2019 recap: how did I do?

At the beginning of 2019, I finally decided to benchmark my stock picks + fund choices so I could stop fooling myself about how well or poorly I'm doing vs. the market. I say "finally" because ever since I first started investing back in the mid 90's, I have not ever been truly able to say whether I beat the market or not. Why would I be so stupid? For the same reason I never balance my checkbook or keep a budget: laziness, pure and simple.

So... did I own Mr. Market, or was I owned?

Owned.

According to this page, here's how the major indexes did:

• NASDAQ = 35.2%
• S&P 500 = 28%
• DOW = 22.3%

And me

• JEFF = 26% (all funds/stocks in Schwab, Vanguard and Dell)

Shazbat.

Mid-year checkup. Who's winning, me or Wall Street?

Hard to believe but 2019 is more than half way over. (Even harder to believe is that Trump is still president but that's for another post.)

So how are things going? Is my portfolio of hand-picked stocks doing better or worse than my portfolio of Vanguard index funds? I'll cut to the chase. Vanguard is up 15%, but my stocks are up 25.5% Holy cow, tempted to quit while I'm ahead, but onward.

Here are VERY brief recaps for my stocks, plus notes on buys and sells.

 Arista Networks (ANET): From what I can gather, growth is slowing but has not stopped and ANET's financials remain pristine. Holding out for $300.

Activision(ATVI ): What can I say? Tough times for these guys but I still believe gaming will only get bigger and that ATVI will figure out the free game thing sooner or later, plus e-sports will just keep on growing, possibly for years and years. Holding out for $70.

Blackberry (BB): Long story short, growth is not happening as quickly as I expected, nor is Cylance, which BB acquired this year, meeting expectations but how can you argue with a company known for secure mobility in an ever more mobile world. Holding out for $15.

Cognex (CGNX): Machine vision has a bright future, hell, it has a bright present, and it's what these guys do. Holding out for $75, though I imagine that's a touch of a long shot.

Etsy (ETSY): In a world gone tech, artisans are in demand, people want the one off, the personal, and Etsy is where to find such delights. No plans to sell.

Ionis Pharma (IONS): My swing-for-the-fences biotech. Fences are currently safe but won't be forever. No plans to sell.

iRobot (IRBT): Robots that do grunt work and do it well? Sign me up and keep me signed up. No plans to sell.

Paycom (PYCM): Weed-like growth in a market that will only grow? I'll take it. No plans to sell.

Paypal (PYPL): The world is moving toward mobile payments and PYPL is a leader. No plans to sell.

SQM: My lone lithium play. Word is that massive new supplies of lithium are expected to hit the market soon and drive prices down, but massive increases in demand are also expected. Currently paying an EIGHT percent dividend, holding out for $50.

Talend (TLND): These guys connect cloud data sets for AI, pretty handy. Times are little tough as they transition from selling an appliance to a cloud service. No plans to sell.

Zynga (ZNGA): Makers of Farmville, one of the first mobile games to really hit it big, ZNGA sureley has another hit coming sometime reasonably soon, right? No plans to sell.

NEW STOCKS

Zoom (ZM); The best video conferencing solution I've ever experienced, puts Skype and WebEx to shame, growing like crazy. No plans to sell.

STOCKS I'VE SOLD

Sierra Wireless (SWIR): This was my big Internet of Things bet, but after several frustrating years, I gave up. I used the proceeds to buy ZNGA.

Cutting my flowers and watering my weeds? (ZM, SQM)

I bought Zoom (ZM) about a month ago (4.23.19) and it's already up 50%. I know the old adage is ride your winners but yesterday ZM was trading at a valuation of over 60x sales, which is, to be technical, full-throttle nuts. So I sold my gain, so far, leaving me with my original investment.

What to do with the the money?

I was SO tempted to spend it on SQM, which is a lithium play that is currently paying a forward dividend of  EIGHT PERCENT, but I hesitated because A) I just bought more SQM and B) the total loss that was Cable and Wireless, also a dividend play, still makes me fearful.

But, but, but... SQM is profitable! And electric cars are inevitable in the next 3 to 5 years, a fact that should materially increase the demand for lithium! And Simply Wall Street says SQM is trading for 66% LESS than future cash flow.

Argh.

So.

Tempting.

Mulling...

Buying more SQM to ride the lithium wave.

I bought SQM several years ago and it's been great but recently SQM's price has been falling as analysts fret over the prospect of the lithium supply doubling and as a result the price of lithium being cut in half. They know more than me, I am sure, so let's say they're right and big lithium producers basically see flat revenues for a few years (something I doubt), so what? SQM pays a dividend of nearly 7%. That is one juicy dividend for a financially solid company operating at a profit in a growing market. Of course, the last time I bet on a stock for the dividend it was Cable and Wireless, which went bankrupt. But it's different this time, right? Right? Knocking on wood...

It's coulda, shoulda, woulda Wednesday: EBAY

I was just listening to the Bob Lefsetz Podcast episode in which Bob interviews Linda Perry. She's talking about her dad and how should be so rich today because back in the 1970s he was RIGHT SMACK IN THE MIDDLE of the computer revolution.

Reminded me of me! Because back in the 90s I was RIGHT SMACK IN THE MIDDLE of the dot com boom. I have a LOT of coulda/shoulda/woulda stock market moments from that decade but I'm going to kick off this coulda/shoulda/woulda series with EBAY.

Here's the moment of truth that I remember: I was at a get together in a park in Menlo Park, CA, and talking to a friend about where to invest. I was preaching Onsale.com, while she was all about EBAY.

My logic was that Onsale's business model of buying up clearance items and reselling them was way better than EBAY's auctions for the simple reason that with Onsale, customers were buying from a business while EBAY customers were buying from whothehellknows. For awhile, I felt smug in my rightness as Onsale rocketed from around $15 (my buy price) to around $100. Did I sell? Hell no. Stupid, greedy, dumbass me.

Honestly, Onsale STILL makes sense to me but they are long out of business, while EBAY has risen from an adjusted price of about $.80 in 1998 to about $35.

Ouch.

Coulda: had money

Shoulda: 35x gain vs. bonfire of vanity as I held on to Onsale to sustain a total loss.

Woulda: Except I just did not believe that EBAY's business model would succeed, never occurred to me that a system so dependent on decentralized trust could ever succeed, still seems amazing!

Lesson learned: When you buy stock and it goes up nearly 10x in a few months, SELL.

What is the one thing that every investor and should do more of but is murderously difficult (and ridiculously easy)?

If you've investigated investing in stocks at all, you're probably feeling overwhelmed by all the possible strategies, but to my mind, there are really only two: passive and active.

Passive generally means you buy an index fund (you could also create your own list of stocks) pressing the buy button and then doing NOTHING. Active means you are a badass, so smart you can beat the market, almost always picking winners, holding them for the right amount of time and then, with cold rationality, selling and buying something else. Hedge funds are active, betting both on things going up and going down. Which is the best? You can find good arguments for both but Warren Buffett recommends passive so that's where I would bet my money.

And I do.

Mostly.

If a passive strategy is so great -- remember, passive has Buffet's imprimatur -- why am I not all in on passive investing and using my precious free time for, say, playing my guitar, instead of researching stocks? Because doing nothing is hard. Really hard, especially for a chronic market watcher like me. Every day, I check the market at least 10 times, scrolling though my list of holdings, reading market news, mulling, pondering, fretting, getting excited. And what about my index funds? I never look at them. Ever.

So which strategy is winning for me? Hard to believe, but in the short term (last 10 years) my active strategy is trouncing my passive holdings. And that's a problem because as we enter May, even though my active holdings are up nearly 3x my passive, they are well off their year highs, prompting me to wonder, should I "sell in May and walk away", as the old adage counsels. Fueling my jitters is global news, always bad but now a bit over the top with North Korea testing short range missiles, Trump threatening higher tariffs against China, Pompeo on a midnight flight to Iraq because of concerns about Iran, Iran announcing it was no longer adhering to the nuclear deal signed in Obama's last year, Trump's AG being held in contempt of Congress over the Mueller report, Russia fiddling with elections all over the world and on and on and on.

But here's the deal: worst case scenario, we get into a nuclear war and the market goes all to hell, in which case I think gold bars held in my own vault would be best; next worse case, war, in which case, who knows, but probably not good in the near term; three, Trump is impeached and convicted or not, a short term blip. So, given that I am not going to buy a bunch of gold and put it in a pricey vault and every other scenarios are likely temporary blips, I'm going roll up my sleeves, grit my teeth and... do nothing. Seriously, how hard can it be?

Okay, I'm already wavering...

Watering weeds. Not. (SWIR, ZYNG)

Peter Lynch once said, “Selling your winners and holding your losers is like pulling out the flowers and watering the weeds.”  

This adage should be pretty easy to follow, right? Not for me. Because fighting with it is the oldest investment adage of all, namely "Buy low, sell high." My weeds are low, my flowers are high, why not sell some flowers to buy more weeds? 

So which adage trumps the other?

It all comes down to prospects. Do your weeds have good ones or not? Are they cheap because they deserve it or because the market is missing something? Odds are it's the former because -- especially  for amateurs like me -- betting against the wisdom of the entire market and Wall Street traders is almost always a bad idea.

So, when Motley Fool Stock Advisor recently recommended Zynga (ZYNG) -- once a unicorn-like high flyer because of its game FarmVille, but now slopping around in the muck of pigdom -- on the theory that ZYNG's original strategy of free-to-play games that attract millions of users, and are monetized through advertising or in-game purchases (Motley Fool), I whipped out my wallet. As Motley Fool rightfully points out, ZYNG not only has decent financials (for a pig), it also has licensing deals to distribute/develop games based on three HUGE brands: Game of Thrones, Star Wars and Harry Potter. Adding to the likliehood of future glory is the fact the Fortnite, also a free-to-play game, brought in almost as much revenue as EA and Activision combined.

To raise cash for ZYNG, I pulled the weed that is Sierra Wireless (SWIR). I bought SWIR because Ifigured as a maker of chips for the rapidly growing Internet of Things (IoT) market, SWIR's future was all but certain. I actually still think I'm right, but IoT is taking longer gain real traction than just about anyone guessed and, as a result, SWIR is struggling a bit. 

Bottom line: ZYNG and SWIR both look good but ZYNG wins for me because its market is a better one than IoT for the next few years. Luckily, I about broke even on SWIR, a rarity for my weeds, which are usually massive losers!

My prediction for ZYNG: $15 by 2021.

















existing games are doing better than the market seems to think and that new games could fatten up revenues and earnings quite nicely. I agree with this theory.



-- at first glance only, because the company is profitable and growing and has games coming that should fatten up numbers nicely, namely Game of Thrones, Star Wars and Harry Potter. My prediction: a triple in 3 years.

To buy ZYNG, I pulled a weed by the name of Sierra Wireless (SWIR). I originally bought SWIR several years ago on the hype-fueled theory that IoT (Internet of Things) chips would start selling by the container-ship full, as IoT took hold, every "thing" on the planet got connected. Sadly, this is not happening nearly as quickly ad I'd hoped and though I hung on long enough to lose all my gains, plus a few pennies, the damage wasn't that bad.











Soon I was back down to my principle, minus a few bucks, and having had enough (this all took place over several years) I bailed. But… I kept an on SWIR and waiting for some sort of action and suddenly SWIR plummeted. I thought the plummet was way overdone and bought back in with the simple premise that as the Internet of Things (IoT) continues to gain, slow or faster, so would Sierra Wireless. I still believe this but after the Motley Fool Stock Advisor recommended Zynga, I’ve been watching it and with yesterday’s earnings report in the rearview mirror, I decided it was more of a sure thing than SWIR. Games are big and getting bigger and the free-to-play model that Zynga entranced the world with back in Farmville’s glory daze (Zynga published Farmville) seems to be where games are headed given Fortnite’s staggering success. Now, I’m not saying all games are going to be free-to-play in the future, but a lot of them will be and Zynga has paid in blood and toil to gain expertise in this market. Add with the rise of subscription services, as well as Zynga’s deals with Star Wars and Game of Thrones, not to mention Zynga’s stable financial condition, I see some pretty entertaining years ahead, at least a double in 5 years, maybe quite a bit better.