Long Term Investing Identify & Initiate

Long Term Investing

Existing LT vs Initiating LT for future – Identifying & Initiation Strategy

Fundamentals matter! Companies with better numbers do better. Emerging leaders.

Opportunistic times! However exercise patience.

Identifying:

Focus on future growth & these contracting times are very important & telling of companies’ resiliency and how they are handling this tightening liquidity, with real demand coming down amidst rising rates and contraction with margins being squeezed.

Fundamentals are key as well as analyzing a company’s strategic planning.

Which companies are maintaining or increasing their margins, beating & growing their earnings growth, FCF yield & margin (FCF/Rev), FCF/MC, CASH is king esp with higher cost of debt. Are they raising guidance?

PEs are just one part and not as meaningful for growth.

Are they making smart, sizable acquisitions to inorganically grow their market share & differentiate their offerings? Are their strategic plans advantageous to position them as leaders in the future?

These are questions I ask myself when analyzing companies for LT investing

CASH is an undervalued position – highest it has been in a while for me.

Post COVID backlash & inflationary pressures – businesses are suffering & some are closing or others getting acquired.

Risk Management is top focus! Remain flexible.

Reduced position size is key to reduce emotion & risk. I like selling OTM puts to receive premium and attempt to own stocks at a lower price.

Time frame matters & patience is key during these opportunistic times. Times of contraction present opportunities for businesses and investors.

I also like to scale into positions slowly. Scale in and scale out. IMO there is no rush at this time. Things can get worse or remain sideways for a long time so patience is key.

Never give up.

Ex. SMCI – I have spoken about them for months on spaces and tweeted. I have been long a while. Global leader in high-performance, high-efficiency server & storage technology & green computing

They raised their Q4 earnings expectation BEFORE their earnings and then they BEAT while others were lowering and still missing.

GM UP 17.6% vs 15.5% from Q3 & 13.6% from same Q last yr (that’s what we like to see)

Net Income UP 100% from Q3 & UP over 250% from same Q last yr

Diluted EPS ($2.62) UP 80% from Q3 ($1.43) & UP 250% ($.74) from same Q last yr

FY2021 $2.09 EPS

FY2022 $5.32 EPS

GUIDANCE: FY2023 at least $7.27-7.50 EPS

I will be watching their follow through next Q.

Scaling in is key and building the position over time. Watching the charts for pullbacks to support levels including 21d EMA or 50d MA or 200d MA or pivot points. We prefer bounces over breaks. I prefer buying stocks above 50d MA and in an uptrend.

Success in life is about discipline, mental toughness and Mindset.

A growth mindset. Embracing challenges and learning from them. Failures and mistakes are an essential part of the process as we continue learning. Abilities are not set in stone. With work and effort, your skills can improve over time. You only fail when you stop trying. So never give up!