Welcome, everyone. It is time for another update of
the story fund. I'll show you the damage, what's
going on with. It is a lot of red across the
board as we seen with the markets, we're also going to be
diving into some of the scarier news going on right now.
I've tried to avoid talking about this, mostly because I'm
not a political commentator and I'm not going to be in this
video, but I do want to just highlight some of the things
going on to give context to why the market is reacting, the way
that it is. I think it's somewhat important,
but as we've seen today, we have more red days in the market.
Days across the board, especially for the QQQ.
The high-growth companies. This is largely been a
transition from growth to Value. From speculative to
non-speculative, from cash, losing businesses to cash,
making businesses free cash, flow companies.
That's been the transition going on.
We can just see today across the board.
Most things are in the red. We have Healthcare holding up,
okay? And energy holding up, okay?
So the energy trades doing well, as apparently prices are going
to be going up. We can look at The specific
index is here. We have the S&P 500 year-to-date
down 10.72 percent well into a correction at this point so that
doesn't look too good. That's the S&P 500, the mixture
of value and growth. In this one index, the top 500
companies, then we have the QQQ, this tilts more towards growth
oriented companies, technology companies in this one's down a
lot more significantly, more down.
Sixteen point eight, two percent compared to the S&P 500's 72
percent. So basically right now, no
matter what you're investing in unless you really did some like
specific trades and to a couple commodity Industries, you're
probably trading down, your portfolio is probably going down
across the board, but it's going down a lot more if you're in
these growth oriented companies and that's a situation going on
right now, with my portfolio, I have a portfolio here full of
growth oriented companies and it's currently down ten thousand
five hundred dollars which is sixteen point two.
Four, Sent money, waited, if we calculate this based on a
time-weighted basis with the S&P 500 compared against the story
fund, this is what it looks like.
You can see back in kind of November held up for a little
bit. And then early this year, the
end of last year, the performance started to divert,
that's when I got hit with the cloud companies and I did some
things to try to avoid, try to minimize losses during this time
period. And I'll go through that, but
you can see that my portfolio started to sell off the S&P 500.
Held a better. But now even the S&P 500, and a
lot of the bigger companies started to sell off.
We know that I got hit with companies like Ali, Baba Netflix
was an aggressive sell-off, nothing I've ever seen before
with a company like that. And a lot of people thought, Men
Netflix was terrible. You know, look at you investing
in Netflix at a high valuation and then Facebook got chopped in
half, and then PayPal went down, you know, 70% companies that
were established companies that were at reasonable valuations
are getting depart, you know, their valuation 20% 30% in a
day. And we saw that happen over the
past couple of months. My portfolio has somewhat
paralleled, the S&P 500 on the way down.
It's kind of actually over the past week, just Fallen to the
same extent. The S&P 500 has fallen over the
past couple weeks from 20% to 10%.
My portfolio has fallen from the three or four percent in the
green to 7% in the red so both of them have fallen around 10
percent over the past week. Kind, In parallel, but I'm still
trailing it. So, the hope is over the next
five years. I can close in this Gap.
I'm trailing spy, by around 12% right now, and I need a closing
that Gap eventually. So when I look over the past six
months of my portfolio that performance in the actions I
took, and I try to do some introspection and some analysis
on it. I come to the conclusion that
there's some things, I did write that I did good, that were smart
things to do, and other things that I could do better mistakes
that I've made, I want to go over those the things that I
think I did, right? Right was companies that I
invested in based on their fundamentals and growth
prospects that had enormous price increases enormous
momentum carry their price up even further than their than
their fundamentals. Would imply that last scene is
the best example. In March of 2021, it went from
200 dollars. A share to November being 450
dollars, a share, it went up a hundred percent in the course of
six months. That doesn't happen that often
and it wasn't Because of anything dramatically different
with the company. There's no huge fundamental
shift. Making this company worth twice
as much. So the good thing I did in this
situation and this is where I think I got it, right.
The purpose of investing is making Investments.
Then when they go up in value to wear their overvalued, where
people are giving you very attractive offers for the
company, you got to take some of those offers.
And I did, I took some of the gains with that last and in
fact, the majority of them and that helped preserve the gains.
So then one momentum eventually shifted and it moved the other
direction. I didn't go down with those
losses, right? I preserve the gains that I had.
That is decent investing buying and holding does not mean you
buy a company and you hold it no matter what.
Even if it goes up 300% way above its fundamentals Warren
Buffett to buy a Buy and Hold investor.
But if he gets such a good offer for a company, if they're
willing to give him so much money for it, that it's way
above its, it's overvalued. He'll take those offers you'll
say okay, I'll take that money and I'll Somewhere else and I
think that's what I did. Good, that's where I got it,
right. A lot of them are speculative
companies that I could see. We're moving up just far past
their fundamentals, there's so much momentum.
Carrying them up, I locked in gains on a lot of those
companies and that's the reason that I'm not more in the red,
I'd be far more in the red, I'd be down 20,000, 30,000 if I
didn't lock in gains. Another way of viewing, this is
my current Holdings. I'm down twenty thousand dollars
on. But the reason that my overall
portfolio, Leo is down 10,000 is because the previous Holdings
that I had were in excess of 10,000 dollars in gains that I
locked in. So selling these companies at a
high made it so that I didn't have twenty thousand dollars of
losses. I'm only down 10,000.
So that's something where I think I got it, right.
I think I did the right thing, six months ago by taking a lot
of gains in these more speculative positions as I could
clearly, see the valuation diverged.
So much from the fair value that it was not even close come.
Like atlassian, where way, overvalued with 50 plus price to
sales ratios. Even companies like Peloton
which I was very excited about the fundamentals of the company,
the future outlook. You know, this Dynamic change to
exercise and that type of thing. But it got to the point where it
was a fifty billion dollar company and I just kept thinking
50 billion dollars for this company.
That's so much money and I realized once demand had any
issues. Once the story would change at
all, I wanted to take gains because I thought that investors
are going to be offering more money for this in the future.
Future and I'm very glad I did. That was a mistake.
I think that Peloton will take years if ever to get back to its
previous highs. There's a good chance.
It will never return. So that part, I think I did
correct. And I think I can even learn
from that and do that more in the future.
If you have a company that you invested in and the fair value
goes like this, and the price goes like this and the price
becomes. So overvalued, take some gains,
it's okay. To even if it's a good company,
you'll have other opportunities. Is there will be time where
people aren't so bullish on that particular company.
And so if the fair value goes up slightly but the price goes up
dramatically, you can take advantage of those mismatches
and that's something that I did do.
Now when I try to determine where I have the most room for
improvement and where I can learn from, there's a couple
different things that I've really hurt my performance of my
portfolio. It's three different Holdings
that have really affected it spotify's one of them, this one,
in my opinion, the company fundamentals have been, oh,
Okay, the problem was valuation. So I bought it after it had kind
of the hype of the podcast in The Joe Rogan joining on board
and now that hype has gone away and it's shifted in the opposite
direction of Joe Rogan being a problem in controversy and
artist leaving, that's cause the stock to trade down 50% for my
by price. So that's been painful for this
holding. I could be buying it at much
cheaper prices today. So at this one, I should have
been a little bit more patient and not bought it when there is
such hype with the company. I was buying in with a lot of
hype of other investors and of course when that leaves you get
hurt. So Spotify in terms of
fundamentals, I remain very bullish on.
In my opinion, the things with Joe Rogan will pass over time.
There's new concerns that will come up.
Spotify is growing their user base by 20%, they're active
users by 20% their premium users by 20%, their revenue by 20%,
they're growing overall, the Outlook looks good, but the
different still stands, I could be buying this company at much
cheaper prices. Today than my initial buys by as
a little bit more patient and look for a little bit more
favorable entry points to it. So, part of the dip finder and
that tool that I've been building allows me to see when
sentiment is actually negative on the company buying in when
it's at a dip, not when it's on a price search.
And I'm going to be more aware of that in the future.
The next one is Ali Baba. I've bought this company, I
think two or three different times.
I did an initial by knowing that there's a good chance, it might
drop in the short term, then it dropped a lot.
I did another by then it dropped a lot more.
Get another small by. So I've dollar cost average into
this one, the original thesis of Ali.
Baba was to buy when others are fearful to be greedy.
When others are fearful with great companies, like Ali Baba,
that the fundamentals are good, but the sentiment surrounding it
are poor. So my thesis on this was, I'm
buying a company that has terrible sentiment, but the
company is foundationally and fundamentally strong.
That represents Ali Baba, what I didn't give enough Credence to
what I didn't evaluate enough and where I think I made the
mistake With this is how persistent the issues with China
would be. They are not going away quickly.
I thought they would go away much faster than they are.
The Chinese government is still in the way of this whole and
going up. And I think it might persist for
a very long time, so I got that wrong with my analysis, Ali
Baba, although it's a great company and fundamentally sound
has extra risk factors instead of companies within the u.s.
like Amazon, that really don't have this risk factor of the
Chinese government. And so it's just another hurdle
for Another hurdle to go past and I think that makes it a more
difficult investment. Another thing that I do think
affected, this investment was, I was more reliant on external
forces with this investment. I'm more reliant on other
people's research, I don't use Ali Baba.
I don't have any familiarity with the product or services, I
don't really have Hands-On research for the company and I
was Reliant also on Charlie Munger and his thoughts on China
and whatnot. So I was relying on third-party
analysis. And perspective on the company.
And to me, I don't really understand this company as much
as I should. So I violated that rule as well
as not not investing in something that I have direct
Hands-On understanding of like, Peter Lynch.
So often talks about. So, in the future, I'm going to
be investing more in companies where I have a Hands-On
understanding of companies, like Amazon that I really myself.
I use them all the time. The other one is igv.
I'm in the red on this one. I don't really consider this as
much of a mistake because it's just an ETF its Market waited.
It'll rebalance over time and I never try to time ETFs, really?
I don't spend a lot of time trying to time entry points into
ETF. So this one is down five
thousand dollars, right? It could be going better.
It's a software ETF, but I plan on holding this throughout the
duration of this portfolio and I think as momentum shifts away
from it right now, it'll eventually shift back and this
rebalance is market cap weighted.
I think he'll do fine in the future.
The big company that I really made a mistake on was Netflix.
It's apparent by the eight thousand, five hundred dollar
lost so far. Now, Netflix is one that I was
pretty blindsided by, they shared slightly lower guidance,
for a growth company and that caused the stock to sell off 20%
in one day. Now, Netflix is still a highly
debated, highly argued company. There's investors that think
that it's essentially worthless, it'll never be cash flow, free
cash flow generative, it will never give shareholders returns
and that's a valid perspective, they have decent Arguments for
that. There's other Sisters that are
great. Investors like Bill Ackman being
one of them that sees value here.
Out of all the many companies that sold off.
Recently, Bill Ackman bought a billion dollars of Netflix over
the other mini available options.
So, Netflix is a stock that has a ton of disagreement.
Now, in my opinion, the thing that I did wrong on this one was
obviously I was buying into a company that it's questionable
about how much free cash flow. It's going to generate during a
time when liquidity is being moved out of the market and
Investors are becoming more concerned about these very type
of companies. So the time that I bought this
was very poor choice and timing and that hurt my performance
like crazy. I wish I could go back and do
things differently, we can't do that.
When I look at this now and I look at the situation now with
Netflix. I feel like I'm in the same
situation as a lot of Facebook investors that had that as a
major holding your down on the stock and you're trying to
question whether or not this story in the fundamentals have
really shifted. When I look at Netflix and I
assess the beer case, in bulk case, the bear case is that Lex
has never been a free cash, flow generative company.
This is their free cash flow quarter-over-quarter.
You can see that it's not much, and over the past three quarters
are losing more cash, right? So they're never going to be a
business that generates a lot of returns for their shareholders.
The bear cases also that the entertainment and
attention-grabbing economy is overly saturated, you have
Amazon Prime, you have Netflix and Disney, and Comcast and
YouTube, and Tick-Tock and Facebook, and all these things
trying to grab your attention. Ian Netflix is just one of them
and it's overly saturated. There's only so many people only
so many hours in the day. This company can't really
doesn't have a lot of room to grow and it's just way over
saturated with competition. I think that's actually the best
beer case, that's probably the strongest beer case for Netflix.
The Bull case, is that the company's going to be free cash
flow generative that they'll continue to grow their revenue
over time. They'll continue to gain
subscribers. They'll continue to be able to
do price increases, the global Tam remains.
Large. If they get the 350 million
subscribers, their revenue will grow consistently into a large
extent, their ibadah looks very good.
This is their ibadah and the bull cases at the free cash flow
with the scalability of their content and the growth of their
revenue that the free cash flow will start to resemble their
ibadah over time that's the bull case of it.
Now when I do analysis of where I sit down with Netflix I try to
see if the story has really changed.
The price has changed a lot but has the story changed.
I keep coming back to believing that right now.
The story has not changed significantly enough for me to
exit this position and realize the losses.
I don't think All Is Lost. I agree with a lot of the
arguments that Bill Ackman recently made the company still
has a large cam. There's still a lot of people
that want high-quality entertainment across the globe.
Netflix has a good International strategy.
They will have periods of slow growth, but they've had that
before. They'll also have periods of
fast growth, right? If things go good or they have a
break, Series. So in my opinion, the bull case
hasn't changed that much if Netflix continues to grow and
really does get the 350 400 million worldwide subscribers.
The company will generate free cash flow and the investors
looking for that free cash flow will probably jump back on
board. So as of right now, I think it
was a mistake to put so much money in this company, right?
As this transition was happening to more free cash flow,
generative businesses. But in terms of where I stand
right now, I don't plan on exiting this.
Ian, I have to get more of a real confirmation that the
Dynamics have changed. There's things I didn't see in
the company, there's too much competition and they're really
never going to grow free cash flow if that happens and I get
confirmation that the company's fundamentals really have
deteriorated and the company really will never grow to be
free, cash flow generative and that case, I'll realize the
losses and look for other Investments.
So that's a quick update on my portfolio, looking back over the
past three to six months in summary.
The thing that I think I did right was when the Price moved
up way past the fundamentals of many, of my companies.
Taking gains, that's important to do.
If the price surge has passed the fundamentals in the
valuation that supports the price.
That's a time to take gains when everyone else is being greedy.
That's when you can take gains and protect your gains for that
company and conversely over time that price will start to move
back to the fundamentals either. The fundamentals will surge up
and match the price or the price is going to come back down.
And for all the companies that I took As on the price, went back
down to more closely match, the fundamentals.
So that's just another way of saying, be fearful, when others
are greedy, when sentiment is so positive on a company and the
price is just surging and you're looking at the price to sales
ratio in the PE ratio in you're going, wow, this is really
something else. These companies are going up
like crazy. That's a time to be a seller and
take gains. You can get 20 30 percent gains
and companies that are going up. Because a positive sentiment the
time to be greedy and start buying is when the price is way.
All the fundamentals when it's selling off like crazy when
nobody wants to touch these companies.
I look at days like today. This is the dip finder.
This comes with the patreon membership, but look at my
portfolio today. For instance, we added in a
thing that shows you the current percent change on every holding
updated every five minutes. And this is the daily percent
change. So I jeebies down 2%.
Netflix is down, 1.7% Google's down point, eight percent,
Amazon's down 2.8% Ali, Baba's down. 2.4% Microsoft is down 2%
and look over all the momentum with these companies twillie is
down 48 percent from its 200-day.
Moving average Facebook is down, 39 percent, spotify's down, 36
percent, Baba's down 32%. These are all in substantial
dips. The only company out of my
entire portfolio in the story fund.
That's not in a massive dip. Is Apple, Microsoft is holding
up, okay, it's only down three percent but apples, the only one
that's not in a dip this show. You, how much momentum swings
from one direction to the other six months ago?
These would have all been above the zero, x axis, they would
have all been searching. That's the time to take gains
when positive momentum is heavily baked into the price of
the stock. When sentiment is so incredibly
positive. That the price is just soaring.
That's when you should be more fearful and take gains with
these companies. Now's the Time to actually be
buying them. This is the time to be greedy.
People are fearful right now. There's lots of bad news going
on. All these companies are in
massive dips, they're selling off more and more every day.
And, in my opinion, I think every one of these companies is
oversold, they're all Cloud companies have been punished for
the past year. Now that doesn't mean that the
price can't continue to move down.
There's a high likelihood of it. Momentum moves One Direction for
a long period of time. But what we're seeing right now
is instead of the price way up here, way above the
fundamentals. Now the price for many of these
companies is way below the fundamentals, way below their
fair value. So Now's the Time to be greedy
6. To go was a time to be fearful.
Now, moving on from that, I want to also share some thoughts on
current events with the Ukraine crisis.
What's going on with the world? How this ties in with China and
Russia and how I view this in terms of investing if I make any
changes to it. So this is a good summary of the
situation. I want to read through this.
Which summarizes what's going on?
I think in a very concise way, Russia's audacious military
mobilization in and around, Ukraine is the first major
'scrimish of the New Order in international politics with
three major powers. Is jostling for position in
ways. That threaten America premise.
See the challenges are different than those the US and its
network of alliances faced and the Cold War Russia and China
have built up a thriving partnership, based in part on a
shared interest and diminishing the u.s. power.
Now they also go on to highlight how things have changed
dynamically between now in the 1950s, Russia is a critical gas
supplier to Europe. So they're actually supplying
fuel to all of Europe. That's a pretty powerful
position to be in. China isn't impoverished
war-ravaged partner but rather the world's manufacturing
Powerhouse with an expanded military in deploying a huge
Force against Ukraine. President Vladimir Putin is
demanding that the West rewrite, the post-cold war security
agreement for Europe and demonstrating that Russia has a
military capability to impose its will despite Western
objections and economic sanctions.
So he's basically saying that we're going to be doing this
whether you like it or not to do this mr.
Putin shifted military units from Russia border to China
showing confidence in the relationship with Beijing.
The two powers and effect are coordinating to reshape the
global order to their advantage, though.
Their ties, stopped short of a formal alliance.
So I think it's clear that Russia and China do have shared
interests with each other. They both want to be more
powerful and they can leverage their relationship to accomplish
that. But it also says it stops short
of the formal alliance. I don't think they have 100%
trust with each other. The probably still a little bit
skeptical. This emerging order leaves the
u.s. can Ending with two adversaries at once in
geographically, disparate parts of the world where America has
close partners and deep economic and political interests, the
Biden Administration now faces, big decisions on whether to
regear its priorities Step Up military spending demand allies,
contribute more station additional forces abroad and
develop more diverse energy sources to reduce Europe's
dependence on Moscow. It's a lot of different options
that they're trying to take. So that's a quick summary of
what's going on right now. It doesn't sound good.
It sounds like a lot of Bad news.
It's a lot of scary news, frankly.
And I don't want to diminish it in any way, this is really
important stuff. It changes the Dynamics and it
changes our future. It changes the positioning of
all the super powers and world powers.
So I think this is incredibly important stuff.
I don't want to diminish that in any way, but one thing that is I
think always the case with investing is there is always
something to be concerned about all the time that never changes.
That is something that is going to The case forever.
We look at this advice again from Peter Lynch and I reference
him all the time. He has this advice that I think
is classic and it just lives on throughout every single year,
every generation. Because it's so consistently
true, in the stock market, the most important organ is this not
work, it's not the brain. There's always on the way to
work the amount of bad news you can hear is on for the infinite
now. So question is can you take
that? I mean, do you really have faith
that 10 years, 20 years, 30 years from now, Common Stocks
replace the be do you have the stomach to invest in companies
through all the bad news because we know from now on the way to
work, we're going to hear an infinite amount of bad news.
What's going on right now with Russia, Ukraine, China, all the
positioning, The Invasion, all Is incredibly bad news that
again, I don't want to diminish but have you noticed something
over the past month? Have you heard a thing about
Omicron about a pandemic? That was literally killing
hundreds of thousands of people, the virus spreading has gone
down to almost, you know, below where it has been historically.
It's almost not even an issue anymore, nobody even mentions it
anymore. The news seemingly overnight
shift it from Omicron to the next scariest thing.
The new scary thing, Russia, and an invasion in China.
Now, the 24-hour cable companies and all the news are reporting
on that issue, 24/7. Because this one's done.
It's old news, even though just a couple months ago, this was
the scariest thing going on and the News was emphatic about this
as well. So the only thing that's really
consistent here is a fact that there is always something to
worry about. There's always something bad in
the news and you don't want to diminish any of these individual
things. This month, it's Russia,
Ukraine. It's China and World economic
powers and positioning and politics.
Last month, it was Omicron and a deadly pandemic.
You know, the next couple months is can be something different.
It will transition back to interest rates that will be the
big scary thing. The news makes money selling the
stuff, they make money talking about it, 24/7 all the time, and
getting everyone else to talk about it.
That's how they generate money. That's how they run their
business. When you're investing in these
companies, the time to be buying is when people are fearful.
Those are when the opportunities exist.
So, that's my thoughts for now. I'll see you in the next one.