I enjoy reading your posts on here and Saul's board. Keep it up. IMHO, the one thing I think is missing from your portfolio is e-commerce. I am doing quite well with a nice basket of sea limited, jd, meli, and Etsy. I love SaaS and my portfolio is very SaaS heavy but don't sleep on ecommerce! The margins are lower but the Moat is wide.
I agree on ecommerce and actually owned SHOP for quite some time. It's still a strong watch list stock, but the current market cap and price have me on the sidelines. I've also looked at MELI and SE but admit I get a little squeamish with companies who operate mostly in foreign currencies. I found SE's numbers especially complicated because you are basically tracking three businesses at once: gaming (big revenues and big profits), e-commerce (big revenues and big losses) and digital payments (small revenues and big losses). It looks to me like they are using gaming to fund the other two initiatives. If I have it right, SE might also stop using Adjusted Revenues next quarter which would make me have to rework everything. At this point I can't see how I would get comfortable with anything more than a tiny position.
I'm at least perusing ecommerce but just haven't found the right name yet. Any concerns on the TAM for Etsy given the specialized nature of their vendors? It seems like the recent numbers included a lot of masks, which clearly won't be entirely sustainable even though it should bring additional exposure to the platform.
I keep my SE position relatively small (4%) due to transparency concerns in a foreign market and also I'm wary about too much dependence on gaming. I'll feel more comfortable down the road if the losses are smaller in ecommerce and when payments are a larger part of the biz (better margins and wider moat). But all in all the execution and growth is amazing so far. Its MELI with a gaming arm. Founder led with optionally and a Moat is hard to argue against in my book.
Tencent will keep them strong with cash and a ROFR agreement on gaming is reassuring. As for Etsy, I chimmed in a couple times on Bear's recent thread (FoolishJeff). Their previous focus was on 6 core countries, so their TAM was only estimated at 100B. Now it might be closer to a Trillion as the pandemic is blowing things up worldwide. Last quarter non mask sales were up 93% and 1/3 of buyers who bought a mask came back within 3 weeks to buy something else. The masks have been an amazing branding opportunity. They are also expanding their categories. Unlike Amazon, they empower sellers and don't compete against them. I'll be watching closely but I think the momentum will carry beyond the pandemic. If not, I'll sell. Again, I only have 3.5% of my portfolio in Etsy but the almost 200% return ytd has proved to be a good one and the momentum continues.
Can you elaborate on how you became comfortable holding 20% plus in any 1 stock? My portfolio is gradually becoming more concentrated but I'm not yet ready to go with too much concentration, although that could change down the road with the influence from Saul's board. Most of my favorite stocks are 4-6%. ZM is currently my highest at 6.5%.
Actually, I'm pecking away on something about portfolio size and allocations right now. It's not ready yet, but it will probably be my mid-September post after my August recap goes up next week.
My immediate reply to your question is I believe max percentage depends on temperament and conviction level. You should only hold the max in any one name that still lets you sleep at night. Unfortunately, that number is specific to you and is likely found through trial and error. In the meantime, I'll let some others who have been much more successful than I have talk about the potential benefits of concentration: http://mastersinvest.com/diversificationquotes.
Thanks. Great quotes, especially Phil Fisher, who I greatly admire. The main point i think is to really dig in, know your companies well, and not be afraid to invest heavily in your best ideas. The most salient point that comes to mind is from Peter Lynch ( I didn't see it on your list and don't remember it exactly ) who defined risk as buying a company you don't know much about vs a company you know intimately and have a high conviction in. As Fools, Tom and David preach diversification usually in the 25-50 stock range so more concentration takes some getting used to but I'm slowly getting on board. As a practical matter, it's much harder to really know 30 companies vs 10 or 12. Again, sleeping at night is important too, so its a personal matter to some extent, as you noted.
I enjoy reading your posts on here and Saul's board. Keep it up. IMHO, the one thing I think is missing from your portfolio is e-commerce. I am doing quite well with a nice basket of sea limited, jd, meli, and Etsy. I love SaaS and my portfolio is very SaaS heavy but don't sleep on ecommerce! The margins are lower but the Moat is wide.
Thanks for the note.
I agree on ecommerce and actually owned SHOP for quite some time. It's still a strong watch list stock, but the current market cap and price have me on the sidelines. I've also looked at MELI and SE but admit I get a little squeamish with companies who operate mostly in foreign currencies. I found SE's numbers especially complicated because you are basically tracking three businesses at once: gaming (big revenues and big profits), e-commerce (big revenues and big losses) and digital payments (small revenues and big losses). It looks to me like they are using gaming to fund the other two initiatives. If I have it right, SE might also stop using Adjusted Revenues next quarter which would make me have to rework everything. At this point I can't see how I would get comfortable with anything more than a tiny position.
I'm at least perusing ecommerce but just haven't found the right name yet. Any concerns on the TAM for Etsy given the specialized nature of their vendors? It seems like the recent numbers included a lot of masks, which clearly won't be entirely sustainable even though it should bring additional exposure to the platform.
I keep my SE position relatively small (4%) due to transparency concerns in a foreign market and also I'm wary about too much dependence on gaming. I'll feel more comfortable down the road if the losses are smaller in ecommerce and when payments are a larger part of the biz (better margins and wider moat). But all in all the execution and growth is amazing so far. Its MELI with a gaming arm. Founder led with optionally and a Moat is hard to argue against in my book.
Tencent will keep them strong with cash and a ROFR agreement on gaming is reassuring. As for Etsy, I chimmed in a couple times on Bear's recent thread (FoolishJeff). Their previous focus was on 6 core countries, so their TAM was only estimated at 100B. Now it might be closer to a Trillion as the pandemic is blowing things up worldwide. Last quarter non mask sales were up 93% and 1/3 of buyers who bought a mask came back within 3 weeks to buy something else. The masks have been an amazing branding opportunity. They are also expanding their categories. Unlike Amazon, they empower sellers and don't compete against them. I'll be watching closely but I think the momentum will carry beyond the pandemic. If not, I'll sell. Again, I only have 3.5% of my portfolio in Etsy but the almost 200% return ytd has proved to be a good one and the momentum continues.
Etsy's GMS was less than 5B last year so in my opinion, there is plenty of TAM for Etsy.
Can you elaborate on how you became comfortable holding 20% plus in any 1 stock? My portfolio is gradually becoming more concentrated but I'm not yet ready to go with too much concentration, although that could change down the road with the influence from Saul's board. Most of my favorite stocks are 4-6%. ZM is currently my highest at 6.5%.
Actually, I'm pecking away on something about portfolio size and allocations right now. It's not ready yet, but it will probably be my mid-September post after my August recap goes up next week.
My immediate reply to your question is I believe max percentage depends on temperament and conviction level. You should only hold the max in any one name that still lets you sleep at night. Unfortunately, that number is specific to you and is likely found through trial and error. In the meantime, I'll let some others who have been much more successful than I have talk about the potential benefits of concentration: http://mastersinvest.com/diversificationquotes.
Thanks. Great quotes, especially Phil Fisher, who I greatly admire. The main point i think is to really dig in, know your companies well, and not be afraid to invest heavily in your best ideas. The most salient point that comes to mind is from Peter Lynch ( I didn't see it on your list and don't remember it exactly ) who defined risk as buying a company you don't know much about vs a company you know intimately and have a high conviction in. As Fools, Tom and David preach diversification usually in the 25-50 stock range so more concentration takes some getting used to but I'm slowly getting on board. As a practical matter, it's much harder to really know 30 companies vs 10 or 12. Again, sleeping at night is important too, so its a personal matter to some extent, as you noted.