugal and has lived in the same house since 1958.
“I have every possession I want. I have a lot of friends who have a lot more possessions. But in some cases, I feel the possession possesses them, rather than the other way around.”
— CBS News, Feb. 8 2012

23. Buffett wants his three children to make their own contributions to society.
“A very rich person should leave his kids rich enough to do anything but not enough to do nothing.”
— Fortune, June 25, 2006

24. From a letter promising to give away more than 99% of his wealth to philanthropic causes during his lifetime or at his death.
“My wealth has come from a combination of living in America, some lucky genes, and compound interest.”— The Giving Pledge, 2006

25. A person’s best asset is him or herself.
“Your best investment is yourself. There is nothing that compares to it.”
— Georgia Tech alumni magazine, 2013"

MY COMMENT

EVERY DAY now when I look at sources and financial news sites I see a HUGE number of positive and negative opinion headlines like:

"Joe Blow analyst at XYZ Bank says the markets will be DOWN 40% by August"
OR
"Joe Blow analyst at XYZ Brokerage says the markets will be UP 40% by August."

BEWARE.......NONE of these people have any clue what or where the markets will be short term. This STUFF is simply FLUFF. In HINDSIGHT one or two of them will turn out to be right and that will be their media introduction for the next ten years........"here is the man that called the 2020 market", etc, etc. It is ALL total BS. YES, one or two will turn out to be right....by pure random chance.....but.....no one will remember the hundreds or thousands of similar daily predictions that turn out to be totally wrong. THIS sort of stuff is just RANDOM CHANCE. NO one has a magic crystal ball. No one knows what or why anything is going to happen over the short term.....ESPECIALLY.....in a non-financial, non-economic, event like this one.

 

A DOUBLE BEAT today.........barely. My account BEAT the SP500 by 1.04% (corrected, SP was -.92, account was +.12%) and ended the day in the GREEN. The TECH stocks saved me today with AMZN, MSFT, AAPL, and GGOGL being green along with good old PG. Amazon contributed a lot of that being up $101. HOWEVER.........I may be giving a good portion of that back tomorrow since the stock is down about 5% after hours.

ONWARD AND UPWARD.......

 

WELL.......at least we are now past this week. This was one of the BIG earnings weeks and we survived it virtually unchanged for the week. Actually........down slightly. The SP500 was down .84% for the week and the DOW was down .59% for the week. CONSIDERING the backdrop of the virus "stuff" it is NICE to get past one of the MOST SIGNIFICANT earnings weeks with a.....pretty much.......even market by the end of the week. This week is ANOTHER big step to getting through earnings without any big hit AND without retesting the March 23, 2020 low. I personally consider this week a POSITIVE for that reason.

As to performance today...... EVERY position was in the RED.......no big deal. BUT......I was able to squeeze out a win versus the SP500 by .14%.

I will take what we got this week and come back to fight another day........Monday. ANOTHER BIG earnings week next week. MANY, many, companies report next week and than after that the number of reports drops WAY OFF. Once we get through next week earnings are pretty much over and we will have dodged an event that had potential to tank the markets. We will than have three months to move up and down and back-fil and hopefully build up some market momentum before the second quarter earnings begin.

Our state reopened today.......we went out and ate lunch in an actual restaurant rather than take home or the car. Very nice. We were one of two couples in the restaurant while we were there. We were there mid afternoon, so, not at lunch hour. The waiter said they had about 18 dinner reservations. Very busy traffic and a normal rush hour with big backups.