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Review of Our Portfolio Performance

In Search of the Next Multi-Baggers

August 1 , 2014

After 5 years of hard work by all of our team members, our $5K Portfolio and Core Portfolio finally ended their current round of runs with great success.

The Table below showed the Portfolio's performance. Both beat the S&P 500 by big margins.

Portfolio Performance
S&P 500 Performance
$5K Portfolio 06/01/2009 07/31/2014
919.14 1,930.67 110.05%
Core Portfolio 02/01/2009 07/31/2014
825.88 1,930.67 133.77%

Everyone knows that beating the index even by one percent point in the long run will be a very difficult job to do. But we did it and we did it not only once but twice over 14 years of span.

What are the reasons behind the huge runs over the years? We have summarized the main reasons below

Reason Number 1: Be Able to Dig Out Possible Future Multi-Baggers Before They Fly.

We have been in constant search for possible future multi-baggers. And we have been quite successful on this. The followings are some of the big gainers over the years:

2009 -2010 During market melt down in 2008-2009, our focus was on looking for beaten down stocks with very good dividend paying history and took positions when the companies reported their first profitable quarter after the crisis for long term investment.

KFN - The company was paying $2.00 annual dividend back in 2007 and stopped the dividend payment during the crisis. It reported its first profitable quarter on July 29, 2009 and we bought it the next day. We sold it on December 18, 2013 after the company announced KKR's acquisition. The return:

$0.63 -> $12.19, +1,834.92% equity investment return and enjoyed $0.80 annual dividend with 126.98% yield.

GCI - Major US publisher. The company was paying $1.60 annual dividend back in 2007 and also stopped the dividend payment during the crisis. We bought it on June 2009 and the company is paying an annual dividend of $0.80 now.

$3.40 -> $32.88, +970.06% return with current yield of 23.52%.

Other picks with multi-baggers gains were MNI, NCS, BEE, RAS, etc.

2012 - Our focus was on housing market recovery. Home construction stocks were one of the hardest hit during financial crisis. But we noticed that the home prices bottomed six years after it topped in 2006 and we believed that the related stocks should also be bottomed. We bought quit few stocks in this sector in 2012 and all gave us good returns. Some of our picks:

HOV -$1.98 -> $6.55
KBH - $8.20 -> $16.60
RDN - $5.80 -> $9.13
MBI - $7.10 -> $12.30

Others included RYL, LEN etc.

2013 - Our Portfolio got big boost when we invested heavily into solar and some of the biotech stocks.

Solar stocks crashed during 2011 - 2012 due to overcapacity problem. But we have noticed some changes on this sector in 2013. Quite few companies changed their business models from solar component makers to solar project takers. Solar component prices were also stabilizing in the second half. We bought quite when stocks were still quite cheap.

CSIQ - we bought it at $3.63 March 14, 2013 and sold most of our holdings by the end of last year

$3.63 -> $29.01, +699.17%

Other big winners were


Biotech stocks - For the first time ever, our attention has switched into biotech stocks. We have noticed that many of the multi-bagger stocks are from this sector such as JAZZ, QCOR, GILD, ILMN, BIIB, etc. We started our study to see how they made the list of the multi-baggers and tried to make our own pick. We did have made our first one this year on HZNP

HZNP - We bought it at $2.23 on August 12 and it made a huge run to have reached to $18.30 this March.

$2.23 -> $18.30, +720.62% return.

Reason Number 2: Know What is Hot and What is not. Or Know Sector Rotations.

We need to identify the hot spot all the time and to make our investment decisions to catch up the market sentiment in order to make money from it.

Solar stocks were last year's stars in alt-energy sector but it is no longer the case in 2014. Instead, fuel cell stocks have become the hot spot for far. We have played them with great success. Our picks on PLUG, BLDP all gave us big returns.

PLUG - $ 1.76 -> $5.37
BLDP - $3.38 -> ?

Reason Number 3: Know When to Sell. To Become a Disciplined Investor.

No stocks can be held forever. Today's star may become tomorrow's dog. Risks exist all the time once a stock is bought. Over the years we have developed our strategy for risk controls. We also developed a set rule to protect our profit.

Take housing sector as an example, stocks in this sector were the star movers in 2002, but all are this year's dogs when the growth is no longer there.

Can We Repeat our Past Success?

Now we are going to re-set those two Portfolios and will start the third round of runs from this month. The question is: Can we achieve the same kind of returns as we did previously.

Market has gained so much since 2009 and seems topping. No one can predict the future. Our focus will still be placed on digging out possible future multi-baggers.

We will put our effort on looking for stocks with huge and sustainable revenue and earning growth.

Stay with us, the reward will be yours.





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