Weeding out the Garbage and Fishing in Small Ponds
Jeff’s Random Words
This week we interviewed Bill Mann, who is an analyst at the Motley Fool. I’ve had to good fortune to meet Bill a few times in person and based on how much I laughed, I knew having him on the podcast would be a ton of fun. You’ll notice a lot of laughter when you listen.
While the bulk of our conversation was around international investing, we started by joking that Bill’s job title should be “Guy Who Looks For Weird Stuff” because that’s essentially what Bill tries to do. Whether it’s international stocks or small caps, Bill gets a kick out of fishing in small ponds where no one else is fishing.
Our conversation got me thinking about how we bucket stocks when we talk about investing. We like to categorize things. Small caps, large caps, international, domestic, growth, value, etc. While I see the function for those characterizations, I also think it can box us in and make us think we have to check off a bunch of things, like a grocery list of stocks.
I’m starting to think that we should be thinking bigger picture. We want stocks that win, that help us reach our goals. Speaking for myself, I want to have enough money to retire and live comfortably. If my stock portfolio helps me do that, it really doesn’t matter what “kind” of stocks they are, does it?
However, I do like the idea of thinking about fishing in small ponds where no one else is fishing. I especially like that thinking that way helps break down the silos of stock categorization. There can be a small cap that no one pays attention to that’s a great business. Or an international stock, or a mid-cap stock, or a growth stock, or a value stock. You get the picture.
HOW to do that is slightly trickier, it’s hard to ignore what’s in the financial news or on Financial Twitter (still not calling it X). But I think the more we can block out the noise, learn about evaluating businesses, and find the small ponds that are off the beaten path, the better our results might be.
Jason’s Random Words
Years ago when my wife was in grad school, we did the thing that you do in college when you're poor: We helped some friends move. They were relocating a few hours away, and a group of us agreed to help load the moving van, drive down with them, and then help them unload before coming back home. It's the kind of thing that, as a "real" adult, I'd go into witness protection to avoid now.
At any rate, it was a long day. We loaded up their stuff – a lot of which we had to box up because they were nowhere close to being ready to move the day of the move. They had good reasons: Not only were they both in grad school, but they had two young kids. The point is that it was a confusing, complex, very disorganized move.
So we get their stuff loaded up and make the three-hour drive. By the time we arrive, it's very late at night. We are all tired. But we still have to unload the truck. At some point during the unloading process, we began unloading trash bags filled with stuff (did I mention it was a disorganized move?) but there was a problem.
A lot of those bags were actual trash. That's right. We loaded up and moved their trash, too.
And there are days that I feel like maybe I'm doing the same thing with my portfolio. As many of you know, I own a lot of individual stocks. 101 at last count (though that's down from a peak of 120+ last year). Don't worry – this is not me saying I need to run a lean, focused portfolio. I'm not that guy. Honestly, having a portfolio with a century of stocks helps me as an investor. I want to be glacial at selling, and I want to be methodical at building out positions. With this many companies, I can't stay up-to-date on all of them and their competitors and industries and all the other minutiae that should inform investing decisions. So I have to have a slow process or I'm just guessing and reacting.
Recently, my wife changed jobs, and we are about to go through the process of rolling over her retirement savings, her old retirement plan manager doesn't do direct transfers. So we have to liquidate all the holdings, move the money, and then re-buy everything. This is a bit of a pain; we were hoping for a simple process of filling out some forms and letting tech magic do all the work.
But since that's not happening, we are now going to go through every single holding in her retirement savings and make some actual decisions about what makes sense to "move" into her new account, and what investments don't make sense anymore. Frankly, this process is probably going to be a really good exercise for us both, from the perspective of her knowing what she owns (I manage 99% of the decisions with her approval) and me considering the thesis for a significant portion of our combined wealth.
The upshot? We won't be moving a bunch of garbage that we should have left behind, had we paid more attention and had a better plan in place.