Thanks for your excellent post! The way you described the different tiers was very interesting to me. Had a question for you about that. As a novice investor, I find it easier to relate to the different tiers as I build up a position. Not when I’m sizing it down. I was wondering if you have any suggestions on how to do that. When sizing down, mentally, I find it much easier to sell completely.
For ex, recently I’ve been struggling to size down Crowdstrike. It has been a double digit allocation for me but I feel that it’s numbers are weakening. I’m not sure how much to lower the position size. Or rather, which tier to put it into. How would you approach a situation like that where you need to take action on a bedrock of your portfolio?
To be clear, I’m not asking for specific advice related to Crowdstrike. Just want to learn how you approach these situations.
Thanks again for the time and effort you put into your posts. Really appreciate it.
Great question. As you said, I can't give specific CRWD advice but can at least list some thoughts on trims vs sells. First and foremost, if I no longer want to own a company for any reason, I simply sell out completely. Taxable, non-taxed, short term gain/loss, long term gain/loss - it doesn't matter. I've found owning something I don't want to own can be a drag not only on those shares but also on the time, effort and energy I have for the rest of my portfolio. I'd rather walk away and have a clean slate. Others may suggest something different, but that's what I've found works for me.
When considering trimming, I use the same tier framework. Just as a company can move up a tier because of an improved numbers/narrative combo, another can move down due to a decline in one area or another (like you say with CRWD's weakening numbers). What I try to do is compare my options against one another within my current portfolio and the names at the top of my watch list. If you haven't read it yet, I walk through a real-life example in this post: https://thestocknovice.substack.com/p/determining-portfolio-fit. If that process makes sense to you, you could try doing the same thing with CRWD. Even if it doesn't drop all the way out of your portfolio, putting it head-to-head with those holdings around it might help you decide exactly where it fits.
Hope that helps and feel free to reach out with any further questions.
Thanks so much for the reply and sharing the link! I had not read that one.
As usual, the post was excellent. It was exactly what I was looking for. My biggest learning was that I’m not being as disciplined in maintaining a written version of my investment thesis. That is probably holding me back from doing the showdown between CRWD and others on my portfolio. I think writing things the way you are will make it easier for me to compare my different holdings objectively.
The way you laid out the steps was very helpful. Thanks a bunch!
Thank you stocknovice for an excellent and clear exposition of portfolio strategy. One observation. As you remark it is important to read and then review transcripts. Its also important to read them critically. I have found it easy to miss or misinterpret comments during the earnings call because they are mentioned only in passing, or buried in the Q&A or because I start reading with a conviction bias based on old info. Its like missing something in front of your eyes which you don't expect to see.
I was motivated to go back and reread your post on stock analysis. Like some of the others who have commented I collect lots of data which tends to need organization. Your spreadsheet looks like a solution for that. It looks like an EXCEL spreadsheet which I vaguely remember how to use.
With regard to prior year financials have you found some source that presents the aggregated multiyear data for a stock ? Or does one have to dig out the information year by year?( which would be time consuming but not a tragedy.)
Good point. There is a clear danger bias could limit our ability to review transcripts. Thinking about it, I guess what I do is have an idea of what I expect to see BEFORE reviewing it. That process gets easier the longer you own a company. I used to read transcripts twice to make sure I didn’t miss anything but have enough comfort in my prep work now that once is usually enough to get what I need. I view the call as management’s chance to convince me their company is still worth owning. It is easier to make that decision when I have thought through my expectations beforehand.
One thing I do with Q&A’s is pay attention to the quality of the question. When an analyst lobs a glowingly positive softball, I expect an equally fluffy answer that likely won’t provide much insight. However, when I think “ooohh, that’s a good question,” I want to really bear down on the answer. This is especially important if a current metric or future guide looks out of whack. In most of those cases, at least two analysts take a crack at probing the weakness (usually after a wishy-washy first answer). I want to really dig in on those comments. Again, every quarter management is reproving it deserves our money. At the end of the day, we owe them nothing.
As far as prior year financials, I prefer to get it myself rather than use an external source. I have seen too many examples of other investors getting incorrect information from third parties. The easiest cheat I have found is using past 10-K’s. In the financials section they usually have an area with numbers for the past 4-8 quarters. That is easier than digging up each quarter’s release. It is still a decent amount of work, but it is at least a reasonable shortcut.
Any thoughts on y-charts? I saw many analysts using it on motley fool tv so i tried it for a week and absolutely loved it. It is a huge time saver as it charts every metric. Are you worried their could be error in the data like some other 3rd party's have had?
Never tried it. I only know of several instances where public sources like Yahoo Finance have been unreliable. I can't comment on any paid services since I tend to use either company releases or filings for any info I need. Sorry.
Hi stocknovice,
Thanks for your excellent post! The way you described the different tiers was very interesting to me. Had a question for you about that. As a novice investor, I find it easier to relate to the different tiers as I build up a position. Not when I’m sizing it down. I was wondering if you have any suggestions on how to do that. When sizing down, mentally, I find it much easier to sell completely.
For ex, recently I’ve been struggling to size down Crowdstrike. It has been a double digit allocation for me but I feel that it’s numbers are weakening. I’m not sure how much to lower the position size. Or rather, which tier to put it into. How would you approach a situation like that where you need to take action on a bedrock of your portfolio?
To be clear, I’m not asking for specific advice related to Crowdstrike. Just want to learn how you approach these situations.
Thanks again for the time and effort you put into your posts. Really appreciate it.
Best,
Zeecko
Hi, Zeecko -
Great question. As you said, I can't give specific CRWD advice but can at least list some thoughts on trims vs sells. First and foremost, if I no longer want to own a company for any reason, I simply sell out completely. Taxable, non-taxed, short term gain/loss, long term gain/loss - it doesn't matter. I've found owning something I don't want to own can be a drag not only on those shares but also on the time, effort and energy I have for the rest of my portfolio. I'd rather walk away and have a clean slate. Others may suggest something different, but that's what I've found works for me.
When considering trimming, I use the same tier framework. Just as a company can move up a tier because of an improved numbers/narrative combo, another can move down due to a decline in one area or another (like you say with CRWD's weakening numbers). What I try to do is compare my options against one another within my current portfolio and the names at the top of my watch list. If you haven't read it yet, I walk through a real-life example in this post: https://thestocknovice.substack.com/p/determining-portfolio-fit. If that process makes sense to you, you could try doing the same thing with CRWD. Even if it doesn't drop all the way out of your portfolio, putting it head-to-head with those holdings around it might help you decide exactly where it fits.
Hope that helps and feel free to reach out with any further questions.
Thanks so much for the reply and sharing the link! I had not read that one.
As usual, the post was excellent. It was exactly what I was looking for. My biggest learning was that I’m not being as disciplined in maintaining a written version of my investment thesis. That is probably holding me back from doing the showdown between CRWD and others on my portfolio. I think writing things the way you are will make it easier for me to compare my different holdings objectively.
The way you laid out the steps was very helpful. Thanks a bunch!
Cheers!
Thank you stocknovice for an excellent and clear exposition of portfolio strategy. One observation. As you remark it is important to read and then review transcripts. Its also important to read them critically. I have found it easy to miss or misinterpret comments during the earnings call because they are mentioned only in passing, or buried in the Q&A or because I start reading with a conviction bias based on old info. Its like missing something in front of your eyes which you don't expect to see.
I was motivated to go back and reread your post on stock analysis. Like some of the others who have commented I collect lots of data which tends to need organization. Your spreadsheet looks like a solution for that. It looks like an EXCEL spreadsheet which I vaguely remember how to use.
With regard to prior year financials have you found some source that presents the aggregated multiyear data for a stock ? Or does one have to dig out the information year by year?( which would be time consuming but not a tragedy.)
Thanks, Arnold.
Good point. There is a clear danger bias could limit our ability to review transcripts. Thinking about it, I guess what I do is have an idea of what I expect to see BEFORE reviewing it. That process gets easier the longer you own a company. I used to read transcripts twice to make sure I didn’t miss anything but have enough comfort in my prep work now that once is usually enough to get what I need. I view the call as management’s chance to convince me their company is still worth owning. It is easier to make that decision when I have thought through my expectations beforehand.
One thing I do with Q&A’s is pay attention to the quality of the question. When an analyst lobs a glowingly positive softball, I expect an equally fluffy answer that likely won’t provide much insight. However, when I think “ooohh, that’s a good question,” I want to really bear down on the answer. This is especially important if a current metric or future guide looks out of whack. In most of those cases, at least two analysts take a crack at probing the weakness (usually after a wishy-washy first answer). I want to really dig in on those comments. Again, every quarter management is reproving it deserves our money. At the end of the day, we owe them nothing.
As far as prior year financials, I prefer to get it myself rather than use an external source. I have seen too many examples of other investors getting incorrect information from third parties. The easiest cheat I have found is using past 10-K’s. In the financials section they usually have an area with numbers for the past 4-8 quarters. That is easier than digging up each quarter’s release. It is still a decent amount of work, but it is at least a reasonable shortcut.
Hope that helps.
Any thoughts on y-charts? I saw many analysts using it on motley fool tv so i tried it for a week and absolutely loved it. It is a huge time saver as it charts every metric. Are you worried their could be error in the data like some other 3rd party's have had?
Never tried it. I only know of several instances where public sources like Yahoo Finance have been unreliable. I can't comment on any paid services since I tend to use either company releases or filings for any info I need. Sorry.