Diversified Bullish

An Investing and Stocks Blog

Sep 02, 2022

What Does Intrinsic Value Mean?

The goal of this post is to find a layman's idea of what a stock's "intrinsic value" means. Intrinsic value is often praised as a claim to why the market price of company should be higher. What does that mean?

Checking Investopedia, the top hit on Google, "There is no universal standard for calculating the intrinsic value of a company... Typically, investors try to use both qualitative and quantitative to measure the intrinsic value of a company, but investors should keep in mind that the result is still only an estimate." - Investopedia, https://www.investopedia.com/terms/i/intrinsicvalue.asp

The next hit, Corporate Finance Institute offers a "Net Present Value" based formula, along with net cash flow, interest rate, etc. So it seems that the mathematics of instrinsic value calculation are sound, but the weighting of possible future outcomes is where an an analyst is more of an artist. https://corporatefinanceinstitute.com/resources/knowledge/valuation/intrinsic-value-guide/

In essence, intrinsic value is a mathematical model an analyst creates by weighing projected outcomes. There is no standard for producing an intrinsic valuation of a company. I find this somewhat amusing, because before when I heard the term intrinsic valuation, I assumed there was more to it. Such as a formal methodology that is carried out. However, like all future prediction models, they are subjective and sound more like a guess to me. I will be sure to take these instrinsic value calculations with a grain of salt from now on.

Aug 28, 2022

Industry-Based Investing

When picking investments, I like the idea of selecting assets based on their industry or the rise of a specific technology. One can observe the world, watch trends come and go and consider adding them to your portfolio.

For example, I believe that solar technology is likely to be an important source of energy in the future. I am basing this thesis on an anecdotal conversation with an energy engineer, along with generally positive sentiment for the solar energy industry as of late. For these reasons, I am marginally invested and building a position in a solar company, Sunrun.

Electric vehicles are another industry that I believe will play a big part in the future of humanity, so I'm holding Tesla. It's been my best investment by far. I'm still holding because I believe that electric vehicles are going to be huge in the future. One can hold a company based on principle, provided the quarterly earnings reports are acceptable.

Sometimes your thesis will be wrong. You can't win 'em all. You also don't need to win them all. Pick a few winners and mix with index funds to round out your portfolio and the 80\20 rule will emerge. A few of your assets will perform better than the others and reap most of your gains.

I think that this industry-based line of thinking is a way to frame your investments that can make it easy to remember why you're holding it. One can certainly be wrong about our projections into the future, but these are the types of angles a keen investor seeks out.

Aug 06, 2022

Ramblings About Stock Prices, DCA and Cash Position

I have realized a common idea most probably do. Predicting short term price movements is like picking black correctly in roulette. However, if the price does go down, that can often be a good thing for opportunistic and long term thinking investors.

The knobs and levers that influence the stock market are many. Stocks popped in July 2022. After 6 months that pummeled portfolios, we saw a massive buying response. Savvy investors must see opportunities in this hellscape of shriveled securities. So are we in the clear? Have stocks been "derisked"?

Trick question, stocks always include risk. The idea that anyone is certain about the price movement of any stock is pure poppycock. Only time will tell how high or low a stock can go. If the business's balance sheet and business prospects are strong it's easier to hold on for the ride when the market heads down.

In the coming days and months, it's impossible to know what will happen. War, inflation, disease and a public infatuation with the idea of a recession means it's all probably already priced in. July supported this idea with buying coming back in style. Or maybe the overall downward 2022 trend will continue?

My portfolio is down 18% YTD, not far off the S&P 500 index which is down about 13% YTD. After the July run-up, I want to build a large cash position, while making monthly contributions to max out my retirement IRA. I'm also hoping catch further drawdowns when they happen or hold a little more cash than usual. I've been steadily dollar cost averaging into my stocks and index funds during the recent downturn and that will continue, regardless of where we go from here. My most recent buys were adding to my S&P 500 index fund and adding to a minor YETI stock position.

Being aggressively invested with a large portion of your net worth in stocks and index funds makes you realize the luxury and life comfort you gain from holding a little extra cash. I'm hearing the dollar is stonger than the Euro now. My two weeks in Europe in 2011 tell me how shocking that is considering its superiority at the time. I'm allocated at 4% cash right now, but 10% cash seems a desirable spot to be due to my personal circumstances. Then I'll be able to pick my spots, while making regular contributions and have a little extra cash to live my life and pay the bills, travel and maybe even have a mini-retirement!

Jul 16, 2022

Buy The Close

In my experience, markets sometimes open up with a pump in prices. In situations where I bought near to the open because of some anticipated event, I usually bought at a higher price than if I had waited.

I find it's best to watch stocks throughout the trading day, then put in a buy order in the final hours or minutes before the market closes for the day. This is general knowledge for most investors and traders. While not always a certainty, I think it is a good tip to keep in mind when adding to your portfolio on any given day.

Buy the close, because "gains happen overnight": https://breakingequity.com/blog/most-gains-for-spy-happen-overnight-a-quantitative-study

Jul 11, 2022

When Stocks Go Down

If a stock goes down, it may still be a good investment. Some investors act like a stock you own should never go down, and if it does it's not something you should invest in. This view is unreasonable because as we've seen in 2022, market and geo-political conditions can have broad-sweeping effects on all stocks and index funds regardless of company performance.

Investors like growing companies. In recessionary times, investors like profitable companies with stable product demand. Therefore, the companies that are less profitable now but investing heavily in the future may be undervalued currently compared to their potentially more developed, profitable future.

Stocks like NET and SNOW are tech infrastructure plays that have been hit hard by the flight to more established companies. Their underlying bull theses are still in tact. Today, they are priced at a 50%-60% discount compared to their price at the beginning of 2022. The recent market turbulence is allowing me to lower my cost basis on both positions. In the long run, savvy investors will repurpose this downturn into an opportunity. I'm betting that will be the case with these two promising companies.

Sometimes stocks will go down and it is not necessarily an indicator of weakness. Trust your convictions and consider tuning out the stop loss daytrader heros. Sure, it's fine to cut losses. However, sometimes it's necessary to hold your shares "in the red" until conditions improve. Your positions will recover faster if when stocks get cheaper, you buy more.

Jul 10, 2022

Are We in the "Worst Case" Scenario?

As far as stocks are concerned, yes I think so. While the S&P 500 Index is down approximately 15% YTD, many stocks saw anywhere from 30-80% drawdowns. Now one would think selling does not make much sense. Perhaps the inverse of selling is the answer. Why not wait 10 or 20 years and see where the market lies? You can also do nothing and build your cash pile, maybe a smart move in this environment.

I'm not calling a bottom. Stock valuations are unpredictable and since the trend is down, prices might go lower. My bets are placed that we're nearing worst case scenario territory at the moment. Disease, war and inflation have given a much needed haircut to the frothy stock prices of 2021. Here's hoping to better scenarios ahead.

Jul 09, 2022


It's hard to imagine what life could look like in 30 years. We short-sightedly see chaos in our world, and the markets start wavering. I won't tell you what to do now. One lesson of Benjamin Graham's Intelligent Investor is that predicting the markets is futile.

A perspective beyond this current slot of time with assets steadily growing is possible. Index funds all but guarantee it. However, if you bought index funds at the beginning of 2022, you lost approximately 15%. Worst 1st half in the stock market since 1970! That's tough, but don't worry. In 10, 20, or 30 years all will be fine. Keep the longview.

Apr 20, 2022

Buy and Hold

I received a "C" in my only college finance class. I just wasn't that interested in a subject that mostly flew over my head at age 20.

The class consisted of watching video lectures from a reasonable, jolly Finance professor. I failed to absorb most of the lessons, grasping only enough to not get decimated by the course's mid-term and final exam.

One lesson stood out from my professor, who seemed to know his field... "Buy and Hold". Nothing revolutionary but it was the first time someone had introduced me to this simple philosophy.

Owning and hanging onto a stock usually outperforms other more short-sighted investing or trading schemes. It stuck with me. While I have my share of bad investments, the philosophy holds weight and guided me towards some profitable ideas. I continue to hold my highest conviction securities and hold small positions if I am less sure about the company.

A solid investment held on a 5, 10 or 30 year investment horizon will probably appreciate in value. Historically, this is true for many stocks. However, Graham knew investment returns may be extremely unpredictable in sure times and increasingly volatile with global tensions mounting.

Apr 03, 2022

Risk and Reward

A good investment and a bad investment look the same when you buy. What matters is your outlook and the amount of downside risk. Benjamin Graham, famed author of "The Intelligent Investor", states that an investment is either "speculating" or "investing" based on the prospects for the company's profit generating business to grow in the future above where the market currently values it.

Investing in its nature is incurring risk to reap rewards. Index funds keep your risk low and are safe play. But anyone who owned strictly index funds missed the significant upside from riskier securities like Tesla and Apple over the past 5 years. Everyone's financial situation is different and a diversified mix of assets is your best bet. This blog is a good faith perspective on being diversified and bullish on stocks and index funds. Hope you enjoy!

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