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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (51232)	4/6/2013 8:18:45 PM
From: Jurgis Bekepuris	2 Recommendations Read Replies (1) \| Respond to of 78464

Not sure how you do your portfolio management w/ add(s) and/or sell position "rules"? Overall, I buy the stock if its undervalued and I "like" it - where definition of like is qualitative and personal. I could go into more details if you want though. I sell the stock if it's overvalued or business deteriorates in a way where I don't like it anymore. I "peel off" shares quite infrequently - selling some MAUXF and PWRD on run ups that did not reach "overvalued" level may qualify though (but there could also be an argument that I sold because business deteriorated). First is your portfolio exclusively a taxable account of tax deferred? Does that impact your portfolio management rules? My portfolio is around 75% tax deferred. It does not impact my rules much. Taxable portion contains more long-term holds, MHR-D (which pays return-of-capital distributions) and some international yielders where I can write off foreign tax paid on divvies. So there is some tax planning, but not much. Do you normally start out a new Buy idea in size for it to be a top ten position? Or rather do you try to grow a new idea and adding shares over time to where it eventually becomes a top 10 position? I always start with a small exploratory position. If I continue liking the idea and it does not run up, I start growing it. Usually it would take ~5-10 buys for a position to grow from exploratory size to top-10 size. It is likely too many steps. :) Perhaps I should lower this to 3-5 by either making the exploratory position bigger or making the buys bigger or both. So, do you trim the portfolio based on (a) any one position exceeding a set % of the portfolio? and/or (b) peel off shares and/or close a position when a set % gain target is achieved? Neither, though closer to (b). I sell when stock becomes overvalued. Which is not set % gain, but depends on the company's earnings/FCF. I also stop adding to the stock if it runs up, so it's not cheap anymore. So I could have a stock I liked and bought exploratory position + 2-3 more buys, but it did not reach top 10 position. But it did not get (very) overvalued, so I did not sell either. Both BRK and MKL are in this area. Same question, Are their stead fast "set" portfolio management rules you use. If, so can you share a few of them. Stead fast is a loaded phrase. As I said above, my goal is to sell only if position is overvalued or the business has deteriorated significantly. However, neither of these are very pure and clear. For example, are AXP, ETN, HI, JNJ overvalued? I sold them. How about HY, SHOS, SBMRY? I did not sell them. Has RIO, WU, MAUXF business "deteriorated significantly"? I sold all / some of it. How about AAUKY, NOK, AAPL, MSFT, GLW, GAME, PMGLF, PWRD, WDC, STX? I did not sell them. I'll post separately about GLW/MSFT. :)

To: E_K_S who wrote (51232)	4/6/2013 8:36:52 PM
From: Jurgis Bekepuris	1 Recommendation Respond to of 78464

Finally I noticed you have owned both MSFT and GLW for a long time (many years). Are there general rules you apply for holding these "core" positions: income? value? potential appreciation? I don't make distinction about "core" positions. It might be a bad thing or not, I am not sure. I don't invest for income. I don't need income at this point. Moreover, I agree with Buffett (read his 2013 BRK letter to shareholders): there's no point to invest for income. If you need income, you can always sell part of the shares and it's better both for you and for the company. IMHO, the current fixation of lots of people on divvie yields will end badly at some point. I won't try to predict when it will happen though and clearly it may happen at different times for different yield-hogs (prefs, MLPs, REITs, nifty-fifty blue chips, etc.). Unfortunately for me, the "long term" positions are usually positions that have not worked (yet :)). As I have said before, if position works, it usually becomes overvalued and I sell it (MA, GOOG, AAPL - couple times in last 10 years - missing most of the run). So the big "core" - almost wrote "gore" :)))) - positions are positions where I think that the stock is undervalued, that the business is still intact (or may improve), but nothing has happened yet. Both MSFT and GLW are in this camp. There are good arguments why they could skyrocket. There are equally (?) good arguments why they could wallow or fall from here on. In neither case, I am willing to buy more, though they might look cheapish from some metrics. But I did not give up on them either (yet). It would be good (better) to have top 10 positions that are possibly a bit overvalued, but present great long term business and investment case. However, this is something that I did not manage to achieve yet. I tend to think that MGDDY fits this line of thought: cheap and great long-term business and investment. But ask Spekulatius and he'll tell you why Michelin is not a good long term hold. ;)