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Hi JR Ewing! Would you be able to tell us how you got started in stock investing?

I first started as a passive investor back in early '95. I had just finished up several years of military service after graduating from college several years earlier, and was just starting my career - my first "real" job. My Godfather gave me a magazine article that wrote about how one could become a millionaire in several decades by putting away $100 a week into the stock market, assuming of course that you would get the rate of return the markets had averaged over the years. Because my Godfather was a self made millionaire who retired when he was still fairly young, I listened to him.

As luck would have it, I soon came into a modest lump sum from an insurance company settlement - a drunk driver had hit me just before the previous Christmas, and my car was totalled and I had suffered some minor injuries. I bought a cheap new car with about half of what I had left over after medical and legal expenses, and ended up taking most of the rest to a broker my Godfather knew.

For several years I was working long, hard hours in consumer lending and subprime mortgage lending. I took the time to read "The Millionaire Next Door" in '96 or so, and it had a huge impact upon me. By the late 90's, I had saved up some money and was able to start my own mortgage company. I sold it a couple of years later for a nice little profit.

During that time, I also continued to put a little money away each paycheck into retirement investing. By the early 2000's, I had enough money and time to start getting more active in the markets. The broker I had been using during the years from '95 on (who my Godfather had introduced me to) was an older guy who was fairly conservative, so I didn't end up losing a ton of money when the dotcom bubble popped in 2000 or so. I had mostly been investing in many of the companies that had big local footprints in my area - energy, industrials, materials, etc - lots of integrated oil and gas companies, chemical plants, etc in my area. I had also made some nice money with a few bucks in Walmart and a little upstart computer company called Microsoft. 

So I started getting into things more in the early 2000's. I read "The Intelligent Investor", and also "Security Analysis", a couple of books by Peter Lynch, and also several of Jack Schwager's "Market Wizards" books, and later "How To Make Money In Stocks" by William O'Neill. In more recent years, I've really learned a lot from books written since the crash such as "The Quants" and "More Money Than God"

The first couple of years of the 2000's were pretty tough, so I learned quite a bit from experience. Nothing teaches you better than losing a little money early on.

A couple of other things happened during this time. My father's 80-something father died, then my father died suddenly a while later while still in his 50's. I ended up inheriting parts of several properties along with other family members. I also inherited my father's debts, unfortunately, and had to sell off his assets. Luckily property values were quite high in my area at that time, and I was able to realize a nice profit on my Dad's assets.

After several years of this semi-retirement where I was basically a full-time investor, I realized that I wasn't yet quite wealthy enough to live off my own money and also have the kind of lifestyle I desired. I went back to work for another finance company for about half a year, then went on to a bank for about a year, before finally ending up working for a large broker dealer as an investment advisor / broker for a number of years.

During this time, I learned that a couple of those properties I had inherited parts of with several other relatives had turned out have a fair amount of oil and gas under the ground. This turned out to be a great thing for us!

After a few years as a retail broker / investment advisor, I decided to strike out on my own. I have managed to minimize red tape and regulatory headaches by limiting my practice to a fairly small number of accredited investors. Mostly fairly wealthy to very wealthy retirees and late-career small business owners who invest pretty conservatively for the most part.


What is your current investing style? What kind of returns are you seeing?

I suppose you could best describe my personal investment style as multi-strategy. 

Just to put things into perspective, I am an accredited investor myself. I say this not to boast, but to give others a sense of perspective. I have mentioned in the forum that I have over 1000 long stock positions at any given time. I also have a couple hundred other positions at any given time - put and call options, short stock positions, a handful of commodities ETFs, a few mutual funds in my retirement account, a handful of other investments at any given time such as REITs, a few higher yielding bonds and other debt instruments here and there, etc. 

How this plays out in my portfolio is that my very best individual long stock ideas are each no more than 5% or so of my portfolio. Any individual short stock positions are usually no more than 1 to 1.5%. The odd quick day trade or whatever - where something very unusual is happening that makes it highly likely that a substantial profit will be made at very minimal risk in a very short time period - may be 1-2% of my trading portfolio. 

Most of my positions are much smaller than 5%. For stocks, I basically have my own little "5 star" system that I use to rate any given stock based upon about a dozen metrics that are important to me. I may own as much as 6 figures worth of a stock, or as little as $100-200 into some speculative microcaps. I am a big believer in dollar cost averaging - I rarely buy more than $10k worth of a stock at a time even if I plan to own as much as $200k - 300k eventually - I will buy a little of it a time each week or month or whatever for maybe a year or longer.

These days, I have one stock I own six figures worth of. I have dozens that I own tens of thousands of dollars worth of, and probably a couple hundred that I own thousands of dollars worth of. And several hundred more that I own less than a thousand dollars worth of. 

I am generally far less active in my bigger positions - these are the companies that I tend to view as longer term investments. They tend to be larger, more stable companies. I am generally going to buy and hold far more of a multi-billion dollar company that trades millions of shares a day, trades above $20 a share, and that earns lots of money than I am of a volatile $5 million dollar biotech company that trades for $1-2 a share or less and has poor fundamentals. 

But I am often buying a little bit of that smaller company because it could be very likely to eventually shoot up much higher for one reason or another. Such that if its drug does well in trials and gets FDA approval eventually. And if it shoots up big in the future, I take profits when I can - something like buying TBRA last summer when it fell over 50% at $4.80 a share, then selling it 55 days later at $34.90 a share when it was announced that they were being bought out by Allergan. That's unusual, but that's why I buy so many of those when they sell off hard -  and buy them in such small amounts. The higher the risk, the less I'm buying. The higher the short term run up in a stock, the more likely I'm selling some or all of the stock on the big jump.

I like both value and growth, and many companies I buy often fit both categories. It is important to separate investing based upon fundamentals from speculation / short term trading. I almost always spend far more money on a solid investment than on a speculative trade.

I tend to be somewhat of a contrarian in the short term, but over the longer term I probably am more into the trends than I am into buying the companies that have been beaten down to almost nothing over many years or whatever. I may buy into the latter when I see that they may be turning around, or when big activist investors are starting to nibble at the carcass or whatever. 

But most of the time I'm buying good companies that are going up in recent years that have stumbled in the short term - some fairly recent examples I can rattle off at the top of my head include SHOP, URI, RHT, TXRH, SRPT, CLVS, DOW, WLK, WMT, and AAOI.

I have learned a great deal not only from experience and formal education, but also from listening to and reading up on the greats and what and how they do things. I've been a big follower Ray Dalio's ideas on portfolio construction. Basically having your money divided up into a number of different "buckets" of assets, so to speak. The main idea being that you're always making money somewhere no matter what happens in the markets, and that any damage to your portfolio is reasonably minimized when things get ugly. 

I typically have at least 40-50% of my money in long stock positions. I always have at least 5% in cash, typically more. I like to keep at least 5% in one or more good, solid gold ETFs. Perhaps another 5% spread out in other commodities such as silver, crude, etc. I'll usually have a few bucks in puts and calls, and I may also carefully sell a few covered calls and the odd put. I try to buy options when they are relatively cheap and when I think there is a high probability that I can make enough profit on the option to make it worth fooling with, and of course when there is minimal risk to me.

I am very careful with actual short stock positions. I tend to use them on bigger, less volatile companies. I am likely to short GE above $30 or GM above $35-40 - particularly when they shoot up usually high overnight on earnings or whatever. The chances of GE going even to $35-40 or of GM going to $45-50 after already jumping up double digits are very small. And the chances of them going up 50-100% or more overnight like a small cap biotech might do on occasion are virtually non-existent.

Bets against more volatile stocks are either handled with put options if I can buy them at a reasonable price, or perhaps with a very small, very short term short stock position in some cases. 

Some stocks should never be shorted - at least not overnight or longer - by most investors. And if you cannot get a cheap put option on them, just leave them alone. A stock that appears overpriced may keep going up. Or just because it stalls doesn't mean it will drop. A "sell" does not necessarily mean a short sell, nor does it even necessarily mean sell ALL of a holding.

Just remember that the market has a general upside bias, and that your potential downside is theoretically unlimited with shorting, and that this is moreso with smaller stocks in certain sectors and industries. No shame in putting perhaps 5% of your money in something such as SH that shorts the S&P 500 if you want to have some short exposure.

Markets are basically leading indicators of what all is likely to play out in economies. But of course they are beyond our control. If you subscribe to the theory that a stock's performance will basically be 40% market-driven, 30% sector-driven, and 30% driven buy the company itself, you can control up to 60% of the movement of your portfolio if you don't worry about the direction of the market and just focus on buying what you see as the best stocks in what you see as the best sectors to invest in at any given time.

With that said, I think it's important to not get too hung up on any one or two sectors or any one or two stocks. I think it is essential to own at the very least one or two stocks from at least 5-6 sectors. I think it's perhaps an even better idea for most investors to find at least one company they like in each of the 11 main sectors if possible.

And we need to keep our emotions in check and not get too hung up on past performance. One of the members put together a fund of my top 30 biotechs for fun. It has done very well in the past year and in recent months. But it is important to keep in mind that I recently sold out of two of those holdings because they ran up very big in short time periods - one was up 700% in the last year, and the other was up 180% in a recent month. Those big runups are not sustainable. Don't think that because your favorite stock is up triple digits in the last year that it will necessarily continue - very unlikely that it will continue that extraordinary performance very much longer - it will likely slow down, eventually stall, and perhaps reverse itself the longer it runs up so much.

Having some cash onhand and putting some cash into your portfolio each payday will allow you to buy more shares when stocks and markets sell off, and to seize new opportunities that may present themselves.

What brought you to Hashtag Investing and what do you like about it?


I was invited by a current member by the name of Baudwalk, who I've known for a couple of years from another investment forum I've been a member of for several years. I like hashtag investing for a number of reasons. 

The members here are all very smart people who seem to be doing well in their chosen professions, and have lots of knowledge and info to share about the things they do and what they have experienced. And as far as experience goes, who is more experienced than Baudwalk?

It's more active, but not so active and so big that you can't keep up with who is who and what is what. It's like a small virtual "Cheers" - where everybody knows your name, and they're always glad you came. :D

What are your opinions and thoughts about the current market?

I think the markets are pretty fairly valued. But of course they could certainly continue to go higher. It's been quite a while since we've seen a correction, and we'll see the next one sooner or later.

It's been over 8 years since the big bear market and the recession. Recessions historically typically occur every 7 years or so. I have learned to be pretty agnostic about the markets in the short to mid term, and to be cautiously optimistic in the mid to long term. 

I've learned that it is very difficult or impossible to consistently predict the broad markets very accurately. There probably aren't very many people on earth who picked both the top and the bottom of the markets from Q4 '07 to Q1 '09 to the month and within a few percentage points or so. Even Buffett doesn't bother trying to figure out what the broad markets will do short to mid term, and he's the eternal optimist longterm.

It is possible that we could continue on without a recession or a prolonged bear market for quite a while. I am encouraged by recent de-regulation, and with the way the markets seem to be holding up as rates have recently been hiked a bit a couple of times after 8 years of zero interest rates.  I just hope that we don't see another 2008 type of scenario for at least a couple of more decades or so.

The best way to prepare for whatever may come in the future is to be prepared ahead of time. Either resign yourself to a more strategic long term investment style, or else design your portfolio in such a way that you are virtually always making money somewhere in your portfolio no matter what the markets do, and are likely hedged against huge losses when things get ugly - with the understanding that you're going to likely be under-performing in one or more areas of your portfolio when one or more others are doing well or holding their own in varying market conditions. Either way, learn to manage risk, stay diversified, and control your emotions.