This 2022 plans write-up comes after much procrastination. You see, in my mind, I had to first summarize the past year, with an unforgiving post-mortem of what went wrong before I could move on to my plans for the following year.
The last year wasn't as successful as I wished for my investing practice. My portfolio performed above the S&P 500, but mostly due to my "ever-holdings" since 2013: Amazon, Apple, and Microsoft. So it's easy to see why I outperformed. The picks I made this year had ~5% gain - even though the thesis on them is for multiple years, I made mistakes which I will address in the next section.
I also did not research as many companies as I wanted (I aim for one big deep dive every month minimum), and as a result, I did not grow my audience as much as I wanted.
Finding the reasons was futile, as two significant events happened this year: I got married, and my mom was diagnosed with cancer, which she died from very soon after. It was the best of times, it was the worst of times.
I decided I get a pass this year. If there's a year to show myself compassion - it's this year. And to leverage your attention for good - you don't want ever to see how chemotherapy shuts down a person, and you don't want others to see it happen to you, too. So get your annual cancer checkups.
My $TWTR investing lesson
There is one big lesson I do want to write about and contemplate - my investment in Twitter.
I loaded on Twitter in November 2020 when it was $39, publishing my Twitter deep dive a few months later. My thesis was for it to double within ~3 years as it'll better monetize its audience while keep enlarging it.
The thing is, it did the doubling (or close to it) already this year. I also mentioned it in my deep dive. But I was so focused on holding another "ever-holding" similar to my Amazon/Apple holdings that I didn't acknowledge and take advantage of the market exuberance.
What I should have done and will do going forward - if the price is exuberant, even for great companies, I should sell. Getting a price action on a stock that is driven by hype rather than fundamentals is being crazy lucky - and I should take advantage of it.
I still think that Twitter is a fantastic company, and I will keep it for years. But at the same time, I acknowledge my mistake. Plans can and will change as we move.
My investment focus for 2022
My portfolio will consist of 12-15 stocks at any time - excluding a side portfolio for my "ever holdings" that I mentioned - Amazon, Apple, Microsoft, a portfolio I hope to expand.
12-15 is a number that is first enforced on me, then rationalized. I invest a large portion of my money through an Israeli IRA account with great tax benefits, and the Israeli regulator demands no more than 10% of my money at any single stock. This rule forces me to hold 10 stocks at the minimum and a bit more for some growth cushion.
Ideally, I'd rather be more concentrated than that. As I want to be well-versed in all of my holdings, having >12 of them will make this task harder. I also would like to clone other great investors - Buffett, Munger, Pabrai, Nick Sleep, and more - all utilized highly concentrated portfolios to sustain high growth numbers.
But I grew to love this magic number of 12-15. it is concentrated enough that I won't diverge too far from my "best ideas", yet diversified enough to let me sleep well at night before I'll take a step toward very concentrated portfolios. It is right on the threshold of what I think is reasonable to keep close tabs on while researching more companies.
I'll devote at least 80% of my attention to value opportunities. The extra time will be devoted to being aware of potential compounders to life - contenders to add to my "ever holding" portfolio.
Value is a loaded term that has all but lost meaning by now. Cathie Wood called her growth tech stocks "deep value" and there are value funds invested in money-losing high-growth speculative ventures. So defining what value means for me is necessary.
Value for me is having all the variables with high predictability inserted into a simple DCF calculation, resulting in the current price significantly below the intrinsic value. More than 40% below, preferably.
High predictability means different things for different people. For me, it means finding evidence to support the numbers for the long term. E.g. - Zoom wouldn't pass this test in the post corona times as its growth numbers couldn't be excused for the long term. But some hotel chains going back to at least 70% of their growth in the long term? That is something I can work with.
To find these companies, I'll mostly look for short-term events moving the companies out of the market favor. Finding a fast turnaround is difficult and often speculative in and of itself. I'll look for stories that can take years to come around. I can look at a red screen for years - I'm not spooked as long as the value is there. And that's my relative advantage; I'm not a fund manager that must calm anxious customers.
"ever holdings" companies
Potential compounders for life are exempt from the value definition of the price should I run into one that is tempting enough. I want to add a friend to Amazon, Apple, and Microsoft in my ever portfolio - preferably, this time it won't be a tech company.
Many mechanisms will qualify a company into this list; Mohnish Pabrai's definition of "spawner" companies, like Amazon. Companies that keep reinvesting their capital and spawn new profitable businesses within it. It can also be of the "shared economy scaled" thesis of Nick Sleep with companies like Costco. I will keep the models in mind. If I'm lucky to run into something that has a reasonable price and good prospects - I'll take it and let you know, of course.
Filling my portfolio
I currently have a very big cash holding, and my goal is to be at least ~80% invested.
To reach that goal, I'll be taking positions more liberally. Since my investments are mostly value, selling them down the road for better opportunities poses little risk for significant principal loss (although the risk exists).
After reaching ~80% invested, I'll swap out the lowest conviction picks as better opportunities come. Since I'll have 12-15 positions, as mentioned before, I guess this will be easy (in contrast with a highly concentrated portfolio with the highest conviction picks).
My strategy to find opportunities is to start with the lowest hanging fruits, slowly climbing up to more difficult strategies.
The easiest path to start with is to clone other smarter investors work, Inspired by Mohnish Pabrai. I'll start by cloning top-down, first checking what super investors like Munger, Pabrai, Spier, Sleep, and more are doing.
When I'll be done with that, I'll go down the ladder checking great value funds, trustworthy investors in the community, and more. Once I'll find myself doom-scrolling r/wallstreetbets, I'll know the cloning path is exhausted.
Having this path exhausted fast is reasonable - as most companies will be in fields or markets I don't understand and don't want to touch. So even though there are many ideas to clone - only a fraction will be relevant to me.
When this path is done, I'll start coming up with my own ideas by leveraging my advantages - deep understanding of technology, and deep understanding of my local market.
Content creation plans
Content creation part is a very time demanding task. It takes hours upon hours to write deep dived, edit them and then re-edit them into coherent pieces. After that is done, recording youtube videos, editing the videos, and marketing it all on various distribution channels makes it all even harder.
But this is worth it for these reasons:
You are my investment partners
Buffett and Munger. Mohnish Pabrai and Guy Spier. Nick Sleep and Qais Zakaria. And many more - are either partners or close friends that run ideas through each other. This pattern of having another smart guy invest his time to look into your thesis and ask hard questions is one very apparent in the investment world.
I'm not at the position of having a very smart partner running ideas exclusively with me. But when I publish my research on the internet - it always reach relevant investors who are willing to debate. It happen with my Twitter deep dive - 2 hedge fund managers reached out for a call. It happened recently with my Seritage research, that even led me to publish a follow up a day later with the things pointed out to me.
Writing sharpens my thinking
When I write things down, with the intention of other seeing it, I work harder to make sure I'm not stupid.
I write for myself all the time, I'm a knowledge-hoarder using Obsidian for the task (maybe I'll write on how I do my research one day) but this first phase pales in comparison of writing for other people - then the stakes are real, and it makes me less stupid. Thank you for being my Rubber Ducks.
Funding myself through the research
I currently work part-time as a developer so that I won't have to use my savings for living costs, cutting my compounding short. I want to do investment research full time, and for that, I'll need to reach at least $3,000 MRR to break even.
This is not a career plan, I'm a professional developer, I earned >$180k a year at my last job, and much more than that if we take the stock options into account. If I'll want to earn good money again, there are plenty of opportunities for me in the tech industry.
I'm at a point where my savings are big enough that even modest results in the market, compounded, well leave me better off than a tech job. I enjoy the research better, too - engineering has a lot of time spent on implementing and doing trivial work. When I'm investing, most of what I do is research, which is my favorite thing.
So for me to do this full-time, I just don't want to bleed money. So I'll gate some of the content eventually to get to the very low bar of $3,000 MRR.
To get my other goals stated above, I'll need to both share very detailed deep dives with you and get a large enough distribution so that my research will reach the right people.
The detailed deep-dives will keep appearing here on the newsletter, while I'll have to adapt the deep-dives contents and some additional content for other platforms to gain distribution.
The two platforms I chose to focus on are Twitter and Youtube. Each has its own playbook and types of content working on them. I'll have to play by each platform's rules and bend the knee to the algorithm gods to gain enough distribution.
My newsletter is the only place where I don't have to bend the knee to algorithms, as emails have no algorithm gatekeeper. My main goal will always be to funnel the audience into my newsletter.
Twitter, like all algorithms, likes content that keep the users engaged within the same platform. So linking outside of the platform usually performs badly.
I'll have to create intriguing threads on recent research that'll lead people to like and read multiple tweets at once in order for the thread to gain wide enough spread to attract new readers.
I'll also have to contribute and integrate with the Twitter community in a way that will make me recognizable as a valuable contributor to followers of other personas in the community. Mostly commenting with added value.
Youtube algorithm wants these things from me:
- Frequent, predictable uploads. For example, Sunday every 2 weeks.
- Viewers retention - a viewer should come back for my next video.
- Relative watch time - of any given video, watch as much of it as possible.
This means that deep-dives can't go in there, as the "deep" part will not be relevant for most people. I expect most people will be intrigued by the basic idea of each analysis, but only a fraction will want to go through all the details.
What I chose to do is a fortnightly show of 8-14 min (to get that relative watch time) of update on both my research and current occurrences relevant to the investing world.
That way, I'll get most people coming back to the videos to get a quick update, I won't lose those who aren't interested in the deeper details (those will go to my newsletter) and I'll be predictable.
Newsletter Investing Reserch
For my research newsletter, there will be 2 types of content: Company deep-dives and segment/field deep-dive.
The companies deep-dive are holistic in nature, looking at the entire company and assessing the investment opportunity. An example for that will be my Seritage deep dive.
These kind of deep-dives usually take 100+ hours and sometimes even 200+, depending on my familiarity with the market and prior research. For bigger companies, this can easily go over 300-500 hours of research. That's where it stop making sense.
For those bigger companies, I'll usually first focus on a very specific part that I can see to most potential. The research will be so focused on one part, that in the end I'll know if the potential is intriguing enough for a full company deep dive, but won't be able to tell if the investment makes sense yet.
An example for that is my research of Nvidia's future as the AI hardware sole provider. Just one segment, super focused, answering one hard question.
That's a wrap
I think this is a detailed enough plan for 2022. Hope for a better year for everyone! I'll see you in my next piece.