Just a note of "thanks" for bleach bit and Harvey having good posts about interpreting Teds book.
I've lost track on how many times I've reread Ted's book. One book I have highlights and notes when I had an example of what he wrote with many paper clips on pages.
If I go to look for a past reading a second time, I give it a paper clip.
There is no doubt in my mind that we as investors gain more confidence in knowing the fundamentals of a favorite stock.
A good example is a stock that has a growing business (revenue and earnings) and pays a dividend or better yet increases paying a dividend. If that is the case, I will average down in a heartbeat. Averaging down increases the dividend yield and dividend revenue stream. Long term accumulation compounds faster with an increasing dividend yield revenue stream.
I have a stock I first bought in 1978 Cohu. Cohu has been a horrid dog this last year, hitting a wicked $12.57,just last week. My last average down was buying 500 at $13.50 on 4/03/25. I've been in and out of Cohu completely 3 times over the years. For years it was the only stock I owned, as I was running my first dealership and it consumed my every moment 6 days a week.
Cohu will always be a special stock for me, as it was my first 6 bagger in 95 -97 and I had a lot of shares as it was my only stock.
I owned 1 % of the shares outstanding for two different time periods.
In the 1999 to 2001 Dot.com major stock distribution I was running 1.2 million margin and had 97,000 shares and had bought 30 calls to even out 100,000 shares. I had two, two for one splits in 95 and 97, which greatly helped me build out that position.
Having that large of position and a large margin to boot had put me into a hyper attention period. During late 2000 Cohu took off into a fast price mark up. Just before that in March 2000, I had just begun selling puts. When Cohu tagged $8.89 on a final shakeout, I was getting thousands of shares assigned almost monthly. I had owned Cohu so many years I knew a final shakeout was the clue to back up the truck. In November of 20, Cohu popped up over its past highs of 26 and 27, and I got aggressive building up over million in margin. I was consumed as Cohu popped over 30. It had taken over my thoughts almost always. By the time Cohu hit the 40 range I was scaling out and really enjoying the deleverage of my aggressive moves. By the end of 2000 I was sold out by the time 43 had been hit. It continued on to 61.75 without adjustments for dividends. As I had left a lot of money on the table, I never looked back. It could be said I had done well and was more than satisfied to feel that way. For my first scaling out of a big run up, I found a continuing desire to sell and lock in the gain. I have learned to be a bit more patent in my scaling out since.
I had posted here I was selling out and going to detox from the adrenalin rush of being both over concentrated and over margined. It took me 6 months to even look at a stock again. I remodeled my new house I had bought in July or 1995. So, with a cost below $10.00 and an average sale in the low 40, I had cashed in a four bagger, paid off my 1.2 million margin and reserved taxes on the capital gains of the long held stock and paid the short term gains of the fast rising mark up shares I had added during the run up.
When it was all done and over I had 2.2 million in after tax gains, and strong desire to repeat another big run. I also sensed a need to not be over zealous on a repeat. Perhaps I had just been lucky.
I vowed to not use that much margin again - which I got caught up AGAIN with too much in 2008. <smile>
By 2019 I had paid off my margin and never gone back to it.
The point I make is you can learn these companies and their characteristics.
In the early days Cohu all but printed money as the PC cycle and Laptop cycle boomed and busted. If I missed a top, it would repeat in 12 to 18 months as everyone was beginning to adopt PC's into their daily life.
A similar move happened with smartphones. Both very powerful mega trends.
Sadly I missed the AAPL train. In 2012 and 2013 you could have bot AAPL and computer company for $13.00 to $17.00 and they had $7.00 in cash per share. My kind of stock, but I was not diversified.
AI seems to be of similar mega trend status.
The hardest thing for me to adjust to is NOT watching the market too closely. Every time I'd call Ted and ask about the current sell off, he'd scold me and say I'm watching the market too closely.
Note to self: when you are retired and a multimillionaire which Ted was back in the 70's and on, it's easier to not worry about every dip of break out. <smile>
Some stocks (like COHU) always have a final shakeout. It is the signature of an insider or a market maker.
Just a note that over the years I almost never buy on a break out, I'm a chronic buy the dipper. Armanino is the first stock where I've bought on a breakout. It's revenue growth and debt free status with an increasing dividend has justified building a 100,000 share position. My cost on AMNF is $3.63 and with the most recent increase in the dividend to 16 cents annually it provides a yield of 4.41%. I'll re add with the dividends on any dip.
Recently I have added two oil stocks. Both of them are not drillers and explorers, they are oil royalty buyers.
The Bakken and the Permian shale deposits are both on land that has mineral royalties. These royalties do not transfer with the sale of the land.
Both Vitesse - (VTS) and Northern Oil and Gas - (NOG) are "non operating" oil companies. They have very little overhead and few employees , but they have royalties on many wells that are operated by Hess, Devon, Conoco Phillips, and many others. Both have puts that currently are inflated from a decline in WTI.
Both pay high yielding dividends, VTS @ $2.25 and NOG @ $1.80) Vert nice yields.
These kind of companies have a brilliant business model. Primarily they are heavily owned by wealthy investors who have built companies that have little overhead and pay out their Free Cash Flow as a dividend. This gets the income of the corporation out to the stockholders taxed as a dividend vs corporate income. They maintain: their assets are safe long lasting wells that produce: crude oil, gas liquids. and natural gas. Of course these companies cycle along with the commodities the wells they have partial swnership (of the royalties) on.
With WTI's decline to 4 year lows , the fear premium in their puts is inflated. With put premium and high yielding dividends, they represent an excellent value to own and let compound for you.
A true E&P oil company that is the largest Permian "PURE PLAY is Permian Resources - (PR). PR is currently selling below book value and has just completed some contiguous acreage to their holding from Occidental Petroleum. They claim the lowest cost of drilling a lateral foot of shale pipeline in the Permian. They do utilize the dual fuel electrical power generation at the well sight which is the newest and least expensive way to power the drilling well.
All of these are recent buys. I'm into these kinds of companies as they are the leading edge of drilling at the lowest of cost, in the best shale deposits with in the lower 48. Experts claim the shale deposits in the Bakken and now Permian have reached max production and will soon experience a decline in production. Certainly as WTI commands a lower price, E&P will commit less capital and create a short term shortage which should stabilize WTI's commodity price. Sell puts hoping to get below market assignment and compound the high yield dividends is my game plan.
Just a story about my past and you all must know your tolerance of owning shares of a company. It is OK to be your own investolator,and follow your hunch on a company.
We all learn and become better at our investment decisions. It is why we take some lumps along the way to learn more for our futures.
Remember that Ted always said the reason we are "investolators" is "to enjoy some of the finer things our capitalist system provides.
Thanks to all who contribute here.
The conversations had here are becoming better and better, as we all talk about our favorite stocks.
Do your own diligence as we all have different views, risk tolerances and preferences.
Bob |
