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Stocks as a business

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Anything related to investing, including crypto

ljean

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A few years ago I was browsing the bizbuysell listings looking at different businesses to potentially purchase. A few stuck out at me but I ultimately decided I didn't want to buy myself a job, deal with employee and customer hassles, and have my assets tied up in something relatively illiquid. And frankly, most industries I dont know the first thing about. Then it dawned on me that there are thousands of businesses offered for sale every day that are managed by hard-working, well-paid, industry-leading executives, requiring no input or decisions from the owners, and are extremely liquid. Obviously I'm talking about the stock market. Let me tell you a bit about the businesses I own as of today...

Forty-one industries with 55 companies: aviation services, car dealerships, plastic manufacturing, electrical product manufacturing, auto parts retailing, business consulting, recreational marine products, pharmaceuticals, sporting goods retailing, fashion retailing, a financial exchange, home building, plastic molding, ag & heavy equipment production, electronic sensors, medical diagnostics & testing, television, oil & gas, retail footwear, gifts & flowers, basic apparel manufacturing, sporting goods manufacturing, toy & games developer, medical imaging, executive search advisory, steel wire manufacturing, RV dealership, broadband internet, laboratory services, building products, commercial real estate brokerage, healthcare services, wristwatch distributor, nutritional supplements, residential real estate brokerage, chemical manufacturing, boat dealership, commercial truck dealership, trucking & logistics, paper manufacturing, firearms, diamond jewelry, auto parts manufacturing, heavy equipment sales, alloy steel, bedding manufacturing, mobility infrastructure, home goods retail, and marine shipping.

Looking at the TTM financials of these businesses, my current share of revenue is $2.7M with net cash flow of $405,000 per year. That is a net profit margin of 15% and YoY revenue growth is 24%. The value of these interests today is $2.26M which indicates a cap rate of 18%. I borrowed $680,000 of that amount from my stock broker at 1.13%, which pushes my theoretical cash on cash return to 25%. However, this is the stock market after all and if the stock price doesnt go up, it makes no difference how much money these businesses happen to generate in the future. I expect around half of these investments will not work out for one reason or another and anticipate a more realistic return to be about 10 to 15% annually. I started this experiment a year ago and am up almost 70% since then so there is a lot of room for it to go down, or a lot of time ahead for it to do nothing to fall in line with the expected return.

I'll post updates here from time to time.
 
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ljean

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People are losing their minds across the interwebs today because of a -2% drop in the S&P. Here is a table that summarizes the frequency of large negative daily returns of the S&P over the last 100 or so years.

Untitled.png
 
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socaldude

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It’s just normal.

As a trader I’m directionally and emotionally indifferent. I just try to be rational while trading in an ether.

Although I did make pretty good money today on that drop. We’ll see if the 50DMA can hold as support. The VIX futures term structure is flat. So we might see more selling.
 

MJ DeMarco

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Getting clobbered today, down 6 figures

Thank you for the honesty and candidness.

In the 14 years that I've managed this place, NO ONE has every updated their trading thread to report losses, unrealized or not. They only report wins which makes virtually all those threads worthless.

Any plan? Or HODL? Or add more?
 

ljean

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Nothing to do today. If the market continues down next week I'll start to lighten up a bit.
 

socaldude

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We should make a thread on the worst investment decisions we’ve made or the worst unrealized losses we’ve had. I have a few embarrassing ones.

Although that VIX was definitely on to something if we were higher in both SP and VIX.

Don’t trade unless your not willing to get some form of PTSD LOLz.
 
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ljean

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I'm heavy in oil which got totally crushed today.
 

thechosen1

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I’ve chased BGFV (big five sporting goods) for months now and have both made a mint and been clobbered multiple times. It is nice to see the candidness.

I think index funds are lame but they have been the most consistent performers for me... still, way too slow of a way to wealth compared to a business.
 

ljean

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I’ve chased BGFV (big five sporting goods) for months now and have both made a mint and been clobbered multiple times. It is nice to see the candidness.

I bought BGFV last year and rode it a long time. Doubled my money then sold. Got back in about a month ago and gave back a bunch of the gains.
 
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watchopt

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We should make a thread on the worst investment decisions we’ve made or the worst unrealized losses we’ve had. I have a few embarrassing ones.

Although that VIX was definitely on to something if we were higher in both SP and VIX.

Don’t trade unless your not willing to get some form of PTSD LOLz.
Last year I quit my job. With very little knowledge about stocks, followed turtle trading and added in some day trading and made gains up to 27% in three months. Since then it is almost like I lost my mind or the electrons started up against me because I am down -15% . Ugh. Now I am here looking for another way to create wealth.
 

thechosen1

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Last year I quit my job. With very little knowledge about stocks, followed turtle trading and added in some day trading and made gains up to 27% in three months. Since then it is almost like I lost my mind or the electrons started up against me because I am down -15% . Ugh. Now I am here looking for another way to create wealth.
I think the key is to be conservative. Larger accounts help. If you make a 0.5% return in one week on $1,000, that’s only $5. But if you make 0.5% in a week on $200,000, that’s $1,000, and adds up to $52,000 per year.

This is more for trading. Options especially.
 

socaldude

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Ugh. Now I am here looking for another way to create wealth.

My biggest mistakes came from “trying to make money” rather than focusing on a competitive edge or value.
 
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100k

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I should have listened to MJ.

Don't make your money in the stonk market. I'm basically bankrupt because of GME.

I made some quick gains due to AMC and another stonk, but then I put muh money on GME and lost it all.

Now I gotta go and look for work like a common plebe... no offence to all my plebes out there. :)

But yeah... MJ knows his shit. :D ahahah sometimes you just gotta learn the hard way.

Lucky for me it was only $30k ... but to me that was all the cash I had and it was allowing me to have time freedom ... oh well, back to start it is.

:p That reminds, me I gotta update my journey thread on my profile page.

Good luck to ya OP. Hope it works out, be conservative. Don't get greedy.
 

watchopt

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My biggest mistakes came from “trying to make money” rather than focusing on a competitive edge or value.
I agree. Thank you for the reminder. I like the concept of changing my pens too so I put notes on my laptop keyboard to remind me. Though, as you can see I am still not changed, by what the off-the-cuff moments produce from this mind. Currently building a content creation value system to help me get more personal with the thought structure of 'value'
 

MJ DeMarco

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be conservative. Don't get greedy.

Don't think it has to do with conservatism or greed, but intelligent investing and intelligent decisions. Making bets on "meme" or "herd" stocks is not intelligent investing, it's "greater fool" investing.

It's like jumping off a cliff...

There's no good reason to jump off a cliff. However, if you see everyone in front of you jumping off a cliff, suddenly it seems like a good idea, and critical thinking goes out the window.

Intelligent traders can make money, however, I wouldn't call anyone a "trader" unless they've traded through downturns and sideways markets. In the last ten years, a monkey throwing darts can make money... the wheat is separated from the chaff when the markets start to slide downward or sideways for a duration.

Many young gen-Zers and millennials have never lived through a market period that DOES NOT GO UP. When that happens, it won't be pretty.
 

Ing

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I m invested ETFs and I switch that to Cryptos slowly. Its my life savings and I think, with cryptos I can make a better investment. Time for that is next year at beginning of the crypto winter. I have some money in Cryptos already for learning.

So 3 weeks ago my son talked me into a basic course about chart patterns. I didn’t believe in that, but my son insisted in it.

So I prooved my crypto investments for the patterns. Saw a decend head and shoulder, sold and saw the chart crashing 3 hours later. Maybe luck or not, but it brought some k for now.

2 weeks ago I saw some bear shit in my main ETF chart. I googled a lot for Dow Jones and crash and, yes, I decided to sell nearly all of it.
No crash and last week I thought about buying in again. Until Friday. Well I ll wait another day or two to buy back.
And maybe it was luck or not, I ll have a look on the chart patterns in the future, too.
 

ljean

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Speculation & trading is not investing. Traders with their indicators and charts and patterns and whatnot are fooled by randomness for the most part. Without a definable edge, any trade is pretty much a coin flip. You can do ok if you keep your losses smaller than your gains but most traders have a need to be "right" and are quick to take small profits and hold on to losers far too long.
 
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Ing

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Speculation & trading is not investing. Traders with their indicators and charts and patterns and whatnot are fooled by randomness for the most part. Without a definable edge, any trade is pretty much a coin flip. You can do ok if you keep your losses smaller than your gains but most traders have a need to be "right" and are quick to take small profits and hold on to losers far too long.
Yes, right!

Than your 6 figures aren’t worth a rant, because as an investor you ll sit that out! In Stock market you should nt make your money regarding the worth of the stocks, but the rewards. Think that are called dividendes. Independent of a covid caused black friday!

Sorry I wrote my 2 cents! Im out that thread.
 

ljean

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I'll sit it out until I dont. Every position has a point where I say its time to get out regardless - something is not right. Otherwise the risk is it goes to $0 like so many have in the past. Even if its not going to $0 there is an opportunity cost to having the capital tied up in a position going down or nowhere.
 

100k

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You lost all your $30k on GME? And now you have to find a job. How did you make the $30k? Savings?
Let's just say I used my credit. Yep, I know... but the fat juicy premium were just sooooo tempting and I had a good run while there was a bull-run.

I'm staying out of the stonk market for the next few years. Lesson learnt the hard way. Thanks MJ.
 
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ljean

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2021 year end update:

Currently have interests in 82 businesses.
Total value is $3.1M
TTM revenue is $3.38M, 30% growth yoy
TTM cash flow is $435k
Net profit margin is 12.9%
Cap rate is 14.1%
Cash on cash is 20.6%

Realized gains = $270k
Unrealized gains = $309k
Dividends = $47k

2021 time weighted ROR = 41%
 

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