The Long Term Investor

The basics of long term investing....

What Are the Pros and Cons of a Buy-and-Hold Strategy?
Investors can benefit from a long-term, buy-and-hold approach by understanding a few guidelines.

https://money.usnews.com/financial-advisors/articles/pros-and-cons-of-a-buy-and-hold-strategy

Here are some things to keep in mind when planning to implement a buy-and-hold strategy:

• The pitfalls of market timing.
• Risk management considerations.
• The importance of rebalancing.
• Avoiding emotional buying and selling.
• Capital gains pros and cons.
• Holding too long.
• Factoring in risk tolerance.

The only category that I tend to ignore is the re-balancing. In general I say....let winners run. BUT...there is a point where a single position gets too big. Knowing when you are at the point of a single position creating extreme risk is a very difficult decision. The key is your risk tolerance. The other BIG FACTOR is how dominant that single holding is in the business world.....and the fundamentals of the holding.

It is very difficult...but I prefer to....try...to re-balance based on faltering fundamentals and loss of market share....NOT....just position size. I also tend to simply sell out an entire position once I believe the company is faltering....rather than hanging on with s reduced share position. I can simply put those funds into the SP500 and stay exposed to the markets with that money.

 

Some good common sense investing commentary here.....from a great investor.

Charlie Munger and How Not to Invest
Reflections ahead of Berkshire Hathaway’s first annual meeting after Munger’s death.

https://www.morningstar.com/stocks/charlie-munger-how-not-invest

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

"I am still not sure how to feel about the passing of Charlie Munger late last year. It feels unfair to suggest we are missing out when he left behind so much. His ideas will live far into the future, and they are freely available to those who seek them. In fact, YouTube is a veritable Munger gold mine, and I highly recommend his book, Poor Charlie’s Almanack.

The book includes Munger’s famous 1986 Harvard School Commencement Speech. Instead of sharing a recipe for success in life during his speech, Munger instead provided graduates with advice for leading a life of misery. That advice included being unreliable, learning mostly from yourself, lacking resilience, and giving no thought as to what to avoid in life.

In a nod to Charlie Munger and that speech, here’s my prescription for financial misery—or, what not to do when investing:

Be impatient. Aim to get rich fast! Almost anyone can get rich slowly with hard work, disciplined investment, a balanced risk appetite, and the power of compounding. Einstein called the compounding “the eighth wonder of the world.” But in the words of Veruca Salt from Charlie and the Chocolate Factory, “I want it now.” Let that be your catch cry. Eschew patience for shortcuts, make concentrated bets, and lever up your investment. This will greatly raise your chances of future financial ruin, even if it works well for a while.

Build a “house of straw” portfolio. Quality, schmality! Relieve yourself of the need for prudence and underlying portfolio strength. Assume that, thanks to the magic of modern economic management, the days of major disruptions are in the past. And if something bad happens, assume the world’s central banks and governments will come to your rescue. In wishing the big bad wolf away, such optimism facilitates the construction of a “house of straw” portfolio to maximize your chance of wealth destruction in a bear market.

Invest anywhere. No knowledge, no worries! Why stick to the quaint notion of a circle of competence when there’s a world of investment options at your fingertips? And don’t be dissuaded by complexity. Just because you don’t understand an investment doesn’t mean you should avoid it if ruin is your goal. “Stick to what you know” is an unnecessary limitation. Think of all you’d be missing out on.

Keep your own counsel. According to Mark Twain, “The man who doesn’t read good books has no advantage over the man who can’t read them.” Why learn from the mistakes of others when there’s plenty you can learn at your own expense? By formulating all of your investment ideas only from what’s in your head, you’ll be free of the need to learn from others and also free of the benefit that brings.

Don’t change your mind. Quoting John Maynard Keynes, “When the facts change, I change my mind. What do you do sir?” Thanks to modern technology, you can now build your own echo chamber and avoid any inconvenient facts. Read only the news you want: Social media can quickly help you to curate this with zero effort. You can also find groups of like-minded individuals to reinforce and calcify your existing views. These two moves take away the burdensome task of processing new ideas and information and also allow you to fully indulge your own cognitive biases. All you need to do now is wait for reality to nastily collide with your portfolio.

Follow the crowd. Market up? Be happy. Market down? You be, too. Listen to your taxi or Uber driver. Whether they’re optimistic or pessimistic, do the same. So too with backyard barbecue guests. Why let Mr. Market serve you when you can serve him? By closely watching price and volume trading information, you can have your finger on the pulse of the market and be ready to go with the crowd. This helps to sell low and buy high and goes a long way to countering the magical power of compound returns.

Trade often. Turn up the noise. Get engaged. Become a screen jockey. Allow colorful screens, flashing lights, and frequent noisy alerts to command your attention. Harness what Nobel Prize-winning economist Daniel Kahneman called “system one thinking,” the fast but often wrong ideas that quickly pop into our heads. Make snap judgments and act to give yourself the best chance of making costly mistakes. Online traders act fast and mostly lose. You can, too.

Time the market. You can thwart the power of compounding and turn the market into a casino simply by timing it. Move in and out of stocks—and the market as a whole—often. As Buffett has said, “if they think they can dance in and out [of the market] and buy and sell stocks, they ought to head for Las Vegas.” And as we know, Vegas is fun.


Avoid losses. Hold your losers when counter evidence is strong, and even if your investment thesis is broken. No one likes to admit defeat, and to realize a loss is an admission of being wrong. And once sold, any distant hope of a recovery goes, and so too the opportunity to double down. Avoid the inconvenience and save face by changing your thesis as required to hold your losers. And all you give up is the opportunity cost of future returns.

Sell your winners no matter what. So, you’ve found a diamond. A business investment that can compound at high rates for a long time. And you’re up on that investment. Your original thesis has “played out,” and the return you expected in three years has come much sooner. It’s time to sell, chalk it up as a win, and move on. You can always buy it back another time.

Returning to seriousness, investors should actually seek businesses with the ability to compound for decades and never sell. Finding these gems is the Holy Grail. Munger was a champion of this approach and persuaded Buffett of its benefits. He famously told Buffett in 1965, “Now that you have control of Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices.” Such an approach requires patience, discipline, and above all, inaction."

MY COMMENT

PLEASE......the above is sarcasm.....these items are THE OPPOSITE of what you want to do as a long term investor......except for the last paragraph.

As usual it all sounds so simple.....until human emotion gets into the picture and screws things up.

 

Oh...right....the markets are open. AND....looking good right now. ALL the big averages are in the green. Now the real work begins....staying there till the close.

For long term investors that work means....doing nothing.

 

Looks like PLTR is up early in the day in anticipation of earnings after the bell. It is up by over 6%. REALITY will come when the market closes....for better or worse.

I dont try to anticipate earnings results. It is a waste of time.....I leave that to the "experts". I simply wait and see what the real numbers are.

It is a very happy day for Zukodany with PLTR being up over 6%.

 

This little article misses the point a little bit........NOTE.....I do not own this stock.

Ex-CEO Howard Schultz says Starbucks needs to revamp its stores after big earnings miss

https://www.cnbc.com/2024/05/06/howard-schultz-weighs-in-on-starbucks-earnings-miss.html

"Key Points

• Former Starbucks CEO Howard Schultz said the chain needs to fix its U.S. store experience to win back customers.
• In its latest quarter, Starbucks reported a surprise decline in same-store sales and slashed its full-year forecast.
• Since the report, the company’s shares have fallen 17%, dragging its market value down to $82.8 billion."

MY COMMENT

I know this company pretty well. I lived in the NW....in the Seattle area..... and watched this company develop from day one. I also......in the old days....outside my core long term portfolio.....used this stock as a vehicle for momentum trading for a short time....along with another NW stock.....COST.

YES......customer service is HUGE in this sort of business. The coffee business is now completely saturated with options. There is really not much to differentiate the products since there is a limit to how you can make coffee different form any other seller. It is the customer service and experience that creates the difference and is hugely important customer loyalty.

BUT....service has its limits and one very BIG FACTOR that cuts across customer loyalty is PRICE. In my view SBUX is seeing demand destruction based on PRICE. Restaurants, coffee shops, etc, etc, have now hit maximum price. When you expect people to buy a coffee drink for $8 to $10 a day.....if they only buy one....you are talking about $200 to $300 per month. You are talking about half a car payment.

These companies need to cut prices to advance......YES.....cut prices. That is managements job....figure out how to give your customers a premium experience and at the same time a good price.

 

WELL.....it will only be missing for about another week.

Nvidia Is Missing Link in a Strong Season of AI Earnings Reports

https://finance.yahoo.com/news/nvidia-missing-strong-season-ai-120442957.html

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

"(Bloomberg) — Results from the world’s biggest technology companies have brought mostly good news. There’s just one missing piece: Nvidia Corp.

The company, whose dominance in chips that do the heavy lifting for AI computing have made it the focal point in a market captivated by the burgeoning technology, isn’t due to report earnings until May 22.

That’s well after other releases that have shown profits rising at a healthy clip, demand for artificial intelligence tools boosting sales for cloud computing services and signs of continued heavy spending on AI gear.

“You have massive buyers of chips coming in saying we were already buying a ton, we’re buying even more. The question for Nvidia is: is it enough?,” Mike Bailey, director of research at Fulton Breakefield Broenniman LLC, said on Friday.

Nvidia shares rose as much as 2.5% in early Monday trading.

Among Nvidia’s biggest customers, Meta Platforms Inc., Microsoft Corp., Amazon.com Inc. and Alphabet Inc. have all indicated that capital expenditures will continue at the current pace or increase this year.

Nvidia shares have rebounded since April 19, when AI hardware makers tumbled ahead of the first week of Big Tech earnings. The stock is up 18% since then but it’s still down about 5% from a March peak. With other AI hardware maker shares falling in the wake of strong earnings reports, it’s clear that expectations are high.

Rival chipmaker Advanced Micro Devices Inc. tumbled nearly 9% on May 1 despite raising its forecast for AI accelerator sales this year to $4 billion from $3.5 billion. Super Micro Computer Inc., the server maker whose shares have gained more than 170% this year, dropped 14% after its earnings report that included forecasts for revenue and profits that far exceeded the average of analyst estimates.

With earnings from about 80% of the S&P 500 already in, technology and communication services companies are beating profit estimates at a stellar clip. Roughly 90% of tech and communication services companies have topped earnings estimates, well ahead of the 79% average for the benchmark, according to data compiled by Bloomberg.

The trouble is that the results have had difficulty moving the needle for stocks after a rally that’s lifted the tech-heavy Nasdaq 100 Stock Index by more than 35% over the past 12 months. Both groups rank at the bottom of the main S&P 500 sectors for stock price moves the day after earnings. The average move for the tech sector is down around 1.5% while communications shares have fallen 2.7%.

To UBS’s Solita Marcelli, AI computing stocks remain attractive with combined capital expenditures from Microsoft, Alphabet, Meta and Amazon expected to exceed $200 billion this year, up $20 billion from a previous estimate.

“We are encouraged by many positives in tech fundamentals during the first-quarter reporting season, which in our view continue to support the investment case for generative artificial intelligence,” said Marcelli, chief investment officer Americas at UBS Financial Services."

MY COMMENT

YES....we have seen GREAT EARNINGS this time around. Much better than expected by the...."experts". BUT many companies especially in the AI area have been punished for good earnings and/or good guidance.

This is simply short term trading STUPIDITY. Herd behavior. AI program trading based on news headlines and articles. AND....AI program trading platforms....acting in concert and creating the short term market narrative and direction......legal manipulation.

NVDA at this moment is UP by $24....over 2% today....at $913. Pre-earnings the stock is pushing toward its all time closing high which is about $950. These gains will probably tend to lessen the POP post-earnings. But what do I care....I will take my gains either pre-earnings or post earnings or both.....as a long term investor. It makes no difference to me.

I continue to see the BIG CAP AI space as a HUGE opportunity. The next five to ten years is going to be huge for AI and the companies that sell the infrastructure products that are necessary to run AI. The amount of money that is being allocated and projected for AI infrastructure products is MASSIVE.

The question is who is going to get that money. With my portfolio being focused on MSFT, AAPL, GOOGL, NVDA, AMZN (web services), PLTR, SMCI, NVDA.....as tech holdings....I believe I am in a good position to capture that money regardless of where it goes.

BUT....time will tell.

 

You are so right TOr3mnted.

I have seen my kids do the same thing.....they now make their own coffee. Work from home....changed their behavior.....as well as the cost getting outrageous.

You can buy the ingredients much cheaper than paying for the finished product. What are we talking about....a good coffee machine or Espresso machine (a one time expense), some beans, a grinder, some milk of whatever type you like, caramel, chocolate, or whatever additions you like.

 

Speaking of AI.

Microsoft readies new AI model to compete with Google, OpenAI, The Information reports

https://finance.yahoo.com/news/microsoft-readies-ai-model-compete-144733579.html

MY COMMENT

Guess what chips they are using for this? Servers with NVDA GPU's.

 

STILL hanging in there as we head toward the EAST COAST Wall Street lunch hour.....the stock market witching hour.

I am doing well right now in my Portfolio Model.....even though I have a little bit of red in HD, GOOGL, and AAPL.

EVERYONE else doing ok toady? LETS GET OUT THERE AND MAKE SOME MONEY TODAY.

 

Oh yes....by the way....I did add CMG to my Portfolio Model this morning at the open at about $3174 per share. I dipped into my SP500 Fund to get some money for ten shares.

I expect that it will be a long term holding and will end up being 500 shares after the split. BUT....it will be a junior positon AND I will be in "watch mode" over the next 1-2 years.

I really hope it becomes a long time stock for me. I really need NON-TECH companies in my portfolio. I also historically have liked to have 10-15 stocks in my portfolio. This takes me up to ten holdings now.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Microsoft
Nvidia
Palantir (Junior position)
Super Micro Computer (Junior position)
Chipotle (junior position)

I had a chance to drop in to a couple of their locations over the weekend....nicely crowded. I really like their financials other than the PE which is in the 70's and their margins are criticized by some. I definately like the future projections for them. I also really like their stock growth over the past five years.

1 month +8.77%
6 month +54.11%
YTD +42.05%
1 year +56.86%
2 year +167.11%
3 year +163.77%
5 year +352.02%
10 year +1,174.82%

It would have been nice if I had bought before the recent earnings. BUT....that is water under the bridge a this point.

 

Regarding the above.....I will consider it a VICTORY if one of the "junior positions" sticks for the LONG TERM. In the past I have had a normal rate of about one out of two or three sticking.....when I buy a potential long term hold. It is not that I lose money on them....but....the returns just are not high enough even though positive.

My primary vehicle for comparison on the returns of these three new holds....PLTR, SMCI and CMG...will be the SP500 Index.

I WILL always put up any moves that I make on here....basically....when they happen. BUT....I do try to NOT telegraph them ahead of time.

I am not intending for anyone else to do what I do. If you choose to...fine....but that is not my intent and I DO NOT GIVE INVESTMENT ADVICE to others....since I have no clue as to anyone else's situation, risk tolerance, finances, income, assets, etc, etc, etc.

 

Checking back in with the markets....looking....VERY GOOD with only 45 minutes to go. BUT....In the past I have seen the bottom fall out in the last ten or fifteen minutes of the day. So...not counting any chickens.

BIG GAINS in....NVDA, SMCI, and PLTR......and...only three stocks in the red today so far.....GOOGL, AAPL, and HD.

 

I am not where I can check my account....but I know I had a good day. A good way to welcome my new holding CMG to my account....a $44 gain for the day....although I did not get all of it. I am happy to get about $44. I think I ended the day with only two stocks in the red.....AAPL and HD.....but I will check in a while to make sure. Certainly a big day for NVDA up by $33.

Stock market today: Stocks climb as S&P 500 notches best 3-day run of 2024

https://finance.yahoo.com/news/stoc...notches-best-3-day-run-of-2024-200147691.html

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

"Stocks closed near session highs Monday, as the S&P 500 (^GSPC) notched its best three-day run in a rip-roaring 2024. Wall Street continued to build on an end-of-week surge precipitated by a softer-than-expected jobs report that helped spur bets toward an earlier rate cut from the Federal Reserve.

The S&P 500 gained 1%, while the tech-heavy Nasdaq Composite (^IXIC) rose 1.2%. The Dow Jones Industrial Average (^DJI) increased almost 0.5%.

Stocks extended their rally from the end of last week, getting a boost from a "Goldilocks" jobs report that struck the balance in providing welcome news for both the markets and the Fed. More than two-thirds of bets are now on a September rate cut from the Fed, according to the CME FedWatch Tool. Most traders now expect at least two cuts by the end of the year.

Those bets could be swung by the return of Fedspeak, now that free-speaking Fed officials are untethered from a pre-meeting blackout period.

On Monday, New York Fed president John Williams said officials will make rate cut decisions based on the totality of incoming data. Williams assured eventually "we'll have rate cuts," but for now monetary policy is in "a very good place."

Also on Monday, Federal Reserve Bank of Richmond president Thomas Barkin expressed optimism that inflation will come down to 2% as "the full impact of higher rates is yet to come."

Minneapolis's Neel Kashkari is set to speak on Tuesday.

In corporate news, Disney (DIS) will take center stage this week as earnings season starts to wind down. Its stock is up more than 25% so far this year.

After a 6% post-earnings rally on Friday, Apple (AAPL) shares lost around 0.9% after Berkshire Hathaway CEO Warren Buffett revealed over the weekend the company had pared its holdings in the iPhone maker.

Boeing (BA) sank more than 1% in afternoon trading after the the Federal Aviation Administration said it has launched a new probe into the aircraft maker's 787 Dreamliner after the company revealed to regulators last month it may not have completed the required inspections.

A Boeing spokesperson told Yahoo Finance, "we promptly notified the FAA and this is not an immediate safety of flight issue for the in-service fleet.""

MY COMMENT

Looks like a mini version of the EXPLOSIVE bull market rally that I mentioned over the weekend on here. I am sticking with that....feeling. We have now had a big re-set in expectations and are primed to go back up. The WALL OF WORRY is high and begging to be climbed.

PLUS....added bonus....there is nothing going on right now....even though the FED continues to come out and BLAB to anyone that will listen.

A good BONUS would be good PLTR earnings today and great NVDA earnings next week. MAKE IT HAPPEN.

 

Speaking of PLTR.

Palantir raises 2024 forecast on robust AI demand

https://finance.yahoo.com/news/palantir-raises-2024-forecast-robust-200147315.html

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

"May 6 (Reuters) - Data analytics firm Palantir Technologies raised its annual revenue and profit forecast and beat first-quarter sales estimates on Monday, riding on strong demand for its services that help businesses deploy artificial intelligence applications.

The company has emerged as a winner of the generative AI boom thanks to its artificial intelligence platform, which is used to test and debug code and help evaluate AI-related scenarios, among other uses.

"AIP is driving a huge part of both our new customers and growth within existing customers and its having a huge impact on our business," chief revenue officer Ryan Taylor told Reuters.

Taylor said businesses were signing "seven-figure deals shortly" after completing its AI bootcamps, which give potential clients access to its platform for up to five days and have been credited with driving rapid customer additions.

Palantir said it conducted 660 boot camps in the first quarter and closed 87 deals worth $1 million or more across the business, with its customer count increasing by 42%. It did not specify how many customers were converted through the boot camp.

The company, co-founded by billionaire Peter Thiel, raised the mid-point of its 2024 revenue forecast to $2.68 billion from its earlier mid-point of about $2.66 billion.

Palantir works closely with governments, providing software for visualizing army positions, among other things.

However, the company has been trying to diversify its revenue to reduce its reliance on government spending.

Its government revenue rose 16% in the quarter ended March 31, while commercial revenue jumped 27% as U.S. commercial customer count in the segment increased 69%.

The company also raised its 2024 U.S. commercial revenue forecast to above $661 million from its earlier expectations of about $640 million.

Palantir reported first-quarter revenue of $634.3 million and its largest quarterly profit according to a CEO letter. Four analysts polled by LSEG had expected revenue of $625.4 million."

MY COMMENT

Could be a HUGE beat....nope....having now seen the data it is not.. My one negative on this company was its reliance on government work. I dont like that.

NOW...it looks like they are seeing some nice private business coming their way.

 

HERE is more.

Palantir beats on revenue but gives lower-than-expected guidance

https://www.cnbc.com/2024/05/06/palantir-pltr-earnings-q1-2024.html

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

"Key Points

• Palantir reported stronger-than-expected revenue and EPS in line with analyst estimates, but issued weaker-than-expected full-year guidance.
• The company also saw GAAP profitability for the sixth straight quarter.
• Palantir signed a $178 million contract with the U.S. Army earlier this year, to help develop a next-generation, field-deployable sensor station.

Defense-tech firm Palantir reported first-quarter earnings on Monday that beat analyst expectations on revenue. Bottom line results were in-line with estimates, but the company guided to weaker-than-expected full-year revenue.

Shares dropped about 5% in after-hours trading.

Here’s how the company did compared to LSEG estimates:

• Earnings per share: 8 cents adjusted vs. 8 cents expected
• Revenues: $634 million vs. $625 million expected

The firm, which builds big-data and artificial intelligence software for governments and corporations worldwide issued guidance for the upcoming second quarter and full year. Palantir expects second-quarter revenue to fall between $649 million to $653 million, versus the $653million expected by LSEG. The company guided to full-year revenue between $2.68 billion and $2.69 billion, weaker than an LSEG consensus estimate of $2.71 billion.

Palantir reported $105.5 million in net income for the quarter, or 4 cents per share, compared with $16.8 million, or 1 cent per share, in the year-ago quarter. It marked the company’s sixth straight quarter of profitability on a GAAP basis.

The weaker-than-expected full-year guidance comes despite a solid revenue beat for the first quarter and after remarkable success marketing its artificial intelligence products to the government and the private sector. Earlier this year, Palantir signed a $178 million contract with the U.S. Army to help develop a next-generation, field-deployable sensor station."

MY COMMENT

YES....looks like the guidance will be an issue tomorrow. A little light. BUT....I think there is a good possibility that this si simply corporate ROPE-A- DOPE. Low guidance to lower sky high expectations going forward.

We are probably in for a range bound stock for a while.

 

MORE......big gains for me today....although I will probably give a little bit back tomorrow compliments of the guidance from PLTR. I ended the day with only two stocks in the RED....HD and AAPL.

I also got in a good beat on the SP500 today by 0.97%.

ONWARD and UPWARD. STEP BY STEP WE SLOWLY MOVE FORWARD.