Diversification of Top Club Holdings

Laurie Frederiksen on

On Wed, Nov 30, 2011 at 11:51 AM, Paul Madison <madispa@gmail.com> wrote:

You show the top holdings in the investment clubs but a lot of these tend to be Large Caps. It would be interesting to see the TOP 50 in each category Large Cap, Mid Cap & Small Cap. The real growth in a portfolio often comes from the latter two categories and it would be fun to see what people are finding.

Hi Paul,

Great idea. I will pass it along to our programmers.

Out of curiosity, I also pulled the top 100 club holdings into a Manifest Investing Dashboard directly from bivio:

http://www.manifestinvesting.com/dashboards/public/4JFK4NDLHC

You can display diversification charts there. They categorize small, medium and large by sales growth rate. The top 100 are pretty well diversified if you use that criteria:

Now we just need them to give us a list of which stocks are being put into which category.

Hint, hint Mark and Kurt!

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Laurie Frederiksen
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Laurie Frederiksen on

What service!

Mark Robertson just reminded me that if you sort the Dashboard I sent by Growth rate, you can see which stocks are in each of the sales growth categories. Breakpoints are at 7% and 12%

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Paul Madison on

Hmmmmm .....there are only 7 stocks that have greater than 12% growth and 23 that are between 7-12. Some of the the seven that are greater than 12% growth (Apple, Oracle, Google) are far from being small cap so I still pose my question and wonder if sales growth is really the right measure of size?

On Nov 30, 2011, at 11:40 AM, Laurie Frederiksen wrote:

What service!

Mark Robertson just reminded me that if you sort the Dashboard I sent by Growth rate, you can see which stocks are in each of the sales growth categories. Breakpoints are at 7% and 12%

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Laurie Frederiksen
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Paul Madison on

Of the seven that are greater than 12% sales growth only one (BRLI) is less than $10B in market cap. BRLI is a MKT Cap of about $350million.

On Nov 30, 2011, at 11:40 AM, Laurie Frederiksen wrote:

What service!

Mark Robertson just reminded me that if you sort the Dashboard I sent by Growth rate, you can see which stocks are in each of the sales growth categories. Breakpoints are at 7% and 12%

--
Laurie Frederiksen
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Laurie Frederiksen on

On Wed, Nov 30, 2011 at 12:59 PM, Paul Madison <madispa@gmail.com> wrote:

Of the seven that are greater than 12% sales growth only one (BRLI) is less than $10B in market cap. BRLI is a MKT Cap of about $350million.

This is a good topic for a discussion. Does anyone else have any thoughts on whether it's more useful to diversify by Market Cap or by Projected Sales Growth rate?

Does your investment club prefer one over the other?

I don't think there is a right answer to this one but I'm sure it would be interesting to hear everyones thoughts if you'd like to share. I know I would be interested to hear them.

:)

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Laurie Frederiksen
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birkharv on

I feel Sales Growth is something that the company you own, or are considering for purchase, has more control over than Market Cap. Market Cap is determined by the whims of the market at any given time regardless of the progress a company is making.

Bill Harvey

From: "Laurie Frederiksen" <laurie@bivio.biz>
To: "club cafe" <club_cafe@bivio.com>
Sent: Wednesday, November 30, 2011 1:09:33 PM
Subject: Re: [club_cafe] Diversification of Top Club Holdings

On Wed, Nov 30, 2011 at 12:59 PM, Paul Madison <madispa@gmail.com> wrote:

Of the seven that are greater than 12% sales growth only one (BRLI) is less than $10B in market cap. BRLI is a MKT Cap of about $350million.

--
Laurie Frederiksen
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Paul Madison on

The one thing I would suggest is to make sure our language is clear an unambiguous. If we are going to use Sales Growth you cannot call it Size as there is nothing about Apple (or some of the others) that make it fit into a Small category.

I like seeing a graph by Sales Growth but it should be called just that so you have Large Sales Growth, Medium Sales Growth, Small Sales Growth. I know we sometimes think only small companies can have large growth but that is just not true. It does tend to be true that large companies have a hard time sustaining large growth for long periods at a time just because of the rule of large numbers.

Paul Madison

On Nov 30, 2011, at 11:40 AM, Laurie Frederiksen wrote:

What service!

Mark Robertson just reminded me that if you sort the Dashboard I sent by Growth rate, you can see which stocks are in each of the sales growth categories. Breakpoints are at 7% and 12%

--
Laurie Frederiksen
Invest with your friends!
www.bivio.com

Become our Facebook friend! www.facebook.com/bivio
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Laurie Frederiksen on

On Wed, Nov 30, 2011 at 1:23 PM, Paul Madison <madispa@gmail.com> wrote:

The one thing I would suggest is to make sure our language is clear an unambiguous. If we are going to use Sales Growth you cannot call it Size as there is nothing about Apple (or some of the others) that make it fit into a Small category.

This is very true. It should probably be labeled slow, medium and fast or something similar.

But I would think the real question is, which is a more valuable way of classifying things to help manage a portfolio and achieve the best returns?

I'm interested to hear peoples experience with one or the other. I'm also curious to hear which method everyones clubs use. I don't think there is a right answer but it is interesting to hear how other people are managing their portfolios.
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Laurie Frederiksen
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Paul Madison on

The reason Small Cap is important is that as small investors we have a golden opportunity to play in these!

Big institutions, mutual funds, etc are hard pressed to do much with small caps because any significant position in their portfolio and it starts running into being too large of a holding in the small cap that would have to be announced before doing the buying.

Small and Micro Cap stocks represent close to 80% (almost 6000 stocks) of the number of traded companies on the US stock exchange but less than 5% of the total Market Capitalization.

Large Caps are the inverse they are only 8% (little over 600 stocks) of the number of traded companies (little over 600 stocks) but represent almost 80% of the total Market Cap.

Today's money invested in a good small or micro cap will be Tomorrow's Large Cap Apple.

We have no particular advantage in playing Large Sales Growth stocks as anybody can play today's Apple (that is if you have deep pockets).

On Nov 30, 2011, at 12:21 PM, birkharv@comcast.net wrote:

I feel Sales Growth is something that the company you own, or are considering for purchase, has more control over than Market Cap. Market Cap is determined by the whims of the market at any given time regardless of the progress a company is making.

Bill Harvey

From: "Laurie Frederiksen" <laurie@bivio.biz>
To: "club cafe" <club_cafe@bivio.com>
Sent: Wednesday, November 30, 2011 1:09:33 PM
Subject: Re: [club_cafe] Diversification of Top Club Holdings

On Wed, Nov 30, 2011 at 12:59 PM, Paul Madison <madispa@gmail.com> wrote:
Of the seven that are greater than 12% sales growth only one (BRLI) is less than $10B in market cap. BRLI is a MKT Cap of about $350million.

This is a good topic for a discussion. Does anyone else have any thoughts on whether it's more useful to diversify by Market Cap or by Projected Sales Growth rate?

Does your investment club prefer one over the other?

I don't think there is a right answer to this one but I'm sure it would be interesting to hear everyones thoughts if you'd like to share. I know I would be interested to hear them.

:)

--
Laurie Frederiksen
Invest with your friends!
www.bivio.com

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Laurie Frederiksen on

Very good points.

However, don't you think you need to be a much more sophisticated investor to invest in some of those companies? I think you need to have a good comfort level in reading financial reports and doing your own financial analysis to really find ones that you will profit from.

Once you do own them, I also think you need to be very engaged in understanding and following their business.

They are often thinly followed by analysts, if at all. Making a decision based on one or two analysts interpretation of their financial information seems to add a level of risk to me.

Of course, I think you originally asked the question because it would be nice to identify some of these companies and see whether you could get further input on them from the other members of this community.

:)

That's a great idea. I think one of the great things about being part of a community like this is that there may be people in some of our clubs who actually might work with some of the smaller companies and have more insight into what they see happening with them.

So if anyone has any suggestions, let us know.

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Laurie Frederiksen
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Jim Thomas on

In terms of being clear, note also that what's being measured by the MI "Size Diversification" pie chart is *forecast* sales growth (not actual historical sales growth).

> The one thing I would suggest is to make sure our language is clear an unambiguous. <

-Jim Thomas

Paul Madison on

I agree with doing your own Financial analysis and I do this on every company that I own every quarter when their earnings reports come out (first by announcement and then again when the 10Qs and 10Ks are released).

Yes they are thinly followed by analysts.

Yes you need to understand their business.

I agree that you need to have a comfort level in reading financial reports and I do not recommend people investing in individual stocks unless they are willing to learn this skill as there can be so much more to a company than their press releases or what the analysts want to follow.

Yes this is exactly why I asked the question originally! This is where there may be real nuggets. Not to invest in blindly but to do research on.

Before my wife Sue passed away from ALS, we had 150 companies in the portfolio and we would follow each one with the same rigor. We use to joke it was the S&P (Sue and Paul) 150. These days I seem to only want to keep up with about a 1/3 of that (gee does that say she was doing 2/3 of the work ...probably).

Paul Madison

On Nov 30, 2011, at 12:58 PM, Laurie Frederiksen wrote:

Very good points.

However, don't you think you need to be a much more sophisticated investor to invest in some of those companies? I think you need to have a good comfort level in reading financial reports and doing your own financial analysis to really find ones that you will profit from.

Once you do own them, I also think you need to be very engaged in understanding and following their business.

They are often thinly followed by analysts, if at all. Making a decision based on one or two analysts interpretation of their financial information seems to add a level of risk to me.

Of course, I think you originally asked the question because it would be nice to identify some of these companies and see whether you could get further input on them from the other members of this community.

:)

That's a great idea. I think one of the great things about being part of a community like this is that there may be people in some of our clubs who actually might work with some of the smaller companies and have more insight into what they see happening with them.

So if anyone has any suggestions, let us know.

--
Laurie Frederiksen
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Laurie Frederiksen on

Yes Paul. It does sound like she was doing most of the work.

<g>

It also sounds like you were a very lucky man to have had the time you did have to share something you were both passionate about. I'm sure you must miss her very much. Our condolences on your loss.
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Laurie Frederiksen
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Martin Eckerle on

I agree with Bill and to expand the topic some, I think categorizing a company by sales growth is one way of making sure your investments are in the growth area you expect. As companies grow, their projected sales growth may slow, allowing yourself to have more control of the growth of your portfolio.

Marty Eckerle

From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of birkharv@comcast.net
Sent: Wednesday, November 30, 2011 1:21 PM
To: club cafe
Subject: Re: [club_cafe] Diversification of Top Club Holdings

Bill Harvey

On Wed, Nov 30, 2011 at 12:59 PM, Paul Madison <madispa@gmail.com> wrote:

Of the seven that are greater than 12% sales growth only one (BRLI) is less than $10B in market cap. BRLI is a MKT Cap of about $350million.

--
Laurie Frederiksen
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Laurie Frederiksen on

On Wed, Nov 30, 2011 at 2:30 PM, Martin Eckerle <bmeckerle@comcast.net> wrote:

I agree with Bill and to expand the topic some, I think categorizing a company by sales growth is one way of making sure your investments are in the growth area you expect. As companies grow, their projected sales growth may slow, allowing yourself to have more control of the growth of your portfolio.

Good point Marty. I too think that projected sales growth is a good number to keep an eye on.

It seems to get harder to decide how to think when considering a company like Apple. Current and projected sales growth is pretty out of sight, yet size by market cap seems to be limiting their stock price.

--
Laurie Frederiksen
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