This blog is dedicated to my wife, Janelle. When I met her I did not have enough money to fill my gas tank. Over five years of patient tutelage from her on the subjects of saving, thrift shopping, and common sense the situation has changed some. I may even have learned a thing or two which I can apply to the stock market.
The intent of this blog is to serve as a record of my investment decisions, to better help track portfolio performance and decision-making. Ultimately, the goal of this blog is to help stay me stay in the black. With most of my net worth riding on my decisions, I literally can’t afford to be wrong.
My first experience investing was in 2010, just after my return from Afghanistan. When I deployed overseas, I found myself with not a lot of work to do. Luck played a large part in the next huge turn in my life, when I ran out of everything to read in the hooch, except for financial magazines. I must confess that I had read The Millionaire Next Door and The Richest Man in Babylon prior to this experience, but the stock market was uncharted territory to me. I had saved money for the first time in my life, and had the princely sum of $5000 sitting in a bank account. I knew I should do something with it. I read Fortune and Smart Money, got a Fidelity account, and based most of my initial investment decisions off of the recommendations found there.
Without having read any books on investment, I felt that there must be an opportunity to buy great companies at great discounts. It worked out. Really, investing money in the stock market during 2010 was a “can’t miss” game. Stocks had plummeted so far, so fast, that there was simply no way to lose. Then I read The Intelligent Investor and everything clicked. Finally, a scientific explanation for what I had been witnessing!
The founding principle of this blog is that Mr. Market can sometimes be irrational. I intend to exploit Mr. Market’s brief moments of un-clarity with sizable (3-10% of the total portfolio) purchases and sales. I would love to spread the risk around more but my egg basket is simply not large enough to merit the additional costs in brokerage fees. So I will really have to be on my game with investment choices. Investments will be long. I may write covered puts and calls when I feel the situation warrants.
I do have some advantages over the professionals:
- I am in no hurry, and have at least 35 years of work ahead of me before retirement.
- Perhaps because of #1 I am not afraid to take chances if the probability of winning out in the long-term is promising.
- I have some guiding principles established by the greats who have come before me: Benjamin Graham, Sir John Templeton, Warren Buffett, Peter Lynch, Seth Klarman, David Einhorn and Joel Greenblatt to name a few.
- I am currently in my first year at a top-20 business school full-time MBA program. Hopefully I will be learning things which I can apply to my portfolio.
A little bit about my portfolio:
- 5% Short-term CDs designed to mitigate inflation and force me to wait until next year’s IRA becomes available.
- 5% Lending Club, this is my first foray into peer-to-peer lending, but the potential returns were simply too good to pass up, and sated my desire to invest in something with annuity-like cash flows, without having to deal with disappointing rates of return.
- 5% Money Market Funds until I find something I really like.
- 85% Stocks and Indices – the bulk of my personal savings is invested here. Roughly 10% of this sum is invested in market-tracking indices. The other 90% is composed of individual stock selections.
My investment philosophy continues to develop but I am typically most attracted to, and successful with deep value and distressed equities. I am interested in dabbling in municipal bonds due to all the bad press but do not have the means yet. Some of the stocks which I am currently invested in include: BP, DEG, ACE, AIG, GE, GLW, GOOG, HBC, HMC, IBM, JPM, SAN, and TM.
I am strongly weighted towards the finance industry in particular. Money still crosses borders at incredible rates, and computers are now making it possible for large banks such as JPM to make large-scale position decisions at lightning-fast speeds.
I intend to invest primarily in deep-value and distressed equities. Holding time will vary but could range from 3 months to 30 years. On average, I have owned the stocks in my portfolio for 2 years, and that average will probably get longer. I am a long-term investor, and simply am unwilling and unable to attempt to predict the timing for an individual stock’s decline. Market timing is nearly impossible and ultimately, probably not worth the effort for me. I may invest in bonds or esoteric ETFs on an experimental basis, but do not intend to put large portions of my own retirement into products which are still in beta-testing (pun not intended).
I am not afraid to invest in “growth” stocks if I believe the cash flow exists to support such investments but, by and large, I tend to avoid anything with a P/E over 25, or bloated Price/Tangible Book Value ratios.
I will focus future posts on specific investment recommendations. I do not have a bottle of champagne to break over my laptop, and thereby christen this new endeavor, but rest assured, I did chug a beer and crush the can.