The more confidence I have in each one of my stock picks, the fewer companies I need to own in my portfolio to feel comfortable.  -Joel Greenblatt

I made the first 3 purchases for the baby divi account last week. I am starting small with the idea of rapidly increasing my cash position in my brokerage account. All prices below include the cost of commissions in average price.

  • Corning (GLW); Avg Price: $29.45; 33.08% of portfolio
  • Hanesbrands (HBI); Avg Price: $20.43; 33.68% of portfolio
  • Magna International (MGA); Avg Price: $44.84; 32.87% of portfolio
  • Cash position: 0.37%
  • Unrealized gains/losses: + 0.38%

It’s very silly putting gain/losses on a portfolio that has been alive for one day. However, I thought it’d be an easy way to look back in time a year or so from now to get a snapshot of what was going on. Besides, the number is green! You sure wouldn’t be hearing about it if it was red.  🙂

I started a position with MGA as opposed to Kroger (KR) because KR was going up in price and never hit my mark. HBI is doing the best (+ 1.32%) with GLW being the only laggard (-0.52%). I am looking to have 7-10 positions in this portfolio. I will be increasing the cash position as opposed to buying more of a previously held position or starting a new one like in the past. I still LOVE dividends, but I am not solely focused on them anymore.

I am trying to follow Mohnish Pabrai and stay concentrated. I will have to re-read the Dhando Investor so I can hopefully do the book justice in a review. I have a hard copy of it which makes it more difficult to find my notes. My kindle has made me lazy!

According to gurufocus.com (a site I have fallen in love with over the months), Mohnish Pabrai has 7 (SEVEN) stocks in his fund! Autos are 71.74% of his portfolio. That’s conviction!

  1. Ferrari NV (RACE)
  2. Alphabet (GOOG)
  3. Southwest Airlines (LUV)
  4. General Motors (GM.WS.B)
  5. AerCap Holdings NV (AER)
  6. Fiat Chrysler (FCAU)
  7. Seritage Growth Properties (SRG)

 

I will end with a past mistake that is similar to my last post with ATVI. I had a position in Facebook (FB). The average price was somewhere between 118-120. I probably held it a couple of weeks (if that) because it wasn’t moving as fast in the direction I wanted. This was also when I was in the rapid trading phase. Here I was with a good company on a pull back from mid 130s, and I just wasted it! Was every person who uses facebook going to stop using it because the price went from 130s to 116s…No! People will still be going on FB when out to eat, when should be working, playing with the instagrams, posting their political griefs, cat photos, wishing a happy b-day to someone sitting beside them, etc…The stupid part of me really took over…I can probably add that I should have started a position in GOOG (I mean come on how many companies are actually a verb!??!) or AMZN on this same tech pullback…Live and Learn. I don’t even remember if it was a gain / loss so I probably just broke even or did a little bit better. I sure didn’t catch the run up to $150s! If it was a loss, it wasn’t even close to 1% of portfolio because I remember those even though I try to forget them!

Bruce Lee said it better than I ever can though:

I fear not the man who has practiced 10000 kicks once, but I fear the man who has practiced one kick 10000 times.

I feel like this has finely sunk in for me with all the flailing that I have done. I have to find my own way on this investing journey. In short (pun unintended), I am using a long only concentrated strategy with a year plus time horizon to benefit from taxes. It should be easier for me to not obsess over this portfolio too since I can look at my vanguard index funds to distract and am currently waist deep studying for the CFA Level 1 exam.

 

Happy Memorial Day!

JT

 

No matter how much research you do, you can neither predict nor control the future. -John Templeton

After tearing through and finishing the Dhando Investor: The Low-Risk Value Method to High Returns by Mohnish Pabrai and doing some thinking over my past investment choices, I have decided to refund my brokerage account. I am formulating my own Investment based on the Dhando Investor and what I’ve read about Joel Greenblatt’s The Little Book That Still Beats the Market (have it on order). I love the fact that Mr. Pabrai uses a concentrated portfolio. I also like Mr. Greenblatt’s idea of holding a security for a minimum of a year to avoid the short-term gains for tax reasons. A very real threat to any portfolio is the tax man! The only valid reason to sell before a year is to take a loss for tax loss harvesting.

I also finally got around to reading the highly talked about Millionaire Next Door book. I had low expectations going in because I figured it would be the same old live below your means, invest some, etc. However, it crushed my own expectations! I enjoyed the stats about most expensive / avg price paid for the watches, cars, house, and clothing when comparing the Prodigious Accumulators of Wealth (PAWs) to the Under Accumulators of Wealth (UAWs). My favorite part though had to be when talking about economic outpatient care (EOC). (AKA kicking the kids out of the nest, pulling the money support plug, go out and get a job, if you can’t afford it maybe you should change your lifestyle…) This was my favorite part because it shed some light on the life-cycle of wealth. The first generation will take risks and work very hard to accumulate. The second generation will be taught something else because the first generation wants them to have it easier than they had it. Understandable because they put in a lot of work but a lot of times this just creates a dependency which ends up hurting the kid. I’m going to eventually getting around to doing a write up on this one. All in all, much better than I thought it would be.

Back to the fun stuff though. I have decided to fund my brokerage account again! I wanted to sell some of my vanguard index funds in my taxable account to start out with a larger sum in this account. However, through experience I learned that the tax man is a real threat to the account. I had to wake up in the middle of the night to cancel my order to sell.  I will strive to have the patience to sit for at least 1 year before touching any of it. I think it will be neat to be in competition with myself anyways: Active vs Passive.

Only going to be starting with 6k on this one. Hopefully I can get some more in there, but I have some other things to do so won’t be able to aggressively funnel  that seed money just yet. I have had a nice break and am ready to take all the lessons I learned and continue on this journey. Lessons such as don’t change strategies.  A great example of this flaw is my mistake with ATVI in the past. It is a could of, should of, would of mistake that is a painful lesson. Got in with two lots (200 shares) @ $40.96 after it was on a pull back. I was very excited as I have had success with it before and know it’s a good company. However, around this time I was getting more active and reading more trading books etc. This is where I came up with the self-imposing rule to limit losses to 1% of account. This way you could ‘live to trade another day.’ I equate it to chess rules like develop knights before bishops, castle early, and don’t move the same piece twice as rules for the opening. When you gain knowledge and experience you learn when to break the ‘rules’ for your advantage. To end the sad story, I sold out at 35.80 which also ended up being greater than 1% of account. It was a lose-lose. Failure all around. ATVI currently sits at 58.51…Ouch! You can keep your 42% gain Mr. Market. I don’t want it!

Another (semi) failure was with AAPL. I was very happy to accumulate AAPL when it was pulling back due to lack of innovation, ipad sales suck, same phones everytime, blah blah blah…Pick a reason and it was mentioned in the headlines. APPL doomed to fail because it’s snowing in June

 

  • Bought 50 shares of AAPL @ avg price of $96.0835
  • Sold 50 shares @ $118.00
  • Gain of 22.81% (doesn’t include the divi gain!)

It’s fun going back in time and reading what I wrote about these purchases.

As I am typing this, Apple closed today at $90.52. Clearly I did not catch it at the bottom. I am okay with that though. I honestly hope that some of the articles/predictions that I have read come true and it drops to $85ish! I’m not sure if that will happen, but this stock is one I can get excited about dropping. I think there are a lot of possibilities with this company still. -Me

But I did not know the true value! It was like when I was a kid and traded a man eating, fire breathing dragon holographic pokemon card for a boring green dull vegetable pokemon. I started making poor decisions in life from a young age. Very sad. Hopefully reliving these mistakes from time to time will keep me from making poor decisions in the future.

AAPL currently at 153.34. A could of would of should of 60% gainer. I took the boring vegetable gains and decided not to ride the fire breathing dragon. I even did a newbie valuation of it back in DEC 2015. I feel like I have been very close to just having a break through but have not yet. A decent chunk of this can be blamed on switching methods. The larger portion is I am not thoroughly battle tested yet. Entering a position is the easy part. The psychological beat down and exit point is the hard part.

Granted scanning and following stocks is the fun part for me.  It still feels like being given $5 and going into a toy store. The possibilities are endless! I could always find something I liked then and can do the same now. I am going to strive to be more disciplined with the minimum 1 year policy for holding. I want to minimize the threat of the tax man taking my gains!

I usually like my dessert first, but I decided to save the best part for last. I am looking to splash back in with the following companies. I will only get to choose 3 with a 2k position in each.

Two positions are 90% likely to happen! They are old familiar faces: HBI and KR

My previous trade with HBI. HBI is currently mid/low 20s. Lower than this buy!

I had bought 350 shares of KR at 30.64 and sold at 33.505. KR currently in low 29s which is lower than my last buy! My third purchase is likely to be Corning (GLW), however, I am closely following MGA as well which could end up being my fourth purchase down the road.

All in all, I am behind on book reviews and very excited about getting this account up and running again. When I first started this site and investing in individual stocks, I was just making purchases every month to get more dividends. It was a great learning experience. I still love divis but am going to keep my philosophy of staying concentrated for this new portfolio. No more NAT and KMI for this guy…unless I think they are under priced of course. I am moving on from being a yield pig! I will still say thank you when the market blesses me with divis though.

Take Care,

JT