My Investing Method (Updated)

As always, be sure to read my disclosures / disclaimers below. Most notably, I do not encourage or recommend for anyone to follow my lead on any stocks listed here or otherwise, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article. Cheers.

________________________________

In my last post, I forgot to mention that I will continue to allow public access to my personal tracking sheet (some of you know it as the “1% Portfolio”). As the sheet states, it’s for my personal use, but it’s a good way for my research partners track the stocks in which I’m interested and/or invested. Generally, a lot of professional work (and input from experts) gets invested into researching those ideas.

Accordingly, individual and institutional investors also keep an eye on it for investment ideas. The sheet is an integral part of my investing method, which has yielded an average annual return of 40% on my invested capital. It’s a lot of work for me, but pretty easy for others to leverage (though, as my disclaimer states, I neither encourage nor advocate it).

For most investors, the best method is to just buy-n-hold for the long term. That yields about 7% per year.

An even better approach has been to put extra cash into the market whenever it drops 10% or so. Yes, the market can go down 20%, 30%, or more, but each step down simply represents a great opportunity to put more and more cash to work. It’s a simple and effective method that yields something closer to 12% annually.

Those who choose to leverage my sheet get alerted to changes in real time via my StockTwits Feed, which provides a documented and timestamped history of my adds and deletions.

In addition, the tracking sheet indicates what mode I’m in: Green Light, Yellow Alert, Orange Alert, or Red Alert. I use LONG-TERM charts (like the 40 year S&P 500 chart below) to gauge the overall risk / reward of the stock market (I also use them for my individual stock investments).

Anything near the top of the chart has proven to be a great time to take profits out of stocks and seek to make money elsewhere (long-term government bonds usually work great from those points).

Anything below the gray line has been a safe buying zone, with the exception of Red Alerts… and I’ve only been in Red Alert mode twice EVER (in late-1999 5-months before the Internet crash and in mid-2007, 5-months before the financial crisis). Anything near the bottom white line represents a generational (near once in a lifetime) long-term opportunity.

I’ve saved (and made) a LOT of extra money over the past 25 years using this as a guide.

 

During a Green Alert – Unless otherwise noted, I’m in Green Light mode (owning stocks without fear).

 

During a Yellow Alert – Conceptually, I want to keep most of my favorite stocks, but get rid of the third I like the least. With that money, I want to buy something like RWM, which goes up when the market goes down (and vice versa). By doing this, I’ll be 50% “hedged” (hedged = protecting the stocks you like/own against a stock market drop).

Explained: if you have $3 of stock and sell a third, you now have $2 in stocks… and if you put that other $1 in RWM, you have protected/hedged half of the $2 you still have invested in stocks).

 

During an Orange Alert – Conceptually, I want to sell the 50% of my positions that I like the least (keeping pretty much everything I “LOVE LOVE”). With that money, I want to buy something like RWM to protect those positions. In doing so, I’m FULLY hedged.

Explained: (if you have $3 of stock and sell half, you now have $1.50 in stocks… and if you put that other $1.50 in RWM, you have protected/hedged 100% of the $1.50 you still have invested in stocks).

 

During a Red Alert – I sell almost everything and bet AGAINST the market by being heavily invested in things like RWM (which, again, goes UP when the market goes DOWN)… but again, these instances are extremely rare. I’ve only been in Red Alert twice in my life (luckily, those two times were 2000-2002 and 2007-2009, which resulted in big profits).

 

How / When To Get Back In – When the market is dropping, I don’t want to try to call the bottom. Only God can do that. Instead, I make my best guess and START buying EARLY. The reason is simple — my guess has a 50/50 chance of being too optimistic or pessimistic. So, if I wait for the market to drop as much as I expect, I have a 50% chance of missing the bottom (and with it, the great opportunity to buy low).

So, I try to think of it as 5 stages: very early, early, on time, later, and much later. I want to buy a LITTLE “very early”. I want to buy a decent chunk “early”. I want to buy a LOT near the levels where I think the market will bottom, but I also want to keep a little in cash in case we go even lower, so I can buy later or much later.

 

Good Luck !

 

More Research:

 

To get these posts in real-time, just follow/subscribe to this free blog.

If you only want to receive my most critical reports, simply sign up for my MailChimp mailing list instead. If you’re on that list, you will only get key articles and occasional recaps of my recent work.

 

Disclosures / Disclaimers: This is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article.

I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.

I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter.  Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.

I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.

27 thoughts on “My Investing Method (Updated)

  1. Interesting you chose TAST. I too placed a bet on the success of BK by writing naked puts on QSR (Restaurant Brands). Local store checks with store managers and a few impossible whoppers for myself ;p have revealed that in these early stages local store traffic is up between 15-19%. One of the cashiers at a drive through indicated that they were selling more impossible whoppers than regular ones. According to the financials of QSR BK does about 2/3 the revenue. Posted here as QSR is another way to play impossible meat. Also, most people I know prefer impossible burgers to beyond meat.

    Like

    1. Agree. I chose TAST because it’s more of a pure play (QSR has Hortons) and has more enterprise value leverage (due to being deeper in debt — which is positive for common shareholders when things go right).

      Like

  2. Yes, but I do believe that “expectations” are a little higher than Analysts Estimates who have historically been light (and that is probably somewhat recognized by the market at this point). Let’s hope they have some good news on new wins across their products.

    Like

  3. Yep thanks for that. Closed out the naked puts on QSR at small profit and picked up shares in TAST yesterday at $6.50. You’re right better pure play and if revenue/earnings beat the high debt load concerns of the market should be alleviated. Cheers mark.

    Liked by 1 person

    1. Agreed and the trajectory for continued growth looks strong. I would have like Bill to have been a bit tighter on the family Iot product landscape. It was hard to tell from his tone and pace if he wasn’t sure or was playing device types close to the vest. I would look towards more differentiated offering versus what’s out there. The message about a single platform for managing all was a good start but adding additional functionality to new devices or a disruptive form factor approach would be a game changer with the singular platform. IMHO

      Like

    1. No sir. As announced months ago, I am refocusing my attention life.

      I’ve spent the last 10 years educating folks. That has actually hurt my profits, because I can gain from panics and euphorias, but have been a calming force in both situations.

      Now it’s time for those folks to use that education and pass it on to others.

      Simultaneously, it’s time for me to do more for me and my family by letting panics and euphorias happen.. and taking advantage of them.

      Anyone who has taken the time to learn my lessons (vs. just piggybacking picks) will be at an advantage to those who have not… as it should be 💯😊😇

      Like

  4. A little off topic question. Mark are you familiar with the game ready or polar care cube ice therapies to help with post surgery recovery? I am trying to figure out if they are really that much better than something that you can get on amazon. Thanks.

    Like

  5. Thanks a lot for the update, thought you may have put this blog to rest…
    Apart from RWM, I think you mentioned also ZROZ and TLT or shorting China during yellow, orange, red alerts. Would be interesting to see these hedging techniques also in a blog special about hedging or in the 1% portfolio
    Thanks Klaus

    Like

  6. Hi Mark, Would you be kind enough to share any particular reason why you sold MRIN? You put tremendous effort into presenting the investment thesis of the company in a past video. Any insights are greatly appreciated. I hope you and your family are well during this pandemic.

    Like

    1. Sorry… just saw this. MRIN wasn’t executing AT ALL like they suggested, so it became apparent that they would just burn all of their cash, so it was smart to get out before that happened.

      In stock investing, being wrong is inevitable, so realizing it is an important part of minimizing losses which helps to maximize gains. Hope that helps.

      Like

  7. Hey Mark,

    Didn’t want to cloud your WhatsApp so I figured I’d ask here! So what I’m slowly realizing is the best way to get an edge on a majority of folks is the relationship with management (something I’m still working on and getting better at).

    Is there anything you would advice in terms of building a relationship with management? What’s the best way to go about doing so? I’ve gotten into the practice of talking to CFOs and IR but sometimes you can only work your way up to the Investor Relations contact versus say the CFO. Any helpful tips?

    I’m slowly seeing the benefit of the in person conferences, something I’ve never attended but really would change the game I think.Any particular ones for the micro-cap space that you would recommend? The only one I really know of is the LD Micro Conference.

    Thanks for all the advice as always.

    Best Regards,
    Saif

    Like

    1. Great question. Would also be a great question for the WhatsApp group. Getting in good with management starts with doing as much homework as possible to get to know the company. If you can become helpful to Management with the information you gather, then it’s time well spent for them. So that’s one way.

      The other major way is to write up what you learn about the companies. If you are helping to spread the word, then you were doing the company a great service (effectively investor relations and/or part of what investment banks do for them).

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s