Today, I start telling you about my portfolio. I’m going to do it in three parts:
Part One, Rare Insights: This is today. I’ll tell you about my three biggest stock holdings in detail. Once in a while, I think I see something that others don’t and take advanage.
Part Two, Rare Leadership: A big part of success in life is associating yourself with the right people. Good people will take you to the stars. Bad people will drag you down to the gutter with them. Sometimes, finding good people is not easy, but not impossible. Owning companies with great leadership is no different. I’ll tell you how I identify great leaders and which stocks I’ve purchased as a result.
Part Three, The Future: I’ll reveal the rest of my portfolio and tell you about my future plans.
These posts are the ones I never wanted to write. I don’t want to give anyone bad ideas, so please know that I’m not writing this to give advice or encourage you to pick stocks. You probably won’t get rich immitating my purchases. I am doing this for two reasons:
Transparency: This is a personal finance blog, so I need to reveal what I invest in.
I need to show you my thought process: Most of my money isn’t in individual stocks, but a significant amount is. I just can’t tell you what I own without a detailed explanation of why I bought it.
Charlie Munger, in duck form
Before we get into the dirty details, I need to turn the blog over to Charlie Munger for a moment. This quote, from Poor Charlie’s Almanack (a very worthwhile read), echoes my thoughts on investing:
“Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime.
A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind that loves diagnosis involving multiple variables.
And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.”
I love this quote. It epitomizes why I bought these three stocks. Here we go.
*I would buy another 100 shares at $300 on a later date. Those shares combined with dividend reinvestment and a 7 for 1 split is how I came to 1454 shares.
**Stock split! In the case of Google, I don’t have 100 because I sold some shares (mistake).
***Split adjusted price.
Google: I’m a computer programmer. One day at work way back in 2000, I was trying to solve a problem and was having a hard time. I finally gave in and asked a more experienced programmer. His response was, “Did you try Google?” “Goo what?!?,” I said? He brought up the search engine, typed in my problem and there was my answer. The way I worked instantly changed. No more paging through thick books. Anything I needed to know was just a Google search away.
When Google announced their unconventional IPO, I had to participate. I bought 50 shares at $85. My purchase was a bet that Google would continue to innovate. And they have. Google Maps blew Mapquest out of the water with their AJAX implementation. Android is the biggest cell phone operating system in the world. Google’s services are best in class and get better every day.
What I like most is Google’s willingness to take chances on incredibly speculative endeavors. Self driving cars? Yep. Microchipped contact lenses? Yep. Google is changing the world. I have no idea what other crazy things they are dreaming up, but I’ll bet they’ll continue to blow our minds in the near and far future.
Perhaps one of my biggest investing mistakes was selling some of my Google shares a couple years ago.
Apple: Before 2007, I paid little attention to Apple. However, the tech blogs I read had been discussing rumors of a new phone Apple was developing. In January of 2007, I watched as Steve Jobs announced the iPhone.
Prior to the iPhone, no one had released a good smart phone. The iPhone changed all of that. Music, maps and Internet access all on a mobile device with a smart touch interface. Brilliant! I knew I that Apple had nailed it. I snapped up shares of Apple that month and have clung to them.
Times have changed. Apple’s moat is gone as companies like Google attack them and innovate at a frenzied pace. This does not sit well with me any more. More on this later.
Facebook: A smart CEO concentrates on their product and not appeasing Wall Street. Release a really good product and the money will follow. This is exactly what Mark Zuckerberg has been doing with facebook. I remember an interview with him pre-IPO when an analyst asked him about revenue. His response was that he didn’t care about making money, his goal was to focus on the product, connect the world and the money would eventually follow.
Scooping up shares as the price went down, down, down
The infamous IPO came and the media took facebook to the thresher. Among the complaints was that the stock price wasn’t justified by the company’s earnings. Of course it wasn’t, facebook hadn’t been trying to make money. Had the media paid any attention to Mr. Zuckerberg? Apparently not. I did, though.
I bought 1000 shares at IPO price. I watched with great happiness as the stock price continued to drop and I bought additional shares. I never lost faith in my belief that with 1,000,000,000 users, Zuckerberg would have to be an idiot if he wasn’t able to monetize the platform. So far, so good. I think their best days are yet to come.
Random Thoughts
Reading is my greatest weapon: I love to read. I could give up TV forever in a heartbeat, but I’ll never give up reading. I read multiple newspapers a day. I love all sorts of magazines. Cars, science, business; it’s all awesome. All of this reading gives me a framework and reinforcement for thoughts and hypotheses that I have. This could be a series of posts in itself and perhaps will be some day.
Finding the bandwagon before it becomes a bandwagon: Building on the above point a bit, the insights that I’ve had allowed me to identify and jump on a bandwagon before it became one. I knew that advertising dollars would move to the Internet (Google). I knew that facebook’s vast datasets and user base would allow it to generate massive quantities of money when it decided to open the floodgates. I realized right away that the iPhone instantly changed the game and it would take a long time for competitors to catch up. These insights are very rare for me and I only act if I feel very confident. However, as Charlie pointed out above, you just need a few big winners in life.
I love innovators and companies that take big chances: Self driving cars (Google)? Not many companies would take a chance on that. Paying $2 billion for Oculus Rift (facebook)? Seems insane now, but mark my words here; in 5 years even your grandparents will know what Oculus Rift is.
These decisions don’t come quickly: I’ll often think about a stock for months or even years before jumping in. Only after very careful consideration do I take the plunge. Also, I do it very infrequently. I have one more more stock in mind (not yet a public company). That may very well be the last one I ever buy.
I am very aggressive: Tech companies are perhaps the most volatile type to invest in. Technology moves very fast, often rendering today’s hot company obsolete in very short amounts of time.
I am all growth: Some day I may change my focus to income producing holdings that pay a dividend or buy more bonds (1% of my holdings currently). I’m not ready yet though.
I like big moats: Nobody is going to overtake Google in Internet advertising any time soon. Android is very strong and getting stronger every day. Facebook isn’t going away soon.
I rarely sell: I buy and hold. Selling 40% of my Google shares a couple years back was one of my worst mistakes*.
Don’t be informed by the media: The media wants your clicks. They only care about the next 3 months. If a company lays off people, that is great news because the results next quarter will be higher! On the other hand, if revenue falls short because the company is investing heavily in itself, the stock price takes a hit. This is clearly backwards to the long term investor. Forget the media. Read the company’s quarterly statements. Tune into earnings calls. Figure trends out for yourself. Use your noggin!
Qualitative measures: I’ve yapped plenty about Warren Buffett. However, his investing partner, Charlie Munger is who I admire most. He is the one who turned Warren Buffett on to qualitative measures, which I value far more highly than quantitative ones. I instantly tune out to any source that starts talking about trends in a stock price. I want to know that the company has strong leadership and is innovating.
No empire lasts forever: Did you know that there have been almost 2,000 car companies in the United States alone? Now, think how many are around today. Apple, facebook and Google are flying high, but will they be around in 20 years or even 5? These companies are at the top of the world now, but Blackberry and Nokia also were 5 years ago. Perhaps the hardest thing with stock picking is knowing when to let go. I once bought a stock that went from $10, to $120 and then down to $0. Will I make this same mistake again? Maybe.
Way overweight: I have 1/3 of my portfolio in Apple and facebook. Not good. This will change soon. More later.
Where do I go now?
I’ll elaborate more on future plans in post #3, but for now I’ll say that I’m mostly out of the stock buying business. Future money will go into low cost funds, real estate and peer lending. At the same time, I’ll be paring down these 3 investments since they take up a ridiculous percentage of my portfolio.
Next week: I believe that one of the keys to a good life is to surround yourself with great people. The stock market is no different. Next week, I’ll tell you what stocks I have purchased because of great leaders. I’ll also tell you what characteristics make up a great leader.
One more time: Do not follow me. Think for yourself. You own the most amazing machine in the world. It sits between your ears. Use it.
*I sold Google to buy more Apple stock. At the time, they were the same price ($500). I gambled and lost – GOOG has more than doubled since I sold those shares, AAPL has risen about 20%. Sigh.
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Reader Interactions
Comments
Kippsays
Hey Mr 1500,
I really like what you have done to build your net worth. To be honest I had consider Apple when they dropped a year or two ago to around $400-500, but I just don’t have the capital to invest heavily. Facebook I also pondered when it dropped into the teens. Apple I am not overly concerned about as it was the top holding in my mutual funds at the time, so I was in essence still collecting their stock even without directly purchasing it. Facebook tho… coulda shoulda woulda.
I do like your point on “Don’t be informed by the media”, this is basically why I had purchased Ford stock. They had announced updates to several models and the stock got hit a little because it would decrease short term profitability. I didn’t have a ton of capital, but I got together $500 and it is doing well. Good to just take advantage of situations when you can even if the amount is small. Sometimes you need to listen to your gut I suppose, as long as the financials makes sense as well. Kipp recently posted…Net Worth Update – July
I think Buffett rubbed too much off on me – I am a little hesitant with tech stocks. I’ve done extensive research on AAPL (Annual Reports, 10Ks, 10Qs) and the quantitative and qualitative factors scream out at me “buy buy buy!” yet I have not bought any.
Quantitative: My god are they a profit/EPS/net income producing machine. The amount of cash/cash equivalents they have in their war chest is incredible. Fat profit margins, low debt, reasonable P/E, growing market share overseas, increasing dividends, and share buybacks.
Qualitative: I use Apple everything. They have me hooked on their high quality and high levels of customer service. And it’s not just me: most of my friends also love and are loyal to Apple. I extrapolate this confidently to the rest of the population. Apple really is a cultural phenomenon that commands a level of loyalty very few companies can wield. They have also ingeniously created their own ecosystem to get people hooked in and to stay put.
Concern: Really, I should just buy. But I guess I get a little too concerned about how quickly tech can change. Can Apple innovate again and again with extraordinary products like the iPhone and iPad? What realistically is coming after the iPad that would be as revolutionary, amazing, and a fat profit generator? If a bust product is released, will they be able to recoup or will culture change on them? Will they just become a bloated, yet acceptably profitable, tech company like Microsoft?
I probably should ponder the purchase of AAPL further. As for GOOG and FB, have not done enough research into them.
Wow, I’ve gone off on a bit of a stock analysis tangent. Anyways, looking forward to reading further about your portfolio! Fascinating! Steve recently posted…How to Create Subscribe Buttons
I love your analysis and your concern echoes mine. The iPhone and iPad had no competition when they came out. Very big moat. Now, that moat is gone as low cost Chinese and Korean competitors try to tear them down.
Out of the big 3 I mentioned today, Apple scares me the most. The overwhelming amount of their revenue and profits come from the iPhone and I just can’t predict how strong that will be in 5 or 10 years. Android is killing it.
As a result, Apple will be the first I start to sell.
This is a bit of a stretch, but if Apple can hit another home run with some sort of wearable device, which all the rumours seem to point to, they could change the game again. But that’s asking for a lot. But they have a history of hitting home runs, so you gotta give them some credit for being able to do it again.
But I think your mention of the moat hits it on the head: moats in tech don’t seem to have as much lasting power as, say, Coke. Now, I’m just free-wheeling-thinking-out-loud, but if Apple could remain the “Coke” of tech, that would be amazing. But tech changes so quick.
My prediction (whatever it is worth) is that Apple will shoot past $100 per share once the iPhone 6 is released in September and perhaps even more if they release their wearable “iwatch” in the fall as well (loose rumours indicating they will, I’m addicted to checking Macrumours everyday).
I am dying to see the wearable device and I hear it will be announced with the new phone on 9/9. However, I also don’t think it will be nearly as big as the iPhone. Everyone has a phone, but a watch will have to have some compelling features to move off shelves.
Yeah, I think over $100 is a safe bet, but who knows after that. Where will they be in 5 years? Who knows.
I think they need to jump on the home automation bandwagon. I’d also like to see an App Store for Apple TV. I know that TVs have slim margins, but I’d bet a lot of people would pay a premium price for a full-on TV.
Really enjoyed reading your insights on these 3 mega-corps. It looks so obvious now looking back now but getting in on the bandwagon (relatively) early and betting big took some insight and balls. Kudos to you sir!
From my experience, I don’t remember the google IPO as I was fresh faced out of University at that time and even if I did I wouldn’t have been able to act on it in any great way.
I do remember the facebook one and completely fell for the media storm, I just thought what they thought (who would buy shares in a company that isn’t making any money). Again, I wasn’t into investing anyway then (saw it as a risky business, which I guess individual stock picking still is of course!).
I don’t ever recall even thinking or reading about Apple stocks at all, but I do agree with your current thoughts that their moat is all but gone, I can’t see the iWatch being the answer to their prayers and there is little innovation left in the phone/tablet products nowadays. They may well surprise yet again but all they really have left now is their brand in my opinion, which as large as it is, will not last forever if they can’t keep backing it up with products that are so far ahead of the competition and uber cool at the same time.
You have done well, congrats. I learned the hard way I don’t do well picking and holding individual stocks and for a few years have had our 7 figure portfolio entirely invested in a few simple ETF’s. I sleep better at night and don’t worry about trying to time the market.
Very interesting. I believe a lot of people have ridden the Apple, Google, Facebook train up. Will you get off before it rides down? Have you set a number goal to when you no longer have to take the risk you are taking? The Enron, Worldcom, Lehman Brothers, Washington Mutual etc likely never thought they were at much risk.
The large taxable gains will be what keeps you from selling. You don’t mention whether these individual stocks are in a taxable account or tax-sheltered. If they were in tax-sheltered I’d sell and diversify yesterday. 🙂
At 43 I no longer need or want to take the risk of owning individual stocks. Taxable assets (50% VTSAX, 15% VTIAX, 35% VWIUX) Tax-Sheltered assets (50% VTSAX, 15% VTIAX, 35% VBTLX)
Super low cost, market weight diversification, quarterly rebalancing, peaceful sleeping.
I would doubt that my 3 are pulling any shenanigans that will send people to prison like what happened with Enron and some of the others. However, I also know nothing lasts forever. Apple scares me the most as their moat has been breached. I’ll keep some shares, but probably get rid of most.
I think Google and facebook have staying power, but I do have too much facebook, so I’ll be hitting the sell button on some of that soon.
Most of these shares are in taxable accounts so yes, the gains would be murder. Ideally, I’ll sell most after I retire and my income is much smaller. Don’t know if I can wait that long though!
I am moving towards broad market, Vanguard funds, but admit to holding some VGT too. I just can’t stay away from tech!
First off, thank you for taking the hood off the car so we can peak into the engine that drives this machine. It isn’t easy to show your commitment to a few holdings, and I think universally it is greatly appreciated.
I think you’ve made moves that (in hindsight obviously) are extremely successful, but the biggest factor that plays into those moves was your ability to read the market and understand the upcoming trends in technology and online marketplace (which is what Google, Facebook, and even Apple thrive on). Going forward, I love your idea of diversifying and spreading your assets into different arenas. And you can’t go wrong with finding a more passive means of diversification, even with some rock solid Vanguard funds or even a few dividend stocks.
As I have a good idea what your final investment will be, I hope that it too turns out to be successful as it will likely be another market maker and quite disruptive of the status quo. writing2reality recently posted…When life hands you a beautiful girl… marry her!
Regarding that next investment, I’m very bullish on that whole category. Peer services are changing the world: Lyft, Uber, Realty Mogul. The Internet is the great enabler!
Will you be partaking in any of the above mentioned positions outside of the one I’ve alluded to? I’d love to invest with Realty Mogul, but am not accredited, and think Uber would be a fascinating equity holding once public, as well as something that could be built into an actual business as well. writing2reality recently posted…When life hands you a beautiful girl… marry her!
Uber seems crazy valued right now. Didn’t someone peg them at 17,000,000,000? Yes, billion with a B! That seems insane to me, especially considering all of the battles with big cities.
I CAN’T wait to start with Realty Mogul! So close. Did you catch Peter Renton’s podcast with the CEO? It seems like a great way to get into a bit of real estate without the hassle of tenants.
You are getting pretty close to that status Mr! You will have to let me know your experience once you get involved. I listened to that podcast (loved it) and dejectedly counted my pennies in the hopes 10 million would appear! 🙂 writing2reality recently posted…Passive Income and Pageviews – April 2014 Update
Thanks for letting us peek into your portfolio. I haven’t actually invested into any individual funds. I keep wanting though, but honestly I haven’t seen any great deals out there to justify the extra risk. SavvyFinancialLatina recently posted…Dilemma: Helping a Friend Out
If you’re not really comfortable, don’t! Stocks are not for the faint of heart. I highly recommend that most people stay away, far away! Index funds are the smart choice.
Long time reader, first time commenting here. These are some absolutely amazing picks at the best possible times, congrats 🙂
Twitter is probably at the point where they could go either way too, are you nibbling ?
Wow! I love the aggressive commitment to some outstanding companies. I personally favor a steady predictable income component in my investments, but I love your choices, especially Apple. My Dividend Pipeline recently posted…Weekly Sharebuilder Purchases
Pretty cool. Thanks for sharing. I am with you all the way on the technology stocks. Love the insight! Cat@BudgetBlonde recently posted…How to Afford a Long Distance Relationship
haha, my high school librarian showed us google around 2000, too! Definitely a game changer when it came to search technology. =)
My thing is that I tend to be really bad at recognizing which technologies are going to stick around and like adopting losers (but not consistently enough to want to bet against my consumer choices in the stock market). I preferred Sony’s mini disc technology to the iPod, was rooting for HD over BluRay, and for the life of me cannot understand why people spend so much time on Facebook (it’s no different from Friendster and that flopped, right?), Twitter, Instagram, Pinterest, etc. Or how ads on those platforms are worth anything since even when I’m on them I skip over any ads completely.
Because of this I know I need to stick with ETFs that mimic various indices. Feels much safer in my book. =) Mrs. Pop @ Planting Our Pennies recently posted…Reader Question – Food Spending Rules of Thumb
I think what’s most interesting to me from this peek inside your portfolio is the variety of different ways to build wealth. For example, everything I’ve read supports buy and hold index fund investing being the statistically most likely to succeed approach, but there are success stories in individual stocks, real-estate investing, peer-to-peer lending, etc etc etc…
Each of us seems to have a different gameplan for investing, and it’s interesting to see the differences. I think it’s all interesting. Nothing is right or wrong, just different 🙂 Big Guy Money recently posted…Read With Me!
Hmmm, I do actually think that index fund investing is the right way for 98% of people and that is the direction I’m slowly moving towards (post #3). Stocks are like playing with fire and my approach could blow up in my face some day.
I hate gambling, but I enjoy this game. Some would say it’s the same.
Thanks for sharing this information about your investments. It was an interesting read. Working in high tech and seeing companies struggle my whole career makes me not a high tech investor. Seeing the likes of Nortel, BB and my own companies is enough. I know they’re not Apple, FB and Google, but then I’m not astute enough to pick the ones that will make it. I’ll stick with Corporations with a long history of dividends – you can call me Steady Debby. 😉 debt debs recently posted…Sticky Business: A busy bee ‘s work is never done
Here’s the best part, you can do multiple strategies to your comfort level!
Max out the 401k (index investing) – Set it and forget it
DGI for 70% of my taxable portfolio – Slow and steady
Growth plays for 30% of my taxable portfolio – Gambling to keep me interested 🙂
It’s probably obvious to anyone reading your blog but step 1 is the emergency fund and keeping your expenses in check. Anything extra is gravy =P
Thanks for the look at what your portfolio is made up of! I think you stuck with what you know well – tech, which gives you a little bit of an advantage to picking tech stocks vs say energy stocks. I bought Red Hat during their IPO – and sold it as soon as I crossed the one year mark into long-term capital gains. I was in college, and knew Red Hat, but nothing about investing. I still dabble in individual stocks via loyal3 (maybe less than 0.1% of our portfolio), but for the most part, I’m all index funds. Mom @ Three is Plenty recently posted…Detailed Financial Picture – August 2014
I love hearing about different approaches to building wealth. Many roads lead to Rome and, while I can’t travel but one, it’s oddly interesting to hear about someone else’s route.
I own a single stock for about 4 or 5 days out of the year, in between the time my ESPP makes its twice-yearly purchase, and the time I sell it to buy index funds. But during those days, I really do hope the price increases. 🙂 Done by Forty recently posted…I Am Miley Cyrus
Yes, many roads lead to Rome, some may just take a lot longer. If I get there faster, I have to attribute at least part of it to luck. Google is a much different company than they were 10 years ago when I bought them and I don’t think anyone could have seen it coming.
Thank you for this blog! It has been a pleasure to read over the past few weeks since I started following you via BlogLovin’.
I work for Airbnb in SF, and have shares as an employee. I am not at all to the point financially where I have the kind of money to play the stock market (still building my emergency fund and trying to max out my 401 Roth) but I think I’m lucky to fall into shares when we eventually go public.
Airbnb! I love your company! We had the pleasure of using it when we went to Omaha for the Berkshire meeting. We paid $40/night instead of the $200 hotels were charging.
Also, I’m drooling over you shares. I have a strong feeling that those will work out very well for you in the not so distant future.
Thanks for sharing your approach, really insightful!
You’ve picked up some awesome growth stocks at the best possible of times, wow. I’m actually a little jealous!
While I’m not invested in stocks yet myself (only ETFs until now), I don’t think I’d go for technology stocks because I find it to hard to ‘predict’ their future. Because tech moves so quickly, you really have to be on top of the game. A company like Facebook is much harder to understand than Coca-Cola for example. At least that’s how I see it.
And I totally agree on moats; the bigger the better! The only thing I like more are (semi-)state-owned European telecom companies or other types of network inftrastructure.
“Because tech moves so quickly, you really have to be on top of the game. A company like Facebook is much harder to understand than Coca-Cola for example. At least that’s how I see it.”
Yep, exactly. This is my main issue. When do I let go? I’ve ridden these stocks up on nice gains. Will I ride them down when I fail to figure out that the company has lost its mojo?
Nothing wrong with a stop loss, almost all online brokers let you do them now. Keep inching it up your “sell price” to your comfort level”. Nothing says you can’t buy it back later at a lower price if you change your mind. I do this with any growth style plays i have that are up obscene amounts.
This was a very interesting post. I always enjoy hearing why people are invested in what they are invested in. Myself? I tend to avoid tech stocks because I don’t really know the industry very well.
Great write up! I look forward to the next couple parts!
I commented earlier, it must not have taken or went to spam. First I prefer Munger in a sombrero;)
Fun article to read, I look forward to the others. Google is amazing, simple as that. I usually try to not like the next big thing so when I didn’t like Google when it first came out I should have known. I mean Yahoo It, come on, Google It. Even Steven recently posted…Costco Membership Review #894
You showed us your “big wins” in Tech. Any big stinkers over the years?
Those are not as fun to talk about. Like my uncle that goes to the casino regularily. You only hear about the big winning days! Haha. Wade recently posted…$400 oil change for a watch
This was a cool article and it has almost made me want to dabble in individual stocks! *gasp* I know. But, I must say, your words were marked Mr. 1500, and five years later, my grandparents still haven’t heard of Oculus Rift 😉
*I would buy another 100 shares at $300 on a later date. Those shares combined with dividend reinvestment and a 7 for 1 split is how I came to 1454 shares.
Hey Mr 1500,
I really like what you have done to build your net worth. To be honest I had consider Apple when they dropped a year or two ago to around $400-500, but I just don’t have the capital to invest heavily. Facebook I also pondered when it dropped into the teens. Apple I am not overly concerned about as it was the top holding in my mutual funds at the time, so I was in essence still collecting their stock even without directly purchasing it. Facebook tho… coulda shoulda woulda.
I do like your point on “Don’t be informed by the media”, this is basically why I had purchased Ford stock. They had announced updates to several models and the stock got hit a little because it would decrease short term profitability. I didn’t have a ton of capital, but I got together $500 and it is doing well. Good to just take advantage of situations when you can even if the amount is small. Sometimes you need to listen to your gut I suppose, as long as the financials makes sense as well.
Kipp recently posted…Net Worth Update – July
The media blows so much hot air! It is unbelievable.
Nice work on Ford. I don’t own any, but have watched them. I wish Mullaly was still with the company though. I have a lot or respect for that guy.
I think Buffett rubbed too much off on me – I am a little hesitant with tech stocks. I’ve done extensive research on AAPL (Annual Reports, 10Ks, 10Qs) and the quantitative and qualitative factors scream out at me “buy buy buy!” yet I have not bought any.
Quantitative: My god are they a profit/EPS/net income producing machine. The amount of cash/cash equivalents they have in their war chest is incredible. Fat profit margins, low debt, reasonable P/E, growing market share overseas, increasing dividends, and share buybacks.
Qualitative: I use Apple everything. They have me hooked on their high quality and high levels of customer service. And it’s not just me: most of my friends also love and are loyal to Apple. I extrapolate this confidently to the rest of the population. Apple really is a cultural phenomenon that commands a level of loyalty very few companies can wield. They have also ingeniously created their own ecosystem to get people hooked in and to stay put.
Concern: Really, I should just buy. But I guess I get a little too concerned about how quickly tech can change. Can Apple innovate again and again with extraordinary products like the iPhone and iPad? What realistically is coming after the iPad that would be as revolutionary, amazing, and a fat profit generator? If a bust product is released, will they be able to recoup or will culture change on them? Will they just become a bloated, yet acceptably profitable, tech company like Microsoft?
I probably should ponder the purchase of AAPL further. As for GOOG and FB, have not done enough research into them.
Wow, I’ve gone off on a bit of a stock analysis tangent. Anyways, looking forward to reading further about your portfolio! Fascinating!
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I love your analysis and your concern echoes mine. The iPhone and iPad had no competition when they came out. Very big moat. Now, that moat is gone as low cost Chinese and Korean competitors try to tear them down.
Out of the big 3 I mentioned today, Apple scares me the most. The overwhelming amount of their revenue and profits come from the iPhone and I just can’t predict how strong that will be in 5 or 10 years. Android is killing it.
As a result, Apple will be the first I start to sell.
This is a bit of a stretch, but if Apple can hit another home run with some sort of wearable device, which all the rumours seem to point to, they could change the game again. But that’s asking for a lot. But they have a history of hitting home runs, so you gotta give them some credit for being able to do it again.
But I think your mention of the moat hits it on the head: moats in tech don’t seem to have as much lasting power as, say, Coke. Now, I’m just free-wheeling-thinking-out-loud, but if Apple could remain the “Coke” of tech, that would be amazing. But tech changes so quick.
My prediction (whatever it is worth) is that Apple will shoot past $100 per share once the iPhone 6 is released in September and perhaps even more if they release their wearable “iwatch” in the fall as well (loose rumours indicating they will, I’m addicted to checking Macrumours everyday).
Should be exciting times to be an Apple shareholder!
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I am dying to see the wearable device and I hear it will be announced with the new phone on 9/9. However, I also don’t think it will be nearly as big as the iPhone. Everyone has a phone, but a watch will have to have some compelling features to move off shelves.
Yeah, I think over $100 is a safe bet, but who knows after that. Where will they be in 5 years? Who knows.
I think they need to jump on the home automation bandwagon. I’d also like to see an App Store for Apple TV. I know that TVs have slim margins, but I’d bet a lot of people would pay a premium price for a full-on TV.
Hi Mr 1500!
Really enjoyed reading your insights on these 3 mega-corps. It looks so obvious now looking back now but getting in on the bandwagon (relatively) early and betting big took some insight and balls. Kudos to you sir!
From my experience, I don’t remember the google IPO as I was fresh faced out of University at that time and even if I did I wouldn’t have been able to act on it in any great way.
I do remember the facebook one and completely fell for the media storm, I just thought what they thought (who would buy shares in a company that isn’t making any money). Again, I wasn’t into investing anyway then (saw it as a risky business, which I guess individual stock picking still is of course!).
I don’t ever recall even thinking or reading about Apple stocks at all, but I do agree with your current thoughts that their moat is all but gone, I can’t see the iWatch being the answer to their prayers and there is little innovation left in the phone/tablet products nowadays. They may well surprise yet again but all they really have left now is their brand in my opinion, which as large as it is, will not last forever if they can’t keep backing it up with products that are so far ahead of the competition and uber cool at the same time.
You have done well, congrats. I learned the hard way I don’t do well picking and holding individual stocks and for a few years have had our 7 figure portfolio entirely invested in a few simple ETF’s. I sleep better at night and don’t worry about trying to time the market.
Thanks for sharing, I find your blog interesting.
ETFs! I’m headed in that direction. Wait for post #3…
Nice work on a big ass portfolio! I hope to join you soon.
Very interesting. I believe a lot of people have ridden the Apple, Google, Facebook train up. Will you get off before it rides down? Have you set a number goal to when you no longer have to take the risk you are taking? The Enron, Worldcom, Lehman Brothers, Washington Mutual etc likely never thought they were at much risk.
The large taxable gains will be what keeps you from selling. You don’t mention whether these individual stocks are in a taxable account or tax-sheltered. If they were in tax-sheltered I’d sell and diversify yesterday. 🙂
At 43 I no longer need or want to take the risk of owning individual stocks. Taxable assets (50% VTSAX, 15% VTIAX, 35% VWIUX) Tax-Sheltered assets (50% VTSAX, 15% VTIAX, 35% VBTLX)
Super low cost, market weight diversification, quarterly rebalancing, peaceful sleeping.
Thanks for letting us peek inside.
Wade recently posted…$400 oil change for a watch
I would doubt that my 3 are pulling any shenanigans that will send people to prison like what happened with Enron and some of the others. However, I also know nothing lasts forever. Apple scares me the most as their moat has been breached. I’ll keep some shares, but probably get rid of most.
I think Google and facebook have staying power, but I do have too much facebook, so I’ll be hitting the sell button on some of that soon.
Most of these shares are in taxable accounts so yes, the gains would be murder. Ideally, I’ll sell most after I retire and my income is much smaller. Don’t know if I can wait that long though!
I am moving towards broad market, Vanguard funds, but admit to holding some VGT too. I just can’t stay away from tech!
Ahh… the post we’ve all been waiting forward! 🙂
First off, thank you for taking the hood off the car so we can peak into the engine that drives this machine. It isn’t easy to show your commitment to a few holdings, and I think universally it is greatly appreciated.
I think you’ve made moves that (in hindsight obviously) are extremely successful, but the biggest factor that plays into those moves was your ability to read the market and understand the upcoming trends in technology and online marketplace (which is what Google, Facebook, and even Apple thrive on). Going forward, I love your idea of diversifying and spreading your assets into different arenas. And you can’t go wrong with finding a more passive means of diversification, even with some rock solid Vanguard funds or even a few dividend stocks.
As I have a good idea what your final investment will be, I hope that it too turns out to be successful as it will likely be another market maker and quite disruptive of the status quo.
writing2reality recently posted…When life hands you a beautiful girl… marry her!
This is only one part of the machine; wait for the next 2 weeks!
“As I have a good idea what your final investment will be…”
Yep! 🙂
Regarding that next investment, I’m very bullish on that whole category. Peer services are changing the world: Lyft, Uber, Realty Mogul. The Internet is the great enabler!
Will you be partaking in any of the above mentioned positions outside of the one I’ve alluded to? I’d love to invest with Realty Mogul, but am not accredited, and think Uber would be a fascinating equity holding once public, as well as something that could be built into an actual business as well.
writing2reality recently posted…When life hands you a beautiful girl… marry her!
Uber seems crazy valued right now. Didn’t someone peg them at 17,000,000,000? Yes, billion with a B! That seems insane to me, especially considering all of the battles with big cities.
I CAN’T wait to start with Realty Mogul! So close. Did you catch Peter Renton’s podcast with the CEO? It seems like a great way to get into a bit of real estate without the hassle of tenants.
You are getting pretty close to that status Mr! You will have to let me know your experience once you get involved. I listened to that podcast (loved it) and dejectedly counted my pennies in the hopes 10 million would appear! 🙂
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Thanks for letting us peek into your portfolio. I haven’t actually invested into any individual funds. I keep wanting though, but honestly I haven’t seen any great deals out there to justify the extra risk.
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If you’re not really comfortable, don’t! Stocks are not for the faint of heart. I highly recommend that most people stay away, far away! Index funds are the smart choice.
Long time reader, first time commenting here. These are some absolutely amazing picks at the best possible times, congrats 🙂
Twitter is probably at the point where they could go either way too, are you nibbling ?
I admit I did nibble, but it was more to test the LOYAL3 service. I bought 31 shares are $32 on May 13. Not gonna get rich from that!
However, I do think Twitter is here to stay. There is room for everyone.
Wow! I love the aggressive commitment to some outstanding companies. I personally favor a steady predictable income component in my investments, but I love your choices, especially Apple.
My Dividend Pipeline recently posted…Weekly Sharebuilder Purchases
Well, my views are changing over time. Before I sail into retirement, I’m going to change things up a bit. More in post #3 in 2 weeks…
Pretty cool. Thanks for sharing. I am with you all the way on the technology stocks. Love the insight!
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Wow, someone is with me? 🙂
Be careful! Those tech stocks can fly high, but can be really volatile (see Apple 1.5 years ago).
haha, my high school librarian showed us google around 2000, too! Definitely a game changer when it came to search technology. =)
My thing is that I tend to be really bad at recognizing which technologies are going to stick around and like adopting losers (but not consistently enough to want to bet against my consumer choices in the stock market). I preferred Sony’s mini disc technology to the iPod, was rooting for HD over BluRay, and for the life of me cannot understand why people spend so much time on Facebook (it’s no different from Friendster and that flopped, right?), Twitter, Instagram, Pinterest, etc. Or how ads on those platforms are worth anything since even when I’m on them I skip over any ads completely.
Because of this I know I need to stick with ETFs that mimic various indices. Feels much safer in my book. =)
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Yeah, I realize that I’m playing with fire.
I too am a bit surprised how much money facebook makes considering the poor quality of their ads. So much potential though.
Don’t discount the potential for WhatApp, Instagram and Oculus Rift. In 5 years, these businesses could eclipse the facebook social network.
Hey Mr 1500,
I think what’s most interesting to me from this peek inside your portfolio is the variety of different ways to build wealth. For example, everything I’ve read supports buy and hold index fund investing being the statistically most likely to succeed approach, but there are success stories in individual stocks, real-estate investing, peer-to-peer lending, etc etc etc…
Each of us seems to have a different gameplan for investing, and it’s interesting to see the differences. I think it’s all interesting. Nothing is right or wrong, just different 🙂
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Hmmm, I do actually think that index fund investing is the right way for 98% of people and that is the direction I’m slowly moving towards (post #3). Stocks are like playing with fire and my approach could blow up in my face some day.
I hate gambling, but I enjoy this game. Some would say it’s the same.
Thanks for sharing this information about your investments. It was an interesting read. Working in high tech and seeing companies struggle my whole career makes me not a high tech investor. Seeing the likes of Nortel, BB and my own companies is enough. I know they’re not Apple, FB and Google, but then I’m not astute enough to pick the ones that will make it. I’ll stick with Corporations with a long history of dividends – you can call me Steady Debby. 😉
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“I’ll stick with Corporations with a long history of dividends…”
Smart move. Apple may not be around in 10 years, but Coke and Wells Fargo will be. I’m changing it up though; just wait until post #3.
Here’s the best part, you can do multiple strategies to your comfort level!
Max out the 401k (index investing) – Set it and forget it
DGI for 70% of my taxable portfolio – Slow and steady
Growth plays for 30% of my taxable portfolio – Gambling to keep me interested 🙂
It’s probably obvious to anyone reading your blog but step 1 is the emergency fund and keeping your expenses in check. Anything extra is gravy =P
Thanks for the look at what your portfolio is made up of! I think you stuck with what you know well – tech, which gives you a little bit of an advantage to picking tech stocks vs say energy stocks. I bought Red Hat during their IPO – and sold it as soon as I crossed the one year mark into long-term capital gains. I was in college, and knew Red Hat, but nothing about investing. I still dabble in individual stocks via loyal3 (maybe less than 0.1% of our portfolio), but for the most part, I’m all index funds.
Mom @ Three is Plenty recently posted…Detailed Financial Picture – August 2014
Loyal3 is pretty awesome! No fees and they have a pretty good selection.
I am an oddball with my crazy-ass investments. Hopefully I don’t get burned. So far, so good.
I love hearing about different approaches to building wealth. Many roads lead to Rome and, while I can’t travel but one, it’s oddly interesting to hear about someone else’s route.
I own a single stock for about 4 or 5 days out of the year, in between the time my ESPP makes its twice-yearly purchase, and the time I sell it to buy index funds. But during those days, I really do hope the price increases. 🙂
Done by Forty recently posted…I Am Miley Cyrus
Yes, many roads lead to Rome, some may just take a lot longer. If I get there faster, I have to attribute at least part of it to luck. Google is a much different company than they were 10 years ago when I bought them and I don’t think anyone could have seen it coming.
luv
Your blog became my favorite one. I think that you are a very fascinating and intelligent. Also entertaining(carol’s story).
Thank you for this blog! It has been a pleasure to read over the past few weeks since I started following you via BlogLovin’.
I work for Airbnb in SF, and have shares as an employee. I am not at all to the point financially where I have the kind of money to play the stock market (still building my emergency fund and trying to max out my 401 Roth) but I think I’m lucky to fall into shares when we eventually go public.
Airbnb! I love your company! We had the pleasure of using it when we went to Omaha for the Berkshire meeting. We paid $40/night instead of the $200 hotels were charging.
Also, I’m drooling over you shares. I have a strong feeling that those will work out very well for you in the not so distant future.
Thanks for the kind comment!
Totally agree, AirBnB has a big future I think.
Got any jobs going in the UK offices Annie?! Let me know 🙂
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Thanks for sharing your approach, really insightful!
You’ve picked up some awesome growth stocks at the best possible of times, wow. I’m actually a little jealous!
While I’m not invested in stocks yet myself (only ETFs until now), I don’t think I’d go for technology stocks because I find it to hard to ‘predict’ their future. Because tech moves so quickly, you really have to be on top of the game. A company like Facebook is much harder to understand than Coca-Cola for example. At least that’s how I see it.
And I totally agree on moats; the bigger the better! The only thing I like more are (semi-)state-owned European telecom companies or other types of network inftrastructure.
Looking forward to the next two parts!
NMW
No More Waffles recently posted…Stuff Our Parents Never Taught Us, Part III: The 4% Rule
“Because tech moves so quickly, you really have to be on top of the game. A company like Facebook is much harder to understand than Coca-Cola for example. At least that’s how I see it.”
Yep, exactly. This is my main issue. When do I let go? I’ve ridden these stocks up on nice gains. Will I ride them down when I fail to figure out that the company has lost its mojo?
Nothing wrong with a stop loss, almost all online brokers let you do them now. Keep inching it up your “sell price” to your comfort level”. Nothing says you can’t buy it back later at a lower price if you change your mind. I do this with any growth style plays i have that are up obscene amounts.
Yep, stop loss is a great idea. I think I’ll use that to get rid of my excess shares. Someone also mentioned covered calls a while ago.
This was a very interesting post. I always enjoy hearing why people are invested in what they are invested in. Myself? I tend to avoid tech stocks because I don’t really know the industry very well.
Great write up! I look forward to the next couple parts!
I commented earlier, it must not have taken or went to spam. First I prefer Munger in a sombrero;)
Fun article to read, I look forward to the others. Google is amazing, simple as that. I usually try to not like the next big thing so when I didn’t like Google when it first came out I should have known. I mean Yahoo It, come on, Google It.
Even Steven recently posted…Costco Membership Review #894
You showed us your “big wins” in Tech. Any big stinkers over the years?
Those are not as fun to talk about. Like my uncle that goes to the casino regularily. You only hear about the big winning days! Haha.
Wade recently posted…$400 oil change for a watch
Oh yeah, huge stinkers and I’ll reveal all! Tune in for post #3 in a couple weeks.
This was a cool article and it has almost made me want to dabble in individual stocks! *gasp* I know. But, I must say, your words were marked Mr. 1500, and five years later, my grandparents still haven’t heard of Oculus Rift 😉