My Philosophy for 2015

I was going to throw fire balls at the bears this morning for betting against stocks for the past 6 years, but then I thought “what’s the point?” We all have roles to play, don’t we? One thing that is consistent in this market, as well as humanity, is behavior. Some people will always see things for what they are, others for what they want it to be, and a small minority want to see nothing at all. In between that spread of optimism and pessimism is a profit margin to be had by shrewd speculators.

Heading into March, I make no assumptions. We just had the best February in years, one for the ages, and to believe this rally could continue, unabated, would be naive. Nevertheless, there is little reason to prattle about the internets about a pending correction either. Stocks at new highs tend to make fresh, new highs. I’ve always found it to be amusing that people hate buying new highs. How in the world do you think AAPL, ORCL, MSFT and CMG got to where they are today? Do you believe buying new highs in those stocks over the past twenty years resulted in poor returns?

Granted, those are exceptional companies and it’s hard to find those early. But we can avoid the disasters, no? We both know the stocks that I lost money in last year, yes?

Let’s review my biggest blunders.

FEYE: bought it when it traded 20x sales, unprofitable.
SPLK: bought it near 20x sales, unprofitable.
WDAY: bought it near 25x sales, unprofitable.
YELP: bought it near 17x sales, barely profitable

GPRO: I didn’t sell it when up 15%, ended up losing 15%. The company isn’t profitable.

Now since 2009, it was fairly easy to make money in a number of sectors, simply due to a high tide lifting all boats. That changed in 2014 and I believe the characteristics of 2014 will continue throughout 2015. Those traits are: avoid high price/sales dice rolls, companies that are unprofitable, and small capped nonsense is simply not worth the hassle.

That doesn’t mean you can’t make coin in small cap trades, directional, over small periods of time. But the time for gambling on unprofitable, small caps, into earnings is over. That’s the main philosophical difference that I’m adhering to throughout 2015.

The overwhelming majority of my holdings are free cash flow machines. I do, however, partake in rampant speculation on a continuous basis. However, that is done with a pre-determined percentage of assets, all done under the framework of certain risk profiles.

Early going the market looks good, sans commodities. More later.

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