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My last post for a while, hopefully my most valuable.


valueinvestor
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Alas, it seems my time has come to be a lurker for a while.

 

I have responsibilities that are growing every day, and it's getting harder and harder to contribute meaningfully. Especially for an auto-pilot portfolio that essentially has 3 stocks that take up more than 75% of my portfolio. The reason why my portfolio exists is to park any residual cash generated from my business, where most of my time, energy, and effort is being spent. However, it's no excuse to not attempt to give back as much as you can, especially with the value I've received from the golden nuggets embedded in this forum.

 

Hence I will leave you all (not that you need it - mostly geared towards those who are just starting out) with what helped me for the last 15 years.

 

1. Luck. Focus on getting luckier, not smarter. Almost similar to focus on your character, rather than your reputation, as good characters always have good reputations. Many people underestimate the utility of luck, and never attempt to get as much of it. Luck always revolves around certain places around the world with certain people, and it can be attributed to your stock selection. When I started out, I had a folder full of spreadsheets, and my portfolio was always dictated by what provided the most alpha via DCF, SOTP, you name it. While it was good, the process was labour intensive and not recommended if you're not a full-time investor or institutional player. Also, in most cases, even if my thesis was right, my alpha would've been capped because before the thesis played out... there would've been unfriendly shareholder actions, for instance, unfriendly squeeze-outs, acquisitions, management, mergers, capital restructure, etc. The proverbial summation is if you want to be unlucky... let's say get struck by lightning, then go to a mountain and hold onto a metal pole, where lightning always strikes.  :P

 

2. Write. I'm a big proponent that learning how to write makes you smarter. DCF and SOTP are great tools, but only part of a great repertoire IMHO. This skill is present with many great investors, and probably the reason why we have annual letters... idk. However, I do know that writing allows one to distill abstract concepts into useful and actionable ideas/philosophy (e.g. fair price for wonderful businesses are better than wonderful prices for fair businesses, being lucky rather than analytical, etc.)

 

3. Know thyself. In my opinion, many try to invest as if they are Bruce Flatt, Bill Ackman, Stephen Schwarzman, or worst, rocket scientists. IQ doesn't automatically translate into wisdom, and knowing yourself is critical to investment success. In my case, my portfolio is not going to pay the bills, but will eventually pay for my retirement (if I want to retire). Most of my efforts again go towards growing my business and being a better person, hence I'm not going to compete with people who have a large capital, smart analysts and have greater means to obtain alpha. Therefore, I'm not going to have the same ideas like them.

 

4. Reflect. In order to "know thyself," one must reflect. It's impossible to know what you look like without a mirror. I reflect twice a day, and possibly more in my head during the day. Constantly questioning my business strategy, investments, and general directions in life. I am a very irrational being, and hence it helps to constantly monitor yourself and make sure it does not bleed into your business, career, investments, etc. Shout out to LongHaul and his Psychology of Misjudgement Thread, which I think is a must-read. Oh before I forget, what also helps with reflection is finding people who constructively disagree with you, as opposed to those who are just disputatious, because they provide another insight that you can add to your mental framework.

 

5. Grow. I'm constantly growing as a person, whether it's physical or mental. I find that it helps me personally, as a result, it translates professionally. I love annual reports because it provides a makeshift mental map of the world and keeps track of large changes. With the reduction of available primary sources or reliable secondary sources, annual reports are one of many great resources to stay up-to-date. It's not hard either, because you don't need to read the entire report to understand how it fits in the world, but probably wise to read the footnotes, if you're planning to make an investment.

 

There's so much more, but I think these are the largest contributors, and probably what I would leave try to leave with my possible descendants. Should you construe this as advice, no... there are always exceptions to rules, and what worked for me, may not work for you. Most of these are no-brainers, but I feel that many people know them, but it has not registered with them or better yet, resonated.

 

Anyways, with the world divided, on the brink of economic depression, where the future is dim, I wish you all the best. Also, remind you that every great crisis provides great opportunities, and your greatest liabilities can be your greatest assets. More importantly, I would also hope that you are living lives how you see fit, and hopefully, it's full of music, dance, adventure, and/or meaning. It's been real. ;D

 

-valueinvestor

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Guest cherzeca

thanks for this, valueinvestor. well done.

 

I have a variant of 1., which is to focus my alpha seeking to one opportunity.  mostly I have come to believe that low cost long term index investing is the sanest and smartest way to go (the market is right), but to borrow WEB's punchcard idea, I am willing to punch one special situation/value investment where I am betting the market is wrong now but will come to agree with me later.  does luck require diversification or just extra work and focus?  we shall see. I like hiking mountains, but only when the sun is shining.

 

given your portfolio it seems you have three holes on your punchcard.  if I had three good ideas and thought I could follow them intensely, I might too.  but it sounds like your portfolio is a sidecar to your business in terms of wealth creation, so paying sufficient attention to that which requires it most and which provides the most valuable payoff is my most important takeaway from your post.

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thanks for this, valueinvestor. well done.

 

I have a variant of 1., which is to focus my alpha seeking to one opportunity.  mostly I have come to believe that low cost long term index investing is the sanest and smartest way to go (the market is right), but to borrow WEB's punchcard idea, I am willing to punch one special situation/value investment where I am betting the market is wrong now but will come to agree with me later.  does luck require diversification or just extra work and focus?  we shall see. I like hiking mountains, but only when the sun is shining.

 

given your portfolio it seems you have three holes on your punchcard.  if I had three good ideas and thought I could follow them intensely, I might too.  but it sounds like your portfolio is a sidecar to your business in terms of wealth creation, so paying sufficient attention to that which requires it most and which provides the most valuable payoff is my most important takeaway from your post.

 

Thanks! I purposely stayed away from specifics because I find people learn more from insights than instruction, as it forces them to think and interpret. I found my outperformance by essentially betting on stocks such as Amazon where valuation always seems to be stretched, but opportunities and luck always seems to be on their side. Is it because their lucky, or are they in the right place and right time?  I always try to bet  on the “lucky” ones.

 

However to your point, yes - compounding at a rate higher than 15% over a long period of time with just the public markets, if you’re not full time is quite a feat. Luck may come from diversification, extra work, anywhere really.

 

There was a time where anyone in Silicon Valley could’ve been rich, if they simply went there at the right time  and associated with the right people. To borrow my uncle’s line, who was a beneficiary from the dot com boom - “You actually had to try to be poor that time.”

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Great Post. Thanks for sharing your wisdom and being humble.

 

Alas, it seems my time has come to be a lurker for a while.

 

I have responsibilities that are growing every day, and it's getting harder and harder to contribute meaningfully. Especially for an auto-pilot portfolio that essentially has 3 stocks that take up more than 75% of my portfolio. The reason why my portfolio exists is to park any residual cash generated from my business, where most of my time, energy, and effort is being spent. However, it's no excuse to not attempt to give back as much as you can, especially with the value I've received from the golden nuggets embedded in this forum.

 

Hence I will leave you all (not that you need it - mostly geared towards those who are just starting out) with what helped me for the last 15 years.

 

1. Luck. Focus on getting luckier, not smarter. Almost similar to focus on your character, rather than your reputation, as good characters always have good reputations. Many people underestimate the utility of luck, and never attempt to get as much of it. Luck always revolves around certain places around the world with certain people, and it can be attributed to your stock selection. When I started out, I had a folder full of spreadsheets, and my portfolio was always dictated by what provided the most alpha via DCF, SOTP, you name it. While it was good, the process was labour intensive and not recommended if you're not a full-time investor or institutional player. Also, in most cases, even if my thesis was right, my alpha would've been capped because before the thesis played out... there would've been unfriendly shareholder actions, for instance, unfriendly squeeze-outs, acquisitions, management, mergers, capital restructure, etc. The proverbial summation is if you want to be unlucky... let's say get struck by lightning, then go to a mountain and hold onto a metal pole, where lightning always strikes.  :P

 

2. Write. I'm a big proponent that learning how to write makes you smarter. DCF and SOTP are great tools, but only part of a great repertoire IMHO. This skill is present with many great investors, and probably the reason why we have annual letters... idk. However, I do know that writing allows one to distill abstract concepts into useful and actionable ideas/philosophy (e.g. fair price for wonderful businesses are better than wonderful prices for fair businesses, being lucky rather than analytical, etc.)

 

3. Know thyself. In my opinion, many try to invest as if they are Bruce Flatt, Bill Ackman, Stephen Schwarzman, or worst, rocket scientists. IQ doesn't automatically translate into wisdom, and knowing yourself is critical to investment success. In my case, my portfolio is not going to pay the bills, but will eventually pay for my retirement (if I want to retire). Most of my efforts again go towards growing my business and being a better person, hence I'm not going to compete with people who have a large capital, smart analysts and have greater means to obtain alpha. Therefore, I'm not going to have the same ideas like them.

 

4. Reflect. In order to "know thyself," one must reflect. It's impossible to know what you look like without a mirror. I reflect twice a day, and possibly more in my head during the day. Constantly questioning my business strategy, investments, and general directions in life. I am a very irrational being, and hence it helps to constantly monitor yourself and make sure it does not bleed into your business, career, investments, etc. Shout out to LongHaul and his Psychology of Misjudgement Thread, which I think is a must-read. Oh before I forget, what also helps with reflection is finding people who constructively disagree with you, as opposed to those who are just disputatious, because they provide another insight that you can add to your mental framework.

 

5. Grow. I'm constantly growing as a person, whether it's physical or mental. I find that it helps me personally, as a result, it translates professionally. I love annual reports because it provides a makeshift mental map of the world and keeps track of large changes. With the reduction of available primary sources or reliable secondary sources, annual reports are one of many great resources to stay up-to-date. It's not hard either, because you don't need to read the entire report to understand how it fits in the world, but probably wise to read the footnotes, if you're planning to make an investment.

 

There's so much more, but I think these are the largest contributors, and probably what I would leave try to leave with my possible descendants. Should you construe this as advice, no... there are always exceptions to rules, and what worked for me, may not work for you. Most of these are no-brainers, but I feel that many people know them, but it has not registered with them or better yet, resonated.

 

Anyways, with the world divided, on the brink of economic depression, where the future is dim, I wish you all the best. Also, remind you that every great crisis provides great opportunities, and your greatest liabilities can be your greatest assets. More importantly, I would also hope that you are living lives how you see fit, and hopefully, it's full of music, dance, adventure, and/or meaning. It's been real. ;D

 

-valueinvestor

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I don't mind at all - here's my entire portfolio in my main registered savings account. I have others and they vary in positions, depending on the tax advantages.

 

Prudent to probably state that this should not be construed as investment advice and this entire portfolio can be changed on a dime. As most of these main positions have been held for years, and I regularly change my mind... So in other words, do your own research.

 

Now we got that out of the way,

 

Punch Card Positions:

Sea Limited - SE - 55%

Shopify - SHOP - 20%

GoEasy - GSY - 10%

Elastic NV - ESTC - 10%

---------------------------

Work-Outs/Indulgent/Speculative Trades:

Scully Royalty Ltd - 2%

GameAccounts Network - 2%

Contura Energy - 1%

 

Recent Exit and Possible Return:

Shorting Billboard and Traditional Advertising Companies, which I probably get back into after the recent run-up.

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Thanks for your contributions. Was the composition of your portfolio based upon interest/insight from your job or in a completely different field? Congrats on identifying some nice growth companies that the market underestimated.

 

Packer

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Great post. Thanks. As a horrible writer I appreciate your writing and your comment on writing. I read all the way down to "on the brink of economic depression, where the future is dim".

That was a bit of downer! ;) I usually lurk but I'm even using emojis for this.

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I don't mind at all - here's my entire portfolio in my main registered savings account. I have others and they vary in positions, depending on the tax advantages.

 

Prudent to probably state that this should not be construed as investment advice and this entire portfolio can be changed on a dime. As most of these main positions have been held for years, and I regularly change my mind... So in other words, do your own research.

 

Now we got that out of the way,

 

Punch Card Positions:

Sea Limited - SE - 55%

Shopify - SHOP - 20%

GoEasy - GSY - 10%

Elastic NV - ESTC - 10%

---------------------------

Work-Outs/Indulgent/Speculative Trades:

Scully Royalty Ltd - 2%

GameAccounts Network - 2%

Contura Energy - 1%

 

Recent Exit and Possible Return:

Shorting Billboard and Traditional Advertising Companies, which I probably get back into after the recent run-up.

 

It sounds like you made a transition from cigarbutt’s (Graftech) to growth stocks successfully. Congrats and good luck with your business.

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It sounds like you made a transition from cigarbutt’s (Graftech) to growth stocks successfully. Congrats and good luck with your business.

 

Thanks - much appreciated!  ;D

 

Great post. Thanks. As a horrible writer I appreciate your writing and your comment on writing. I read all the way down to "on the brink of economic depression, where the future is dim".

That was a bit of downer! ;) I usually lurk but I'm even using emojis for this.

 

I'll admit to that  ;D

 

It wasn't intentional and I'm typically a "prepare for the worst, hope for the best" kind of person - hence why after the "future is dim" line, I mentioned what hopefully allows people to be hopeful in a possible contraction.

 

Thanks for your contributions. Was the composition of your portfolio based upon interest/insight from your job or in a completely different field? Congrats on identifying some nice growth companies that the market underestimated.

 

Packer

 

Thank you!

 

That's a good question - I haven't really stopped to think about it. My interest and job experience vary more than the weather in Toronto, much to my parent's chagrin.

 

I think beyond my job experiences, the primary driver behind my investment decisions now, which naturally leads to portfolio compositions is business quality and other intangibles that you can't find on financial statements, such as customer experience, customer acquisition process, etc.. I believe this thought process was derived from my experiences/traumas in starting, running, and/or turning around tiny but very different businesses.

 

I used to bet on businesses based on their valuation (I know, blasphemy) before that experience, which is similar to betting on players based on their performance stats, both yield good results but discounts humankind's resilience and the possibility to capitalize on surprises/luck. However, now that I am finally a "player," for all intents and purposes, I can make bets beyond the stats.

 

Hence, my portfolio composition is not based on my interest or knowing the intricacies of a company, but rather the fundamentals driving it, seeing the direction it's going twenty-five years down the line (this particular point was derived from my mistake with Valeant, and possibly will make the same mistake with GoEasy w/ their potentially usurious not-illegal-yet rates) and having time arbitrage as an edge... as many overestimate what can be done in the short term and underestimate what can be done over the long term.

 

Also the risk of sounding even more blasphemous, I factor in luck now, as alluded before. Some industries are innovating at a ridiculous rate, and some companies get all the attention, therefore opportunities flow to them. When investors ask why this is important, I simply ask what's the ROI of nobody knowing you? What about being Sea Ltd? They are a company in economies that are growing twice as fast as the US, attracting the best talents, great access to cheap capital, and innovating at a crazy pace - so I fail to see how they won't get lucky with an event that no one saw coming - therefore they won't have a chance to include it in their DCF. However, even if the worst happens, and the stock rerates down - dollar-cost averaging and position sizing is the kevlar of getting fair valuations in the short-term (another lesson from Valeant). Hence, why I was able to swallow 50x earnings for Sea and doubling down when it ripped up.

 

Hopefully, this answers your questions!  ;D

 

EDIT: Someone alerted me that the last part can be misconstrued, when I doubled down, it doesn't mean I got out of existing positions. Rather, I had more leftover capital coming in and increased my portfolio allocation because for a time price got cheaper, although much higher than my initial buy-in.

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