dajo9 said:DiabloWags said:
In my long account, I've been in 55% cash with my single biggest position making up 45% of my equity exposure.
Not the typical investor, nor typical for someone my age.
But it has worked for me.
Well, you are far more active than me. And I never short. I did once and I couldn't stomach the margins. Hard enough to invest without that. Good luck.
It's tricky when you are a growth investor because you have to undergo these gut-wrenching "corrections" if you are to allow the management team the opportunity to execute.
For example, I was down $230,000 on my one overweight position two Friday's ago when the markets got clobbered all day long. I was talking with the GM at my local Porsche dealer about the markets and he was asking me about my investment style over the weekend and when he learned of my drawdown he said, "That's INSANE".
It is.
But if you know what you own, it certainly helps when dealing with such a drawdown.
That's the key. You have to know what you own. You have to have full faith in the management team. If not, you can't do this. I've done this three times now in my life and have grown accustomed to it. Never mind that it has been in the Medical Diagnostics sector which is fraught with regulatory and reimbursement issues.
The first time, was not fun. Not fun at all. I was invested in a data-mining company after the Dot-Com bust in 2003 that I thought would bounce back. I barely knew much about the company, fundamentally. And to make things worse, I was on margin. Big position on margin. No bueno. The margin was a KILLER. I was forced by my broker to liquidate. "Would you like us to liquidate your position, or will you liquidate it?"
The second time I did this (no margin) the volatility was literally a KILLER. I watched a $2.5 million dollar winner go into a $300,000 loser over the course of a year in 2015. It was like Chinese water torture. I eventually wound up being right, but it was only because of a "miracle" rarely seen reversal in a regulatory decision.
And then of course because I went thru so much PAIN during that drawdown, when the stock rebounded and started to approach a market-cap of $3.5 Billion, I sold half my position in the $40 - $50 area, given the motto Sell Half and Hope You're Wrong. Nearly two years later, it was trading at $125.
(see EXAS chart below)
Bottomline: The markets are the ultimate teacher of humility.
And if you are heavily invested in a Growth Stock that sports a price to sales ratio that trades at quite a bit of a premium to the group that it's in (because it is the class leader)- - - that means that that premium is going to "contract" during a decline in the market and send the stock a lot lower than others in the group.
I've been an adherent of Stanley Druckenmiller.
His philosophy is that he wants to take the old age axiom of Bulls and Bears Make Money, but Pigs get Slaughtered.
But he wants to be the Pig.
That means putting a lot of your "eggs" in a small basket of just a couple of stocks and watching them closely. Companies that you believe have a proprietary technology that will dominate the space.
In the case of EXAS below, it came down to me thinking that a change of one's DNA
can be measured in stool in order to detect colon cancer, as suggested by
Dr. Ahlquist at the Mayo Clinic back in 2009.
As Stanley says, its the only way to really produce wealth.
