Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Paul Senior who wrote (54701)	1/3/2015 8:52:49 PM
From: E_K_S	3 Recommendations Recommended By bruwin CusterInvestor Mattyice Respond to of 78625

I never commit 30% new money to any investment. Maybe I will grow a position (w/ new money) up to a 2% portfolio position, then if I am right, it will grow to a 10% portfolio position. I did this with WMB buying shares at $15.00/share (9/2010). Stock now at $45.50/share or almost 3x my original investment. That position represents a 4% portfolio position and is one of my top ten holdings. Note: I built original position to a 1.5% portfolio position buying my shares in Q4 2010 w/ three different buys. Typically when a portfolio position is over 7%, I will peel off a few shares. I have the KMI (MLP roll-up of 3 separate MLP's) which now represent 10% of the portfolio. I plan to hold that position w/ an avg cost at $35.00/share ( avg reflects the new shares I got at $41.50/share). I expect KMI to double in value in 3-5 years, so will hold the large position mainly because the dividend is one of my higher yielders. So in summary, I will never ever commit more than 2% 'new' money to any one position and/or as I am building a position. My goal is to find those that are undervalued and/or will grow to 5% portfolio positions or higher. FWIW, I did buy a distressed Duplex in 2009 which I paid all cash. I sold shares in the portfolio to do the purchase. Once I completed all the fix-up (nice high end everything) and converted it to a tri-plex adding another 25% cash, my final investment represented a 20% portfolio position. I got the property to produce a 10 Cap rate and the current value has increased in value by 20% too but I have no intentions to sell. This approach has saved me from land mines. Like SDRL at $38/share and now $12.00/share. Fortunately my total portfolio position in SDRL was less than 1.5% but I still felt the pain. EKS

To: Paul Senior who wrote (54701)	1/3/2015 10:10:42 PM
From: Elroy	1 Recommendation Recommended By Jurgis Bekepuris Read Replies (1) \| Respond to of 78625

If I had 30% of my funds in one stock and the next day I find something I like better (e.g. something like a one-time event that has temporarily cratered a heretofore solid stock), what would I do? Drop the 30% holding? Sell other stocks? Ignore this newest stock? Put 30% into each of two stocks? </i. I suppose if you had a 30% stock and 70% of your holdings in another 119 stocks, and Cisco (for example) went to 50 cents for no good reason, yes, you should sell everything you own and buy Cisco at 50 cents. You should put 100% of your assets into Cisco at 50 cents. That makes sense. At 30% holding, you can be right many successive times then lose a lot with one wrong move. If you're right many times, your gains will probably outweigh the one time you're wrong. it doesn't take that many 50% or 100% gains for you to suddenly be playing all with the house's money. The crap thing would be if you suffered a major loss on your first 30% pick. But, if that happened, you're not very good at playing the "top pick" game, and would probably give up on that approach. Certainly that's possible to bet against the crowd and be right. But repeatedly? I think I've done this 5 or 6 times in 15 years, so repeatedly isn't really how I would put it. You don't need to bet the farm every week. Every coulple of years is how it has worked for me. I myself would not like to tie up 30% of my portfolio on a bet on one stock for years waiting for a payoff.) If it pays off the number of years shouldn't matter. Most of my multi-baggers have taken 2-6 years to get there. I don't generally churn holdings. I try to make my point which is that the opinion of people seems to be that if one has a large and diversified portfolio -- a lot of stocks--, then by some law -- law of averages? law of large numbers?-- it must follow that the person will get average results. My experience has been (until two years ago), that this is not so. Searching among the many thousands of stocks for good growth stocks, good value stocks - buying them, sometimes adding to them, sometimes culling them -- that has(had) enabled me to keep up with and often beat commonly used indices. All I'm saying is it is a lot harder to beat a benchmark if you have 30 stocks than if you have just one. It's more work, for one thing. 120 stocks sounds like a lot to know a lot about, to me, even if you are doing this professionally. And whatever works for you is fine. Curious - when you add a new position to your numerous holdings, have you generally been paying attention to the company for the past 1-2 decades, or does it somehow get on your radar and you decide "Yup, that looks good" after a bit of analysis? I've also found that I make my money on stocks that I have been paying attention to for years. Usually when I get introduces to some new stocks or sectors, it takes a few years of pain and learning to get enough knowledge to feel confident I know what I'm doing investing in the company.