WBI 156.6 Our portfolio was boosted 1.1% today. People who claim responsibility for these sort of random gains are a great source of comedy. Lately, we've been taking a lot more negative hits than positive so this week has been a welcome surprise. My job, as a long term investor, is to unflinchingly absorb the punches as they come. For every punch to the throat, there are 10+ fakes that would cause us to lose money if I were to respond. So, we will just blow like a leaf with the market wind, content with the companies we own. If we were not happy with our companies, if we just viewed them as numbers randomly jumping around on a ticker feed, I don't see how we could possibly be pragmatic.
Like the mighty Oak tree swaying in the wind. Mr. market can give Tom bumps on the chin. The roots are deeply planted within, it happened before and will again. Now the leaves are all blown away. The mighty Oak is here to stay. Standing tall to survive another day.
I suspect people do not understand the power of a well run business. From what I can tell, just about everybody is looking for the: hot sector, broad market changes, hot tip, takeover arbitrage, etc. These things have the potential to return big gains, if harnessed properly, but they are far more likely to strip someone of their cash while they look for a lottery win. If you can find a well run business and buy it at a reasonable price, you have a near certainty to have really good returns for a long time. The Tortoise and the Hare should be required reading for investors. Then they can put 100% of their energy into getting rich quickly and know why they are being stripped of their wealth over time.
OK, expanding the above idea. If I have a known-good business in my short list and the company falls under market pressure for a reason other than bad management, that is an opportunity to buy. If I am holding a known-good company and it is priced more than 80% above my valuation, that may be an opportunity to sell. Tesla fell into this category for me. I wanted to hold it forever. The 80% number is arbitrary. I want to own companies so I don't sell when they go a bit above my valuation but my software will flag me at the 80% over valuation level. In practice, I have never used this number to sell a company. It's just an idea and the point I start thinking about it. In the case of Tesla, it was grossly over valued but that was not new. The new factor was that a great deal came up on a REIT that was distributing about 9% and it dipped down below PE of 4.5. By selling Tesla and buying the REIT, we had an immediate, executive level, pension. When Tesla shot to $1150, I would have been substantially better off to keep Tesla but, at this point, Tesla would have to soar past $475 ($1400 in pre-split) to have been a more lucrative choice for us. Even if Tesla does eventually pass $475, at that point our REIT is nearly certain to have moved those goal posts even further out. The PE of the REIT is now 7. I have thought that if the REIT PE were to pass 11 and a better value were to come along, it would be tempting to sell the REIT and buy the value. That value just might be Tesla. If one of these moves (over priced to extreme value) comes up again, it will be a happy event but I have no expectation of it nor am I looking for it. I'd rather keep the companies we currently own because they are very well run businesses.
Tom, do you ever trim your holdings? In this case selling 1/3 or 1/2 and moving it into a better value position?
Hi Chris. Not deliberately, although it has happened. I recently tried to exit a position for reasons of losing confidence in management. I was able to sell 85% of the position before the price started to plummet. Thinking the price would recover, I sat on that position and still have it. The position has recovered about 30% of it's losses so perhaps this would be a good time to exit. I have no idea if it will go up or down from here. If I don't know what to do, as is the case here, I do nothing, as is the case here. This company is paying a 7% dividend so the 22% loss of capital wasn't exactly a blood bath and it has recovered one third of that. I can afford to be patient. I literally have no idea if waiting is a mistake, or not. Sometimes being patient is a mistake but most times the less trades the better. Meanwhile, the bulk of that position is now in a different position which has gained 15% in that time and is paying a nice dividend, also. I didn't make the move because of dividends or the allure of equity gains. The move was based 100% on losing confidence in management.
I literally have no idea if waiting is a mistake, or not. [/QUOTE] Tom, TBH I don’t know enough about your situation, but from the parts that I’ve gleaned reading your blog over the months I think there are probably a couple things worth exploring: 1) Re: confidence in management — obviously, these people are managing your money. If they aren’t making prudent decisions, I would have no problem selling and holding cash in the interim. You make lose to inflation, but I’d rather have the opportunity to make a better value play somewhere else, than wait and hope that management outperforms my expectation. 2) 1/2 positions — like I mentioned in the last post, I think there are times where it makes sense to halve the risk, since you’re getting a strong dividend, but to also give yourself the flexibility to move into a better value play (which it sounds like you’ve done). Like you have mentioned, it seems we’re heading into a more unpredictable time. So, there will be opportunities to be had, even if they aren’t evident at the moment. I think we are similar in the sense that we’d like to keep positions to a minimum, but sometimes that can ebb and flow — and since you’re ‘retired’ you probably have the time and ability to flex as well. Love your blog. I wish, at times, you’d be more open with your positions — but I understand that as well. Cheers! Best of luck the rest of the way. - Chris
Chris, thank you for your thoughts. I appreciate them and will consider what you have written. Now that we are retired, I am looking to become even less active with our investments. WBI 145.4 7 becomes 6. I sold one of our positions on Friday. It is a small Canadian REIT that is distributing 10% but the earnings continue to shrink every quarter during a period when they should be booming. Time to go. We really have 5.5 positions. One of our holdings is a tailing that will be sold in the next year, or so (as above). I am always looking for new companies but have no worries about diversification.
I've been letting our cash grow. Also, with the sale of one position, we are pretty high on cash right now. The idea was to have some money to spend at a possible year end sale on companies. With the Russian missile strike on Poland, if it is confirmed, we may need the cash to buy bread and spam. This is a game changer in which all bets are off. I predict stock prices will land somewhere between 0 and infinity if NATO forces start building in NATO countries.
It looks like Europe is going to have enough gas for this winter. This is based on a predicted, mild, winter. Let's hope. Europe has two new LNG port terminals coming online next year. They currently have 21. Two more will help next winter. Apparently, the LNG terminal projects in the pipeline (how delicious is that phrase?) are all projected to be done by 2026. In the mean time, Europe is re-commissioning nuclear and coal, importing at 100% capacity, and buying every m3 of gas that will fit into Norway's pipeline. One the fail side of the equation, many European governments are subsidizing gas so there is no incentive for much of Europe to conserve. It's like they literally don't understand how a market balances supply and demand.
The primary issue with the gas shortage is that corporations will be asked to conserve gas first, and then residential. It is likely some corporations will be shut down because of this, but unlikely residential will be impacted. Corporations which shut down for more than a short time, perhaps a few days or a week, are unlikely to ever reopen. Europe is on the brink of a recession and there isn't much prosperity buffer. Of course, this will send these jobs to China which will cause another problem because China is getting more evil by the day.
It's time to start planning a post TSMC world. The days of TSMC being the IC foundry of the world will soon be over, for political reasons. Sansung is said to have their 3nm node ready for next year but that remains to be seen. Consider me hopeful but skeptical. We need Intel's EUV nodes to have successful yields. Intel is North America's hope for the future. In this way, I find myself interested in Intel for the first time in many years.
100% agree. One cannot rule out China seizing Taiwan. Would we go to war over that? Dunno. But if they do, damn that would be bad for us. We absolutely need to be semiconductor independent. The sooner the better. It's sad that Intel is our hope, because they were sitting on their ass for years!
It was a corrupt organization, not dissimilar to Boeing, for about a decade. I loved it when AMD started to spank them regularly and benchmark fixing became less effective in the marketing war. But, now AMD is an IP only company and it is impossible to imagine Intel would make AMD parts in any world, even a post TSMC world. AMD could probably engage Samsung and do pretty OK. It's time to start thinking of how to create a financial advantage if this comes to pass. Perhaps buying Intel is a good place to start but there are more knobs to turn so feel free to share them in this thread, if you are OK making them public. I usually am not so I don't blame anyone for not participating.
Gelsinger talks a good game wanting to catch up in 5 years and is actually knowledgeable in engineering, so they have that going for them. I suppose now would be a good time to invest in them if all the talk bears fruit.
Speak of the devil... Intel just posted a roadmap that shows the next gen processors, about to be released, will be exclusively lithographed on their 4nm node. I must confess ignorance as to the Intel 4nm node. I have no idea the feature size or density characteristics. These days, the number before the "nm" is essentially meaningless. Still, their process does seem to be evolving as per their timeline. That is impressive.
I am wondering how they could have such a hard time getting Sapphire Rapids to market and now look forward like all is well. I am glad they are moving along, but I am curious about the backstory of them hitting so many roadblocks for so long. Whatever the case, this is good for the U.S. I just wish there was some domestic competition. AMD sure does not have the resources to have fabs anytime soon.
A powerful response that goes back in time "in general" If any of you remember sitting in the ration lines waiting your turn to buy gasoline and the Buy American chants that we ignored. It's time to pay the Lady.
