Selling These Tomorrow
“For last year's words belong to last year's language, and next year's words await another voice.” - T.S. Elliot
The Portfolio
As I'm writing,
The portfolio is UP +47.67% YTD
Our benchmark, the S&P 500 is up about +15.52% YTD
Last Day of Trading Thursday, December 31st is the last day of trading in 2020 so I wanted to give all my subscribers a heads up on what I've decided to sell. I want to be clear that I actually do like most of the companies I'll be selling, and I do see more upside in many of them, but I feel compelled to structure the portfolio differently for 2021 and look in some new places for sustained growth. It really pains me to let go of a few of these companies, but I have to stick to my own discipline and do what I think is right for the future of the portfolio.
Just like every year prior to this one, my new ideas may be wrong, there's no guarantee that I'll get these right. What I do know is that the odds of me getting every choice wrong is very small. This is why if you're following this portfolio with your own money I strongly recommend that you buy the entire portfolio, even if you do it with fractional shares (slices).
My Sells Two companies I've already sold and will remove as we collect the final dividend payment are American States Water and Northrup Gruman.
AWR
NOC
This is the rest of my Thursday sell list. With the exception of Nabriva, I think all of these are good companies, and may in fact continue to provide gains in 2021. What I want to do is provide greater exposure to the areas in the market where I think we will see greater growth without owning 50 stocks. The areas I'm looking to are companies that are disruptive in healthcare, biotechnology, energy, cloud computing, and technology. To reshape the portfolio I had to make some tough decisions. If you plan to keep any of these I've provided some notes below.
Boeing BA
- Will benefit from the re-introduction of the 737 Max, return to air travel, and new orders
Biogen BIIB
- Very interesting science with respect to Alzheimer's, a binary play that depends on Japan's approval
Coherus CHRS
- Great biosimilar company, won't be impacted by political drug pricing rhetoric, just taking too long
Chipotle CMG
- The standout during COVID-19, will probably do well, but 66 times forward earnings for a burrito bowl is too much
CVS CVS
- Will be a beneficiary of vaccines, I really like the health hub master plan, I see better growth in other healthcare stocks
Fox Factory FOXF
- I really like this company, its a beneficiary of a long term trend in outdoor recreation, we have a 64% gain
Goldman Sachs GS
- Goldman is a cheap stock, great bank, but SPACs will eat into its most profitable business, we have a 53% gain
MasterCard MA
- Excellent payment systems, but at 41 times forward earnings and a 41% gain I'm ringing the register
MarketAxess MKTX
- The best in fixed income platforms, I'm ringing the register here too with a 60% gain
Nabriva NBRV
- One of my biggest disappointments of the year, I'm closing this position and taking the loss
Veeva VEEV
- I've loved this company for years, over 225% gain, it trades at over 87 times forward earnings, it's just time
Vanguard Total Market VTI
- I've always advised investors to own an index fund, I think this is the best. But stock picking is going to be very important next year so I'm freeing up some cash and a position in the portfolio by closing out this position. I wouldn't knock anyone who keeps it for broad diversification as a form of protection
"Tomorrow, is the first blank page of a 365 page book. Write a good one" -Brad Paisley
What's Next
For the new year, I'll be adopting a new layout for the portfolio page. The new layout will illustrate more clearly how I think about how different holdings support the portfolio. Allocation, or how much money is invested in a specific holding is very important. The new portfolio will show this visually. I'll provide some explanation next year, and please feel free to post questions on the site.
I have also decided to correct something I did a couple of years ago. After the first two years of beating the market, I had a number of emails wanting to see me get to $1 million and more. At that moment the portfolio felt like a video game, which is the complete antithesis of what we're doing here. I got angry and closed the portfolio and re-booted with a smaller amount of money. At the time I was hoping to keep it real for readers who are working with small amounts of money...which is a lot of money to them.
What I did is not something that anyone would do at home. My mistake, I apologize. I frequently espouse to eliminate emotion from investing, so I think I did a disservice to my readers. My mistake, I apologize. For 2021 I will be collecting the starting and ending values for each portfolio and displaying them permanently on the portfolio page which will show the running balance since 2016. My intent is to clearly show what an investor who followed the portfolio diligently could have earned over the past five years and what the YTD gains and gains since inception are without the disruption I introduced by restarting the portfolio. My larger objective is to repeat the last five years with another five years of beating the market.
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
Stay Invested,
Clay Baker
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Keep Me Honest 2020
Today is a good time to carefully leg into stocks again (3-20-2020).
Worst Case: S&P 500 decline further to around 2,100 - 2,150 (3-28-2020).
Middle Case: S&P 500 level out around 2,650 - 2,700 (3-28-2020).
Best Case: YE S&P 500 eventually rise to around 3,000 - 3,200 (3-28-2020).
Market bottomed March 23, 2020 at S&P 500 2,237.40 (4-17-2020).
Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't, Stay Invested
Rule #4: When good stocks you own drop 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your own homework.
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
AMD
I am invested short in these securities mentioned in this post: GSX
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.
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