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Bac has been awful ....the last 5 , 10 ,15 year total returns lagged bad ....you had to take on individual company risk as well as market risk to get total returns with dividends that lagged an s&p fund with out taking on individual company risk too.
The S&p blew it away with way less risk
OK, now that I have a little time, I can respond with a little more detail. I am a value investor, with a twist of GAARP sprinkled in. My individual stock portfolio makes up about 15% of my total invested money. My 401K, IRA, kids account, and even my daughters 401K, which I "manage" for her, are all more than exposed to the S&P500 both through actively managed funds like Fidelity Growth, Contra and Blue Chip, and index funds like VTI, plus other small and mid cap growth funds, so I have no intention or need of adding more S&P or total market exposure.
When I buy individual stocks, I take individual company risk into account by practicing strict value investing, and by value I don't mean cheap stocks like WFC, F or AT&T, which is what most people tend to think of as value stocks. I mean quality stocks purchased at the right price. I have 30 companies that I follow all the time, companies that I consider quality companies that have traits like strong, shareholder friendly management, solid balance sheets, insider ownership, a long and strong history of dividend growth, etc. I run basic valuations to determine a fair value, build a margin of safety below fair value, and buy them when they break below that level and hold them long term. I currently hold AAPL, BAC, BRK-B, RKT, V and WASH (an excellent small cap bank here in RI), all purchased at least 20% below what I considered fair value when I bought them.
Most people tend to think of value investing as buying cheap, beaten up junk stocks, again like WFC, F, DAL, etc, but that's not how I see value investing at all. I see it as buying quality companies when they're discounted, such as when I bought into V during the COVID meltdown. It's already back near it's all time high, and I'll continue to hold it for years. What good is buying crap like WFC, or a cruise line or air line when a top quality company like V is trading 40% off it's high? Or buying AAPL at $43 (I paid $170, the $43 is split adjusted) when the market threw a tantrum after they stopped breaking out individual device sales? No, there's no value in buying junk. The value is in buying quality on sale, regardless of whether the sector it's in is in favor or not. In my case, I actually prefer that it is not. Remember Peter Lynch's famous quote - "The one stock I would avoid is the hottest stock in the hottest sector." Truer words were never spoken.
I avoid certain sectors all together, sectors that I'm not comfortable with for one reason or another. There are no energy stocks (commodity risk), no auto stocks (TSLA, disgustingly overvalued, F, GM or FCAU, no thank you), no REITS, and I limit my healthcare list to two stocks - SYK and ZTS, so no pharma or insurance political instability there. And no retail anything either. I try to stick to my comfort zone and keep out of what I don't know or like. Given the diversification in my other accounts, I have no problem running a concentrated portfolio of individual stocks, and could care less about diversification in this account. All dividends are reinvested, always.
See, the goal in value investing isn't really about chasing every last dollar of alpha. It's about using fair value with a margin of safety to limit your downside risk, rather than trying to chase every last dollar and exposing yourself to risk chasing the upside using the great fool theory. Remember Warren Buffets two rules of investing - Rule # 1 Never Lose Money, Rule # 2 Never Forget Rule # 1. This strategy allows me a comfort level that lets me hold through crashes, knowing that I'm good on my current positions while letting me concentrate on my NEXT position. It has worked very, very well for me over the last 12 years or so since I began buying individual stocks, and the only times I've ever picked losers were when I strayed outside of the plan and bought lesser quality or overpaid on speculation.
And besides, when you tell me I could have done better holding SPY instead of BAC, what am I really measuring BAC against? Take away AAPL, GOOG, MSFT, AMZN, and FB, and has the S&P500 really done all that well? I don't think so. With those 5 companies making up such a huge portion of S&P500 growth the last few years, is SPY really such a wise "passive" investment?? Think about that. If you want to really do well, why not just eliminate the so called dead weight of the rest of the S&P500 and just buy those 5 stocks and hope for the best?? Doesn't sound like such a wise strategy to me.
No, value investing gives me my comfort level, and for that reason alone I think I have an edge over most traders and investors. It's a very mechanical process that allows me to keep my head when the market melts down and positions me to take advantage of a crash, and eliminates the emotional angst that leads to costly mistakes. I'll gladly settle for less then the mythical "beating of the index" in exchange for the peace of mind that comes with having a solid plan and sticking with it and not getting scared out of it. And besides, I love buying dollar bills for .50 cents!!
For anyone that's interested, here is my current 30 stock watch list:
AAPL, ADP, BAC, BAM, BRK-B, CTAS, DE, DIS, DPZ, FDX, GD, HAS, HD, JPM, LHX, MA, MCD, MKL, MMM, MSFT, NDAQ, RKT, SYK, TXN, UNP, UPS, V, WASH, WM, ZTS. This list is constantly evolving, and probably changes 1 or 2 stocks every month, but I keep it to a maximum of 30 names, because I really don't want to have to keep track of more than that.
Last edited by treasurekidd; 09-15-2020 at 08:26 PM..
OK, now that I have a little time, I can respond with a little more detail. I am a value investor, with a twist of GAARP sprinkled in. My individual stock portfolio makes up about 15% of my total invested money. My 401K, IRA, kids account, and even my daughters 401K, which I "manage" for her, are all more than exposed to the S&P500 both through actively managed funds like Fidelity Growth, Contra and Blue Chip, and index funds like VTI, plus other small and mid cap growth funds, so I have no intention or need of adding more S&P or total market exposure.
When I buy individual stocks, I take individual company risk into account by practicing strict value investing, and by value I don't mean cheap stocks like WFC, F or AT&T, which is what most people tend to think of as value stocks. I mean quality stocks purchased at the right price. I have 30 companies that I follow all the time, companies that I consider quality companies that have traits like strong, shareholder friendly management, solid balance sheets, insider ownership, a long and strong history of dividend growth, etc. I run basic valuations to determine a fair value, build a margin of safety below fair value, and buy them when they break below that level and hold them long term. I currently hold AAPL, BAC, BRK-B, RKT, V and WASH (an excellent small cap bank here in RI), all purchased at least 20% below what I considered fair value when I bought them.
Most people tend to think of value investing as buying cheap, beaten up junk stocks, again like WFC, F, DAL, etc, but that's not how I see value investing at all. I see it as buying quality companies when they're discounted, such as when I bought into V during the COVID meltdown. It's already back near it's all time high, and I'll continue to hold it for years. What good is buying crap like WFC, or a cruise line or air line when a top quality company like V is trading 40% off it's high? Or buying AAPL at $43 (I paid $170, the $43 is split adjusted) when the market threw a tantrum after they stopped breaking out individual device sales? No, there's no value in buying junk. The value is in buying quality on sale, regardless of whether the sector it's in is in favor or not. In my case, I actually prefer that it is not. Remember Peter Lynch's famous quote - "The one stock I would avoid is the hottest stock in the hottest sector." Truer words were never spoken.
I avoid certain sectors all together, sectors that I'm not comfortable with for one reason or another. There are no energy stocks (commodity risk), no auto stocks (TSLA, disgustingly overvalued, F, GM or FCAU, no thank you), no REITS, and I limit my healthcare list to two stocks - SYK and ZTS, so no pharma or insurance political instability there. And no retail anything either. I try to stick to my comfort zone and keep out of what I don't know or like. Given the diversification in my other accounts, I have no problem running a concentrated portfolio of individual stocks, and could care less about diversification in this account. All dividends are reinvested, always.
See, the goal in value investing isn't really about chasing every last dollar of alpha. It's about using fair value with a margin of safety to limit your downside risk, rather than trying to chase every last dollar and exposing yourself to risk chasing the upside using the great fool theory. Remember Warren Buffets two rules of investing - Rule # 1 Never Lose Money, Rule # 2 Never Forget Rule # 1. This strategy allows me a comfort level that lets me hold through crashes, knowing that I'm good on my current positions while letting me concentrate on my NEXT position. It has worked very, very well for me over the last 12 years or so since I began buying individual stocks, and the only times I've ever picked losers were when I strayed outside of the plan and bought lesser quality or overpaid on speculation.
And besides, when you tell me I could have done better holding SPY instead of BAC, what am I really measuring BAC against? Take away AAPL, GOOG, MSFT, AMZN, and FB, and has the S&P500 really done all that well? I don't think so. With those 5 companies making up such a huge portion of S&P500 growth the last few years, is SPY really such a wise "passive" investment?? Think about that. If you want to really do well, why not just eliminate the so called dead weight of the rest of the S&P500 and just buy those 5 stocks and hope for the best?? Doesn't sound like such a wise strategy to me.
No, value investing gives me my comfort level, and for that reason alone I think I have an edge over most traders and investors. It's a very mechanical process that allows me to keep my head when the market melts down and positions me to take advantage of a crash, and eliminates the emotional angst that leads to costly mistakes. I'll gladly settle for less then the mythical "beating of the index" in exchange for the peace of mind that comes with having a solid plan and sticking with it and not getting scared out of it. And besides, I love buying dollar bills for .50 cents!!
For anyone that's interested, here is my current 30 stock watch list:
AAPL, ADP, BAC, BAM, BRK-B, CTAS, DE, DIS, DPZ, FDX, GD, HAS, HD, JPM, LHX, MA, MCD, MKL, MMM, MSFT, NDAQ, RKT, SYK, TXN, UNP, UPS, V, WASH, WM, ZTS. This list is constantly evolving, and probably changes 1 or 2 stocks every month, but I keep it to a maximum of 30 names, because I really don't want to have to keep track of more than that.
Thanks for sharing your list and your strategy. I've been trying to determine how a customized stock portfolio like yours measures up to the S&P over a span of time, say 5 years. Do you or anyone here know how to do this? Is this possible to do with simply Google Sheets? I know you can compare charts on TradingView but I'm not sure how it works when you have 30 stocks in there.
It's doing poorly compared to most sectors right now over the year, only doing better than the energy sector. As an industry, it seems like it's been going stale over the last ten years, compared to the tech sector. It had to merge with tech to keep up with the times. ALLY and C looks undervalued right now and they seem like great companies but I don't know about the rate of their growth. C hasn't been able to go back to pre-2008 crash prices and I don't know if it will. Might just be more slow growth over time but I doubt they will beat the market. What does other people here think about the two stocks compared to the overall market?
The stocks that did well in the last bubble lag in the next one. You'll have to wait for a real bear market that changes the leadership from the tech industries. I would look at XLB and XLI, both of which are tied to manufacturing. Banks and homebuilders were rising during the 2001-2002 bear market. Manufacturing is probably tipping off inflation and more trade friction with China.
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