Wednesday, June 11, 2014

Lessons Learned

I have posted several times about my bear flags. The key ones for me are looking at decision moose (when it moves to cash or treasuries) and looking at 50 day vs 200 day ema for key indices. The moose flag flashed on April 14th. The IWM was suggesting bear around May 1st. So at that time, I sold at the margin and went roughly from 18% cash to 28% cash.

Interestingly, since April 14th, my portfolio is up 10%.  Clearly I would likely be up even more if I had not moved to additional cash. But I wanted to point out that bear market indicators are not always right, and that is a big reason not to bet the whole enchilada.  In the grand scheme, one expects the stock market to have an upwards bias - so be careful with any sort of shorts.

So my plan (as I have mentioned many times) is to generally be between 20 to 30% cash! depending on my view of attractive opportunities. I believe it is very important to always have a strong cash position, as you never know what opportunity might drop in your lap tomorrow. Then my MFI stocks are on a pure schedule, so I never really sell them - I just rotate once a quarter. That takes an investors biggest enemy (emotion) out of the game. My Dividend stocks are also intended to be sold infrequently and if the market drops, that just means reinvested dividends get to buy more shares. My discretionary portfolio is where I have the wriggle room. Though I do have some positions (such as warrants in BAC and HIG) that are intended to be long term holdings.

SYNA absolutely exploded upwards today, almost 29%. The number of times in my investing history I have had a 29% daily move can probably be counted on one hand.  They are now up about 78% for me since I bought back in November. The funny thing is that really do not look that expensive. The revised guidance they gave is revenues up 30 to 35% over last year.  But they are only trading at 18x forward earnings. If the growth is sustainable, you could easily argue they should be 25x forward earnings. In addition they have a strong balance sheet and the upcoming acquisition of Renesas appears to be accretive and is surely not baked in the projections.  My MFI stocks were up about 1.5% today on the back of the SYNA move. It is amazing, but I am not that far from my reboot of MFI becoming a double.  Recall I invested equally over four tranches starting August 2012.  My total investment is now up 73%.  I am sure that even noting the possibility of a double will jinx me, but it really struck me today.

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