VERY SMART......not looking for the next Tesla. That would NOT be a good thing. Those type of......BIG GAIN......events are RARE for any investor. Looking for another....single stock....investment to equal Tesla would be a sign of obsession or mania. Getting carried away after a WIN like that would be a dangerous thing. OBVIOUSLY you know this and are very smart in your plan for the proceeds. That is EXACTLY why my long term goal is to average a total return of 10% or more over the long term.
The case for letting cash rot. With so much cash, I considered the idea of adding a couple of rungs to my bond ladder. The analysis ended with a clear view of this mistake. Bonds with decent yields are over priced. Governments tend to be 10 year maturity with extreme low returns; this brings far too much opportunity cost. The bond ladder will remain limited to reaching for oatmeal on the bottom shelf. Finding value in companies is also extremely difficult, at the moment. I've had limit buy orders in, most of the time, for the last two years. They barely fill. We just got a few hundred shares this morning on an anomalous partial fill but this isn't something of significance. So, our largest holding will remain cash for the foreseeable future. I'm in no rush to buy anything but I expect we will turn our DRIPs back on in March, when even more cash pours into our accounts.
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” - Peter Lynch Anyone who has been investing for a while knows this to be true. There is a group of people who have been predicting a market crash for some years. The same held before the 2008 financial crisis. When a crash occurs, they will declare themselves as visionaries. If they really were visionaries, they would be high net worth individuals. What's more, they would not need to self market on social media. People who have ignored all indicators and proceeded with blind optimism and ignorance have done far better than pessimists who have tried to protect their money. The most anyone can know is the chance of a correction are elevated in certain market and economic conditions. I believe we are clearly in a period of elevated risk of correction. Here is my process, at times like these: - be patient (fomo is never appropriate for a long term investor) - continue looking for value - do not adjust value targets to compensate for market conditions If a correction happens and companies I enjoy owning go on sale, I will buy heavily. If not, I must still dig deep to find a productive purpose for our cash. That mission includes looking for non-market vehicles, like expanding my business, etc. I am not waiting for a correction.
IMF and a couple of other credible sources are suggesting COVID not being under control until the end of 2022. This seems reasonable to me and this is why I'm happy to move forward with so much cash.
I think Biden's plan was providing every state with 16% extra vaccines every month and the estimate was to have 100M vaccinated by Summer. That's before JNJ gets approved, if it does and helps with supply.
Speaking of GameStop and the amazing video posted by T0rm3nted in the GameStop thread, it has become crystal clear that any time an entrenched power comes under pressure, there will be an onslaught of media reporting why it's an injustice. Big interests control the market and the media. I expect some hedge funds will be driven out of business because of GameStop. Retail investors like us did that. There is a very real possibility legislation will be written to prevent retail investors from doing this at some point in the future. It probably won't happen soon but big players control legislation so over the course of the next decade, it could happen. This is why I've made a point of not having all our money in market equity. Lately, the markets have been a cash fountain but, with the market polluted by valuations that cannot be justified by earnings or growth, only a fool would count on it exclusively for their future. I enjoy making money quickly as much as the next guy but you just can't eat cheese cake three meals a day all your life and be slim with great muscle tone.
Where it all started. In the early 80s, I started as a long term trader. An experienced person gave me a couple of tips, I bought those companies, and 18 months later, my $2400 had turned into $7200. I was in university and had a smug feeling of wealth. You couldn't trade quickly, back then. Trades were made by phoning a broker, having an argument, and bitching at them until they agreed to do what you want. The first three companies I picked did extraordinarily well, based 100% on luck. I thought I had it all reasoned out but I didn't look through any books. I just picked companies I liked with low P/E ratios. In 1991, I took a small part of the cash from a sale and put it into a distributing stock. I remember it had a yield of 3.5%. By about 1993, I grew that position to be large enough enough to pay for a cell phone, if I wanted one. I was too cheap to buy a cell phone, of course. The 90s turned into a decade of real estate for me. I sold half of my investments and bought two properties. In the late 1990s, I sold the first distributor and bought a company that was focused on expanding a cell phone network into a national presence. Cell nets weren't national, back then. There was almost no rural cell coverage or between cities. There was two incompatible standards and networks were just starting to grow. The cell phone company distributed something like 1% but the dividend went up each year so I would open my quarterly statements to see a bit of cash trickling in. In the early 2000s, I started calling, once per year, to re-invest the cash into more of the cell phone company. That was really the start of the core strategy I use to this day. Almost everything good that has happened in our portfolio has come from distributions. Sure, we have injected large amounts of cash from real estate and saving but distributions have always been the core engine that drove the portfolio forward. In 2019, the money to triple my Tesla holdings came from distributing companies. It certainly didn't come from the Tesla shares I had been holding for three years that had returned to their original value and it's not like I had that kind of money sitting around in my chequing account. Our distributions primarily come from REITs, utilities, and financial institutions but there have been several others, over the years. I have owned oil and service industry companies, at various times in the past.
Portfolio update. I share this because it may shed some light on the thought process that goes into our portfolio. It's not about what we own. It's about the decisions made to get here. So, I sold Tesla. That is on me. It went above where I sold it the next day, so I didn't time the market peak. Our largest core holding is under take-over so it will be turning to cash in 6 weeks. This, when we were already awash in cash. But, we do still hold quite a bit of equity. What's left is absolutely booming. Our boring stocks have become oddly exciting. Before the boom, I picked up a small amount of two stock but not enough to make all that much difference. Still, every time we own a bit more of a good, distributing, company, that makes me happy. Those buys brought our cash down into the high 40% range. Post boom, the only company close to my value line is an alternative financing company. That company would probably buy, if I posted a limit order at my value line. What's more, we currently have a terrifying amount of cash. I'm normally pretty comfortable with cash but we are about to have an avalanche. However, I can see a very real possibility of the market crashing in the first half of this year. What to do? Limit orders have been submitted. The reason is that it's always a good idea to buy a company that shows value. I'm often wrong about crashes and I believe no one can predict them accurately, including myself. So, having a good portfolio trumps everything else. So: Good portfolio > lucky market timing.
Another thought process piece..... The Tesla cash isn't gone. It's just sitting there, freaking me out. I do a lot of research on Tesla. I still have my connections in Shanghai, Fremont, and Austin. I've never known anyone local to Grunheide. Also, I still watch everything of interest regarding Tesla on YouTube. It has become a lifestyle. Two key Tesla channels posted videos in the last 24 hours with almost the same title, "Last chance to buy Tesla before it goes to $2000." I'm a FOMO contrarian. FOMO has caused far more losses than gains so I make a point of never buying a company that seems like it is going to run away with no opportunity to ever buy again. I don't know what price would be needed to entice me back in but it would be back at or below the $600 range.
Just curious, TomB16. What percentage points below current value did you set your limit orders? You can ballpark it if you don't want to give away specifics.
I don't care what the current market value is. In fact, the spreadsheet page where I calculate intrinsic value is deliberately devoid of market cap and quotes. I'm not quite ready to share my formula but there is a small chance I may, at some point. Everything of value is below, though. I don't even use the formula. I override it at every opportunity. It's just a guide but it has value to me. So: - Calculate IV based on management, earnings, assets, risk, etc. Where objective data does not exist, like quality of management, I provide my own subjective data. - Determine potential growth, based on ability to raise capital, market opportunity, etc. - Use the above derived numbers to determine a five year future value - I used to say I need a 30% discount from the five year future value but that number has barely been used. There are companies I buy for their stability that I've gone with a much more shallow discount, where other companies I would need a 50% discount to be interested. It's all based on the risk and I don't currently have anything remotely close to an objective process on this. I do have an objective calculation for the five year future value but I've never followed it. - All of these values have an override field where I can supply my values of ignorance. - From this subjective, conjured, number, I divide by the number of shares and that is my target price. This feeds the limit orders. Even though I regularly override the calculated values, the calculations themselves are of value. I look at it like doing homework at school. One day, you will throw it all away and head out into the real world but you will take with you the experience of having done all of those calculations and studied all of that history. I've long wanted to devise a system to determine volatility and weight limit orders based on likelihood of filling. My system is so far from being fully automated, I can see this will never happen. Even though it could happen, I see more effort than return. Even though the return might be a high enough number to make it worth being my life's work, I don't have enough life left to warrant the investment and we have enough. Subjective input has hurt us, on many occasions. Our largest holding got so huge I haven't purchased stock in a few years (did add in March 2020 during the COVID sale). I haven't even dripped it in years. It was just too big. I didn't sell any, though. If I had been courageous, I would have let it drip and pumped up that balloon at every opportunity. The buy out would have been even kinder to us. It is yet another data point on a graph that shows to let the winners run.
Many of the overrides are based on dead reckoning. For example, I value Tesla's SuperCharger network based on a similar fuel station network that has a pretty well known intrinsic value. While they aren't directly comparable, there is enough similarity to use the fuel station company as a guide and compensate for the differences. This number is substituted in place of the future earnings formula result. For years, Tesla was said to be impossible to value. Of course, this wasn't true. It was just impossible to value accurately. lol! Tesla is a mix of car, fuel distribution, solar, power production, and software companies. I value them individually as best I can, sum the result, and divide by the certificate circulation. It wasn't hard. While it also wasn't accurate, it proved to be a lot more rational than the moist thumb in the air done by industry analysts. This is how I value nearly everything in my portfolio.
Perhaps there would be some value to newer investors in sharing the perspective of an older person on market corruption. Most of the regulars have seen it all before, so no need to read. The market has always been corrupt. For thousands of years, any time there has been a concentration of wealth, some son-of-a-bitch has been trying to get more than his share. During this same period, every time someone has pitched a transaction, it has been skewed in their favour. What we saw with the buddies of hedge funds shutting down trading on GME to allow them to close short positions is nothing new. Believe me, it was just as hard to swallow in the 1970s as it is today. Knowledge of the fundamental lack of trustworthiness of the average person informs my entire investment strategy. Before buying a company, I study the executives. Most executives siphon off most/all of the profit before it can get to the owners.... shareholders. I look for that. The point is not to give up. The point is to identify the bogies and defend against them. There are techniques that allow me to look for executive honesty. There are techniques that allow me to avoid the front runners, charlatans, and corruption. These techniques have worked surprisingly well, but there is always the chance I could be fooled. I don't do this diligence after the fact. This is where my research starts. I believe corruption is a larger factor than retail and industry trends. Oil is going away but I have owned oil companies recently and I would be happy to own another. This, despite knowing that oil is not the future. Over the years, I've learned to identify wildcat, micro-managing, savages at the helm of small oil companies. These sort of men can easily manage a small oil company of $50M, perhaps to $100M. Strangely, these assholes are genetically optimal for running an oil field services company. When I am able to identify such a CEO, I buy the company. These companies have always done extremely well, over time. They run the most efficient companies going. In fact, I will opine they are some of very few CEOs worth the money they pay themselves. I actively avoid any company run by an MBA. MBAs are legendary for self aggrandisement, over self-compensating, alienating their work force, and generally performing somewhere between lacklustre and poor. I champion WSB and what they stand for but the corruption they rail against is nothing new. Market corruption. Corporate corruption. Good people and good companies are out there. Our job, as investors, is to find these values.
One of the reasons I'm on this forum is for the younger people. I'm an older man and I have an older man's perspective. I've also been in the market for some decades, so perhaps my long term perspective might enlighten someone. ... but there are information blockages that build up over time in the human brain that reduce the success of someone at my age. Younger people don't have as many of those problems so they can enlighten someone in my position, who is increasingly under the disability of age ignorance. I do my best to compensate for this ignorance and I've done OK, thanks to folks on this site and others. I believe this sort of sharing is helpful to both my investing and my acuity. It is my hope, it is helpful to all involved. So, if you are younger than 50, please post more. I would appreciate it. lol!
That is the beauty of generations listening to each other. Every age has something unique and valuable to offer. It is this mentality that leads to the greatest advancements in society. It also helps prevent history from repeating itself. And you nailed it: corruption is as old as the human species. There are those who are more than happy to get all they can to the detriment of others. Some is genetic, some is learned. The new factor here that makes things different versus every other time period in history: the ubiquitousness of the internet. In this case, young motivated people with as many tools at their disposal as the hedge fund managers. That is why, even with the concept of corruption being around from the beginning, I believe this is a new era in investing. A lot of that shadowy corruption crap is now being exposed and called out by ordinary people.
I'm going to pretend fundamentals still matter. WBI = 188 (down a tick due to an uptick in estimated GDP) Early this week, two long standing buy orders triggered bringing us down into the high 40% cash range. Several more limit orders remain. If there is much of a market contraction, our buys should connect. DRIPs back on. This isn't because the market indicates doing so. It's because we achieved a cash target of 50% for this level of WBI. While we have again dipped below this level of cash with recent buys, more cash coming in March will put us way over the top so no need to shop for the very best values.
Navigating market vicissitudes. The WBI is now 193.25% This is a very unusual market, from my perspective. The market is high but I still see the occasional value that is reasonable. As long as I can find value, I will buy companies.
