# Tech sector



## MrBlackhill (Jun 10, 2020)

I've seen in a few posts that many of you have invested in Energy, Financials, etc. But not much into Tech or tech-related? Is it because you lived the 2000 dot-com bubble? I totally agree that living that bubble certainly did a big scar. I'm trying to understand the sentiment for tech from people who invested over the last decade or more, where it seems like tech was the place to be.

I think tech is pretty safe and it's thriving big. The last 10 years certainly made a few millionaires for tech investors. Tech is the main factor when differentiating how we lived a century ago compared to now. The growth of most sectors also depend on new technologies.

Elon Musk now has a net worth higher than Buffet. There are a lot of multi-billionaires out there who got their net worth from tech-related industries and most are 50 years old or less and already have a net worth higher than 90-year-old Buffet. This is not discriminating Buffet, don't get me wrong. You should also know that Buffet also invested about 50% of its holdings in... AAPL, a single tech stock. With Zuckerberg at 90B$ at only 36 and Bezos at 190B$ at only 56 including his >30B$ divorce cost last year, that's just crazy. He's just a few years away from becoming the world's first... trillionaire! In the top 10 of the world's richest people, only 3 are not tech-related. Real Time Billionaires


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## james4beach (Nov 15, 2012)

I started investing right around 2000 (the previous tech bubble peak) and this "trained" me to dislike the tech sector. Tech also looked horrible in back tests, which is why my 5-pack does not include it. At the time I created my 5 pack, there was no good reason to include tech.

I often ask myself if I have too little in tech, but I decided that I'm OK. The reason is that I have a lot in the S&P 500 and tech is a huge component of this index. So I'm not missing out. *Tech drives the S&P 500.*

I also hold a smallish growth portfolio, about 3% of my overall investments. In this portfolio I do hold some tech stocks (CSU and DSG). This won't make a big difference overall, though, since the portfolio is small.

Additionally, I work in tech myself so I have plenty of exposure through employment and my small business. I think it would be a mistake for me to seek extra exposure beyond this.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> I started investing right around 2000 (the previous tech bubble peak)


You said the "previous" tech bubble peak because you believe we are currently in another tech bubble which is going to burst?


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> You said the "previous" tech bubble peak because you believe we are currently in another tech bubble which is going to burst?


Yes I think this is a bubble, but that's just a guess (and I could be wrong). Even if it's a bubble, it could be 5 or 10 years from bursting.

At the end of the day, I can't really predict these things, so I stick with my asset allocation and don't try strategically trading.


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## londoncalling (Sep 17, 2011)

I think tech is currently way over valued. In the past I have not purchased it for a similar reason. A few years ago I tried to buy MSFT and APPL but once again my target price never was filled and alas I missed out. I have long thought Amazon was an amazing company and would change not only retail but other areas of our lives. I thought they would make a mistake at some point and the stock would take a dive. That hasn't happened. In March I expected tech to fall with the rest of the market and I would be able to make a few purchases. Again to no avail.


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## doctrine (Sep 30, 2011)

Tech is insanely overvalued. It will come back. I retain exposure through the S&P 500, in a not-insubstantial way. But most of it is untouchable directly. 

I don't know when the bubble will end, but I know how it ends. Usually in tears and people never investing again. 

There is a difference with the 2000 tech bubble - it is obvious that most of these companies have sustainable businesses. It is just the valuation. It will take decades of unrestrained growth, zero execution faults, zero new competition, zero unexpected changes in consumer behaviour, and zero technological advances that cause disruption. 

The 1970's is a good comparison, where blue chips hit P/Es north of 50. It took 15-20 years before investors would see gains from those highs.


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## james4beach (Nov 15, 2012)

doctrine said:


> Tech is insanely overvalued. It will come back. I retain exposure through the S&P 500, in a not-insubstantial way. But most of it is untouchable directly.
> 
> I don't know when the bubble will end, but I know how it ends. Usually in tears and people never investing again.


SHOP being 20% larger than RY's market cap is also an indication that something funny is up.

Of course, we could be in the early stages of a mania or bubble. SHOP might end up with double RY's market cap. XIT could triple in price, and TQQQ could quadruple from here... but you will never know when the wipeout is coming.


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## MrBlackhill (Jun 10, 2020)

But how are they overvalued with a P/S around 5 or less? I know you are going to tell me a true good valuation is a P/S below 2, but some big names in the tech stocks have gone through the dot-com and yet they are happy with a P/S around 5 as a valuation. I agree though that it's getting overvalued as their P/S history is more around 3, which means they could drop 40%... Unless their revenue growth fits their price growth (or it becomes the new standard). Look at FB, its P/S is about 10, but its revenue is growing faster than its price, so its P/S is slowly decreasing while providing 33% CAGR in the last decade. Meanwhile, people are investing in AAPL when its revenue growth doesn't match its price growth...

SHOP is overvalued, I agree with that, it has a P/S over 60 and that's why I won't touch it. Even though they had huge revenue growth, it's not enough.

And what about non-tech stocks like V and MA who had great growth in the last decade with a P/S of 15? You think Visa and Mastercard are going to drop hard?

But if I want great growth for the value, then I'll go on the US side and buy non-tech stocks like ROST who has a P/S of 2 while having about the same growth as AAPL in the last 30 years. Or I'll buy COST with a 10-year return of 20% and P/S below 1. Or PGR. Or TJX.

Or stocks like TPL because even though it has a P/S of 11, it had a 5-year revenue growth much faster than its price growth. Now that's a gem! Unfortunately, its price growth has been slowing in the last 2 years.

Unfortunately, no CDN stocks stands out of my screening... I guess I'll go on the USD side! Maybe ATD-B.TO, but its last 5 years weren't that good.


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## kcowan (Jul 1, 2010)

I have 3 long-term holds: AAPL, CSCO and IBM. they have done well and all pay dividends. I have stayed away from anything that does not have good earnings. The USD has helped. I missed MS and have stayed away from Alphabet, Amazon and Facebook so far to my lost opportunity. I have licked FOMO.


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## james4beach (Nov 15, 2012)

I wouldn't normally listen to Cramer, but he has a point here. There have been giant rallies in mega cap stocks, and that's never been seen before.

AAPL is worth $1.7 TRILLION. It's up 94% over the last year.
AMZN is worth $1.6 TRILLION. It's up 60% over the last year.
... while the S&P 500 is up 12% in the same period.

These aren't small or mid caps rallying like mad. It's just worth noting that historically speaking, this is very atypical, and I share Cramer's worry.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> I wouldn't normally listen to Cramer, but he has a point here. There have been giant rallies in mega cap stocks, and that's never been seen before.
> 
> AAPL is worth $1.7 TRILLION. It's up 94% over the last year.
> AMZN is worth $1.6 TRILLION. It's up 60% over the last year.
> ...


I agree about AAPL. But that's not true for all stocks.

AAPL is worth >1T$ because of its investors, because of its shares price, not because of its revenue. It comes to the same point about my observation on its P/S.

Its worth doubled means its market cap doubled means its shares price doubled (considering the same number of outstanding shares).

Meanwhile, did its revenue double? No. On September 2019, AAPL's revenue was 260B$. On September 2018, AAPL's revenue was 265B$.

The current market cap (worth) of 1.67T$ divided by the current ttm revenue of 268M$ gives us our P/S of 6.23. Which means investors are spending more for 1$ of AAPL's sales. And since AAPL's sales growth is not as fast as AAPL's price growth, its P/S is increasing, which means its becoming overvalued. At a P/S of 6 it seems still safe, but that's why I'm not buying SHOP at 60 of P/S.

See how AAPL went from a steady P/S of 3 to a suddenly P/S of 6? Investors are valuating AAPL twice of what it was in its recent history.










Compare this to FB. Facebook's revenue grow faster than its share price. That seems healthier. Though, its P/S is still higher than AAPL's.










Facebook could keep up with its share price growth because it had a revenue growth. In 2012, FB had 5B$ revenue. Now it has 70B$ revenue has of 2019. That's an average of 45% revenue increase per year during 7 years. Meanwhile, its share price increased from about 30 to 200, which is an average of 30% per year during 7 years. See how the revenue is growing faster than the share price?

Now Apple. Its revenue in 2012 was 156B$. Its revenue in 2019 was 260B$. That's an average of 8% revenue increase per year during 7 years. Meanwhile, its share price increased from about 70 to 300, which is an average of 23% per year during 7 years. See how the revenue is growing SLOWER than the share price?

I'm definitely not an expert, but from my understanding, AAPL's growth situation is unhealthy while FB's growth situation is healthy.

Now, the mystery is... tell me why Buffet has 35-50% of its BRK portfolio in AAPL? Simply because its P/S is still much lower than FB? Give it a few years and they'll cross. Why not choosing GOOGL then? Its revenue growth matches its price growth and its P/S is comparable to AAPL.


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## doctrine (Sep 30, 2011)

Apple's share price in the past was much cheaper. They were trading at a P/E of close to 10. The price tripled, profits remain steady, P/E is 30. I doubt Warren Buffet would be buying $90B of Apple stock today. It is definitely expensive. It's business prospects are no better or worse than 5 years ago when the P/E was < 15. Apple is such a high % of BRK's portfolio because it tripled, not because he invested that much in it. Future returns are likely to be much less. Wouldn't be surprised to see BRK selling those shares down.

FB is perhaps the fairest valued of big tech. However, you also have to consider their business is evolving. They have to spend more to monitor content. It may reduce earnings moving forward.

Google has been fairly valued, but at a P/E > 30 now it is very expensive for its growth, which is closer to 10-15% a year. 

Earnings are more important than P/S. Increasing revenue is important, but earnings are what grow a company. If both revenue and earnings are increasing, that is good though. If a company can improve its margins, it can grow earnings faster than revenue. And it has more profits to reinvest or return to shareholders. Revenue doesn't get reinvested or returned to shareholders.


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## james4beach (Nov 15, 2012)

Right, just because Berkshire owns AAPL doesn't mean they would buy it at this price. They bought it some time ago, and I'm sure they are happy with how it's performing. Holding their existing positions is the natural thing to do.

AAPL doubled in in the last year. I still think that's crazy. Yahoo Finance says that the forward P/E a year ago was 16x, and today is 26x. That means the share price increase is nearly entirely multiple expansion.

GOOGL using Yahoo Finance, shows forward P/E a year ago was 23x and today is 37x. Again the rally in the stock price is entirely multiple expansion, not earnings.

Multiple expansion can come from many things: there's more liquidity in the system (central bank manipulation of the market), people are in a more optimistic mood, people are being greedy, there's a bubble mania, or people feel like we're in a growing economy. So the fact that the multiples are expanding is not necessarily a bad sign on its own, but one has to acknowledge that it's *multiple* growth and not earnings growth.

Some analysts believe that due to very aggressive central bank money-printing, the liquidity in the system could drive multiples far higher than we're used to seeing. In that scenario, we don't need to have a good economy in order to get much higher stock prices.


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## MrBlackhill (Jun 10, 2020)

doctrine said:


> Apple is such a high % of BRK's portfolio because it tripled, not because he invested that much in it. Future returns are likely to be much less. Wouldn't be surprised to see BRK selling those shares down.


Yes, that's what I was going to ask, why didn't Buffet sell yet? I mean, we do rebalancing every year and even more and yet BRK has not rebalanced AAPL at its current 35-50% of the portfolio? Why? I understand that holding it while its still moving up is good, but at some point it's overwhelming all other investments in the portfolio and it's increasing the risk.



doctrine said:


> Earnings are more important than P/S. Increasing revenue is important, but earnings are what grow a company. If both revenue and earnings are increasing, that is good though. If a company can improve its margins, it can grow earnings faster than revenue. And it has more profits to reinvest or return to shareholders. Revenue doesn't get reinvested or returned to shareholders.


Well, there's a debate on this. Personally, from my understanding, I'd look primarily for a great P/E situation if I'd be looking for dividend stocks, but I'll be looking for a great P/S situation when I'll be looking for great growth stocks.









Forget P/E, Focus On Price-To-Sales To Find Super Stocks Like These


Finding stocks using the price-to-sales ratio offers investors a cleaner way to assess a stock's value versus ratios like price-to-earnings. Here are five stocks worth considering.




www.forbes.com





SHOP doesn't have P/E and is now worth over 100B$. But back in 2016 SHOP's P/S was around 10 which was quite decent considering all the high P/S of tech stocks. For companies that grow fast, their earnings comes after and are most likely not stable. I bought KXS at about 12 P/S while its P/E was more than 100, but at least it had earnings and KXS did quite a good run. I had +60% in a matter of less than 3 months.

Or take our big tech name CSU which P/S has been steadily increasing from about 2 to 6 in a matter of a decade, slowly becoming overvalued. Meanwhile, its P/E went 25, 9, 27, 49, 59, 85, 46, 60, 49, etc. How can one take a decision with that fluctuating P/E? (Or simply, how can one set a threshold for screening that parameter?)

Or take a non-tech stock like BYD which P/S has always been below 2, meanwhile its P/E went 4, 7, 29, N/A, N/A, N/A, 99, 50, 30, 50, etc. But BYD had an eye-popping 45% CAGR over a decade from 2010 to 2019.

I'm not saying that P/S is sufficient, but personally I prefer it over P/E when screening for growth stocks, then I combine it with other indicators.

The P/E will be worth looking at for dividend paying stocks because it drives its EPS (EPS = SP / PE) which drives its payout ratio (DIV / EPS). A healthy EPS growth means a healthy dividend growth.


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## james4beach (Nov 15, 2012)

Buffett doesn't manage these stock picks and hasn't for a while. There's someone else who deals with their equity portfolio.

Berkshire Hathaway is a group of fully owned companies and the stock portfolio is a pretty minor part of BRK.


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## MrBlackhill (Jun 10, 2020)

True, but still, why would BRK (instead of saying Buffet) would keep 35-50% holdings on AAPL? I'd never buy an ETF with that much in a single stock.


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## kcowan (Jul 1, 2010)

MrBlackhill said:


> Yes, that's what I was going to ask, why didn't Buffet sell yet? I mean, we do rebalancing every year and even more and yet BRK has not rebalanced AAPL at its current 35-50% of the portfolio? Why? I understand that holding it while its still moving up is good, but at some point it's overwhelming all other investments in the portfolio and it's increasing the risk....


BRK did exactly that in 1Q this year:


> Berkshire Hathaway, Warren Buffett's investment fund, has reduced its holdings in Apple over the last quarter, offloading in excess of $800 million worth of Apple stock over a three-month period, but it still maintains its position as the iPhone maker's biggest shareholder.


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## MrBlackhill (Jun 10, 2020)

kcowan said:


> BRK did exactly that in 1Q this year:


Well, they're not offloading enough... or fast enough? What's selling 800M$ when you hold 90B$? It's not even 1%.

For example, reducing a 50% hold by 1% of its worth only means reducing it to a 49.5% hold. Meanwhile, the price will increase faster than that.

In fact, someone who holds 90B$ and wants to reduce that amount to 45B$ (half) in a 1-year time frame for a stock growing at a 30% CAGR pace should sell as much as 1.2B$ worth of stocks every week during 52 weeks.









Warren Buffett's $90 billion Apple stake is now 43% of Berkshire Hathaway's entire stock portfolio


"I don't think of Apple as a stock. I think of it as our third business," Buffett told CNBC's "Squawk Box" in February.




markets.businessinsider.com












Diversify? Almost half of Warren Buffett’s Berkshire Hathaway portfolio is now composed of a single stock


Warren Buffett once said that “diversification is protection against ignorance. It makes little sense if you know what you are doing.” The takeaway: Load up...




www.marketwatch.com


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## james4beach (Nov 15, 2012)

MrBlackHill, I had a random thought today while hiking around some fjords

You're just starting out investing, right? I know you are a very analytical person and you work with analytical software as well. All great things... and I know you're very excited about doing the analysis for your own securities selection.

but investing is such an *emotional* game that hinges on human behaviour. This is never captured by all the software, statistics, etc. Even the experts and analysts barely talk about this side of it, but in my experience, the behavioural side is * the * key to investing success.

Many of my friends are engineers and data analysts, yet many of them have had a lot of trouble with investing in practice. And it comes down to more behavioural things. Their selections weren't bad, but they got themselves into situations that either became too stressful, or weren't a good fit for their emotional styles, or they had trouble sticking with one specific plan (that's the most common mistake I've seen)

I write all this to say, maybe you are approaching this a little bit too analytically for your first shot at investing? Based on my own experience (and struggles) with all of this, I would suggest separating your investment money into two pots.

In one pot, maybe do a really dumb couch potato / ETF type of approach. Maybe something as dumb as XBAL, or a really simple XIC-XAW-XBB mix, together with a firm plan to always stick with it (no matter what). The second part is the key.

In the second pot, continue doing what you are doing, as I agree it's fun and very interesting.

I wish I had done something like this. The first pot, for me, would have given superior long term overall results, even though it's dumb and lazy. Why? It's because the more "intelligent" techniques are hard to stick with and commit to over 5, 10, 15, 20 years. You get one idea, then you get another. Or you notice a flaw in your plan. Or you find a better way.

All the ideas and methods we have discussed have one flaw or another. As an intelligent person you are going to face some big challenges going forward. No matter what you choose to do, you are going to eventually find flaws with it. This can psych you out and make you abandon your strategies. Heavy in stocks? Well oops, it turns out that we only have about 50 years of reliable stock performance data and all indexes have a hindsight bias going further back (actually true, sorry to say). Heavy in bonds? Well oops, turns out that they can perform badly during high inflation, perhaps for decades on end. etc, etc, etc

This constant re-analysis and being too smart (even though the ideas are all valid) can really disrupt the overall return.

Again this is just based on personal experience. I had been doing all the "intelligent" stuff, going down many of the roads you are talking about now. But here's the funny part ... long ago, my dad had asked me to make a low fee index portfolio for him.

So I had set my dad up with XIU, XSP (today I would use ZSP) and a few other things. Really just a dumb old selection of a few index ETFs that I knew were solid. But we never touched it again. That was his demand, he said DON'T touch it, I don't want to deal with it.

Want to guess which actually performed better over 15 years? The answer... it was the dumb ETF portfolio, not my more advanced techniques.


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## james4beach (Nov 15, 2012)

And sorry I did not mean to sound discouraging. I find all of this stuff very fun, I'm just saying that there is a very counterintuitive thing that happens when investing: the fewer actions you take, the better you'll do.

That's assuming you start with reasonably solid investments. Even a low fee balanced mutual fund will give better long term results than what most investors achieve, even some very intelligent investors.

And hedge funds, which make a lot of active decisions, great analysis, and the best models on earth, often *don't* outperform.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> And sorry I did not mean to sound discouraging. I find all of this stuff very fun, I'm just saying that there is a very counterintuitive thing that happens when investing: the fewer actions you take, the better you'll do.
> 
> That's assuming you start with reasonably solid investments. Even a low fee balanced mutual fund will give better long term results than what most investors achieve, even some very intelligent investors.
> 
> And hedge funds, which make a lot of active decisions, great analysis, and the best models on earth, often *don't* outperform.


Hi James,

Thanks for the advice. Here's my full story and context. We're a couple in our mid-30s. Actually, I'm 32, she's 34, soon to be 35. I've been working as an engineer for 8 years, she's been working for only 5 years and started making some decent money about 1 year ago. We live in Montreal, we don't do 6 figures, but we got decent salaries. We bought a duplex last year, which got me to use absolutely all of my investments (TSFA, RRSP) because she had no savings on her side and still our down payment was less than 6 figures so we bought with a down payment of only 5%. Before taxes, the rented unit pays 40% of the mortgage. Though, we must do a lot of renovations, almost 6 figures at first, then hopefully 15-20k per year for the next 5 years. How much we'll be able to do depends if we have kids soon, and it's in the plan. If having kids doesn't work, we'll be planning on adopting, which is another big project.

In the first decade of my investing life, when I was in my 20s, I was just working with banks, not really knowing what I was doing, but simply trying to get access to the best mutual funds, which was what my bank's financial advisers suggested. All that comes with some questionnaire trying to figure out what kind of investor you are and I was always working with them to tweak the results to get on the most aggressive path. Yet, I don't think I got such good advice. I mean, I was in my 20, nothing to lose, an engineering career on my way, I just wanted to be 100% equity and 100% aggressive growth. My goal was not to look at how my investments were doing. I just wanted to set up a weekly investment out of my personal account and never think about it, which is what I did. But they got me split my money into MFC4410, MFC4440, MFC4444 and stuff like that until I asked for stuff like MFC4421 and that's just because the selection was pretty limited. I also planned to change bank, but I only ended up doing that when we got a mortgage. Me and my spouse are now in a total of 4 banks since we bought and that's because I took time to search for the best out of each.

So, anyway, all that to say that during my first decade "investing", my investment style was simply to setup a weekly transaction into a growth portfolio, never look at it, never think about it and that's what I did, but I didn't have access to good advice and good funds, except maybe for MFC4421. They always got me into 80/20 equity/fixed when I wanted 100% equity. What was I really going to lose with my 15k$ initial investment and 100$ weekly contribution? Did I really care if there would be downsides of -35%, I was not going to look at it, as long as there's a 50% upside after that since the financial adviser should be suggesting me solid mutual funds I can trust.

I never knew we could invest by ourselves. Well, I saw the options in some banks, but I always thought it was for big investors and comes with big commissions. I never knew about retail investors. This year, after the crash, a friend told me her boyfriend invested 5000$ then took out 6600$ one week later for 1600$ profit. I started searching and found low-fee brokerage like Questrade (which is what I'm using).

In my personal account, I'm back to almost no money and that's the money I'm playing around with my own investments in my TFSA (in which I can put lots of money since I recently withdrawn everything).

But I also plan to manage our matrimonial money and that'll be "safer" investments. Still, I'm a bit reckless, but I like to learn from mistakes. I already did my first big mistake. We have almost near 6 figures of money for our initial renovations and I invested about half of it, even knowing that we'd be needing it a few months after. At first, I invested 1/4 of it. That money managed to go up +15% and is now stable at that level, so I'm super happy. But then I invested another 1/4 without watching for red flags. That's just my lack of experience, I could've easily seen that red flag, but I didn't have any official procedure yet when investing. That money went down to around -25% and it's now stable at around -15% and at the moment all that money invested (1/2 of the renovation money) is oscillating from -3% to +2%, so my mistake on my second investment erased all my potential profit of my first investment. (What's funny is that in my personal portfolio, I've invested in another stock of the same industry and I'm currently up by +77% on that one, so it's balancing out, I guess)

Now, that seems pretty risky, but I have back up plans. My personal money is currently at +25% and that is now worth about 1/3 of all the money I invested so far. Therefore, the full overview on all money invested is currently at +7% in 3 months. And if anything really turns bad, I can either sell everything before losing money on my first year knowing I need 2/3 of my invested money, or simply postpone the renovations.

At the moment, our matrimonial money is all for renovations that we'll do in the next 5 years, so there's no true risk in my opinion because renovations can always wait.

Now, I still haven't talked about *emotion*. Yes, we are all humans, we make mistakes, we get overexcited, we get stressed out and we take irrational decisions from time to time. We also take decisions from our guts feeling. Some say we have 3 types of decision-taking : using our brain, using our heart and using our guts. I take that into account because one my favourite subjects is about psychology, cognitive biases and much more. So i'll definitely balance out knowledge on psychology, rational decision-taking and decision-taking processes. I plan on studying to find out some kind of automated process to scan for opportunities and to decide when to buy and when to sell. I'm looking for some kind of algorithm trading but for long-holders. I may also go on the US side. If you look here (What is your favourite USD growth stocks?), I just started screening some US stocks and there are stocks like ROST and UNH who has about 24% CAGR on a 30-year range of steady growth. To put that into perspective, it's outperforming AAPL over that 30-year range. Again, past results doesn't guarantee future results, but I'm pretty sure I'd be glad with CAGR over 20%.


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## kcowan (Jul 1, 2010)

I would also recommend 10% of your portfolio in flyers that you are prepared to lose. I started AAPL and LULU in that portion and they have both flipped into the main equity portfolio and are the largest gainers. Jones Soda was also in there, starting at 0.88 a share and liquidated at 9.70 a share. I also held Nortel there at the bottom of its intial swoon and rode up a short recovery before liquidating.

Most of the main portfolio are lovely boring companies with dividends. Eventually, I will probably end up in MAW104.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> I never knew we could invest by ourselves. Well, I saw the options in some banks, but I always thought it was for big investors and comes with big commissions. I never knew about retail investors. This year, after the crash, a friend told me her boyfriend invested 5000$ then took out 6600$ one week later for 1600$ profit. I started searching and found low-fee brokerage like Questrade (which is what I'm using).
> 
> In my personal account, I'm back to almost no money and that's the money I'm playing around with my own investments in my TFSA (in which I can put lots of money since I recently withdrawn everything).


Sounds like you've thought through a lot of details. Yes, it's pretty exciting when you suddenly discover that you can invest by yourself instead of having to go through those banks and giant mutual fund companies.


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## MrBlackhill (Jun 10, 2020)

FAANG going crazy after market with the ERs and annoucements.


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## Rusty O'Toole (Feb 1, 2012)

Mr Blackhill I know you read my posts on trading the TQQQ. That is a tech play and nothing else since 90% of its value is FAANG stocks. But you know I am not a "tech investor". I am a technical trader and chose TQQQ because it gives me action.
You are in a completely different position than I am. I am nearly 70 and in poor health. I don't have 30 or 40 years to wait around. In your case you could do well by buying a fixed amount of the S&P every month until you are ready to retire. Don't waste time studying the stock market when you could be fixing your house and playing with your children.


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## MrBlackhill (Jun 10, 2020)

NASDAQ now at 11 000$ USD. Only 2 months ago, people were celebrating the unexpected 10 000$ USD during the pandemic. If it reaches 13 000$ USD by the end of the year, I'll agree on the tech bubble.


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## MrBlackhill (Jun 10, 2020)

So... We'll see if a simple trend analysis can give an idea of what comes next. Based on the trend of the last 10 years, I wouldn't buy a NASDAQ-indexing ETF at the moment, but S&P 500 feels somewhat fair. The hype will continue after AAPL & TSLA splits, but give it a few months and then...


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## MrBlackhill (Jun 10, 2020)

I must admit I'm currently very tempted to buy a... NASDAQ -2x daily *bear* ETF.


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## MrBlackhill (Jun 10, 2020)

That may be just luck but it's funny.

















[Edited as of 3:33 PM]

(This is not to brag about market timing, it's just a coincidence but I continue to think that NASDAQ is on the edge of a bigger correction. Otherwise, if you have read my thread here you know that I've made some bad mistakes too and I'm not afraid to list them.)


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## londoncalling (Sep 17, 2011)

Some say you have to be good to be lucky. 

End of day numbers didn't look great for tech. APPL -8.01% TSLA -9.02% ZM -9.97% FB -3.76% AMZN -4.63% GOOG -5.00% NFLX -4.90% SHOP -5.11%

Rest of the market was also down but not as much. Is this the end of the euphoria? Or a temporary blip? Will today's prices look like a steal 5 years from now? If the sell continues where will the money go? A move to the sidelines? or deployed into another sector? what sectors will benefit from the rotation? 

Many here know that I don't own any of the above and I don't wish anyone here bad returns. Many have held some of these at much lower prices and have ridden a great wave. Curious as to what will happen next and what others are doing.


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## MrBlackhill (Jun 10, 2020)

And many of the tech stocks continued going down after hours. TSLA was sold at -6.51% after hours. Same thing for the other major tech stocks.

Momentum trading is about riding upwards the euphoria and hoping to skip the downwards of panic sell-off. What's dangerous about momentum is never knowing if you are buying at the turnover point. TSLA for instance had a nice ride up in July then took a pause for a few weeks. How could anyone knew the next move? The next move was another ride up in August. And now, as you said, is it a temporary blip or the beginning of a sell-off? Many people who bought at 200$ are still +100% up, but those who bought at 500$ just took a -20% in 3 days. We are about to witness crazy volatility swings because some people are setting their buy-point at 400$, 350$, 300$, etc. while others may continue the panic sell.

They say September is historically a bad month for the markets. It may be a very bad month for tech... We'll see.

The least hit sectors on the Canadian side seems to be Gold Miners, Energy and REITs. Maybe because Energy and REITs are still very low and gold is the safe heaven. Banks didn't do too bad either.

It'll be an interesting month. This doesn't change my opinion about tech, I'll continue investing in tech, but I didn't buy tech during this euphoria. Even if the stocks goes back up in the next weeks, I don't feel safe with momentum investing at the moment.


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## MrBlackhill (Jun 10, 2020)

That's how my luck/skills work : if I call a shot and do nothing, my prediction will happen, but if I call a shot and make a move, my prediction will be wrong.  (Another example here : IPLP - Missed my opportunity)

That's why I'm still a buy & hold long trader (and also because I'm a beginner). Once I'm confident about my win-loss probability on my analyses, I may make more moves.


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## newfoundlander61 (Feb 6, 2011)

If an investor has no tech holdings in their portfolio what are some decent choices in a ETF listed on the TSX that tracks the NASDAQ. Will the recent and continuing drop in this sector at some point a buying opportunity may be on the horizon as a reasonable entry for some new cash. I read an article published some time ago by Rob Carrick concluding that ZQQ "It's not perfect for Canadian investors targeting tech, but this new BMO product is probably the best all-around choice."


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## Jimmy (May 19, 2017)

EARK - ARK Disruptive Innovations ETF has a 5 yr return of 29%/yr and is the 2nd best returning US ETF over the period on ETF.com. The best is their next generation internet ETF- ARKW- but that may be too specific. It is tech, medical , industrial innovation and fintech. It is worth a look but if you just want tech, the Nasdaq ETFs are good and diversfied. Note the Nasdaq is not all tech either.


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## MrBlackhill (Jun 10, 2020)

Jimmy said:


> EARK - ARK Disruptive Innovations ETF has a 5 yr return of 29%/yr and is the 2nd best returning US ETF over the period on ETF.com. The best is their next generation internet ETF- ARKW- but that may be too specific. It is tech, medical , industrial innovation and fintech. It is worth a look but if you just want tech, the Nasdaq ETFs are good and diversfied. Note the Nasdaq is not all tech either.


Yes, I've been watching ARKW but about 10% of its holding is TSLA and I'm curious how much volatility it's going to add. I'm not sure I like ETFs picking up on momentum bubbles. ARKW was at 20% CAGR as of September 2019 but then it doubled...


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## Jimmy (May 19, 2017)

MrBlackhill said:


> Yes, I've been watching ARKW but about 10% of its holding is TSLA and I'm curious how much volatility it's going to add. I'm not sure I like ETFs picking up on momentum bubbles. ARKW was at 20% CAGR as of September 2019 but then it doubled...


 Tesla is the only stock that may have momentum and is only 9% but it has real sales to back up its price. Most of their other holdings are obscure companies that just have explosive growth in sales. Spotify, Splunk, Roku and all the genome tech companies. ARK won an award for their active ETF management. 

Tesla is also 4% in ZQQ. Would be more worried about momentum in ZQQ which has ~ 48% of its holdings in the FAANGS.


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## GreatLaker (Mar 23, 2014)

Here are some podcasts on the tech sector. I found both of these are worth a listen.

Mawer: What the FAANG is going on?
Discusses how some traditional valuation measures may not be applicable to tech companies because of their different accounting procedures. Sounds an awful like "It's different this time"

Rational Reminder: Mega Cap Growth Stocks (FAAMG, TSLA)
Compares current market cap of tech stocks to previous large cap growth stocks like AT&T and GM, and finds it's not all that different. Notes that it's common for the best performing stocks in one decade to lag in the next. Discusses how good future business performance by these companies may not translate into good market returns because results are already baked into valuations.


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## james4beach (Nov 15, 2012)

GreatLaker said:


> Rational Reminder: Mega Cap Growth Stocks (FAAMG, TSLA)
> Compares current market cap of tech stocks to previous large cap growth stocks like AT&T and GM, and finds it's not all that different. Notes that it's common for the best performing stocks in one decade to lag in the next. Discusses how good future business performance by these companies may not translate into good market returns because results are already baked into valuations.


I remember vividly when GE was a giant market cap which dominated the global stock markets.

It was very popular, very widely owned. Probably the most popular stock on earth at the time (early 2000s) and the top weighting in just about all mutual funds. An amazing dividend payer, a Dividend Aristocrat, biggest industrial giant. It was said that their results are always amazing, always matching guidance, super reliable, "no reason to not own it".

Fast forward and GE has returned -4% CAGR over the last 15 years ... turned out to be a terrible holding.

AAPL and AMZN may be following the same kind of pattern. The problem (as with GE at its time) is that when you buy a stock that everyone on earth already owns, you have to ask yourself: who else is going to buy it? How is new money going to pour into a stock with a $1.98 trillion market cap?

Should beware of any stock with a huge market cap that is very widely held and popular. Examples from the past are GE, Citigroup, AT&T, Exxon. Take a look at this history of the S&P 500 top holdings and see for yourself.


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## MrBlackhill (Jun 10, 2020)

GreatLaker said:


> Here are some podcasts on the tech sector. I found both of these are worth a listen.
> Mawer: What the FAANG is going on?
> Discusses how some traditional valuation measures may not be applicable to tech companies because of their different accounting procedures. Sounds an awful like "It's different this time"
> 
> ...


I think a part of what's happening with the tech sector (FAANG) is explained in The Social Dilemma

These companies are insanely profitable and their business model is something never seen in the past, and very dangerous. If they get regulated at some point, it will cool them off.

I mean, many industries would be highly profitable if their means weren't regulated.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> I think a part of what's happening with the tech sector (FAANG) is explained in The Social Dilemma
> 
> These companies are insanely profitable and their business model is something never seen in the past, and very dangerous. If they get regulated at some point, it will cool them off.
> 
> I mean, many industries would be highly profitable if their means weren't regulated.


It wouldn't take much to fix what's going on here. There are severe imbalances and tremendously uncompetitive behaviour in this aspect of American capitalism. Once you get a more sensible government, I could see some of these giants being broken up.

It won't happen this year but at some point, public mood will be strong enough to put an end to this unfairness. Once the monopolies are busted up, and taxed more appropriately (many of them are evading taxes) the stocks would be nothing like they are today. It's just a matter of time.

In fact US corps overall are paying too little in taxes. It blows my mind that people can be so bullish on American equities when they are operating in an artificial environment with taxes that are too low to be sustainable. Corporate taxes in the US should be much higher -- everyone knows it at this point -- so the writing is on the wall.

Today, you've got a billionnaire who's giving freebies (cutting taxes) for all his rich buddies. One should not expect that situation to persist going 20 years forward, especially if the public gets organized and figures out how to make America more fair. The unrest we're seeing right now are early stages of this but eventually, much higher taxes will come, and corporate giants will be busted up - restoring more of the traditional American balance.


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## Jimmy (May 19, 2017)

US corp tax rates were among the highest in the world. Trump just reduced them to levels comparable to ours. He also cut the middle class tax bracket and doubled the personal exemption which benefit the middle and lower income groups the most. All this cuts just for the rich is just what the left wing socialist Democrats would have you believe


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## MrBlackhill (Jun 10, 2020)

So in September, NASDAQ went pretty near 10,500 as I expected.

On July 2021 (mid-2021) :

If NASDAQ is between 10,500 and 11,500, it'll be healthy for its 2010s continued trend
If NASDAQ is around 10,000, it'll be healthy for its 50-year trend
If NASDAQ is above 13,000, it's on a dangerous bubble

Since tech proven how strong and helpful it was during a lock-down situation, it may continue its momentum which would keep NASDAQ up to 12,000 or 12,500 on July 2021, but if the pandemic is over, then there may be a sector rotation where people will take profits from the tech growth to go buy beaten down value stocks at discount, which could lead to the healthy pull back around 11,000.


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