Specific STOCKS investments

Investing / Portfolios
1

Hi there,
I know that the “standard” Mustachian investment strategy is to go with the Low costs ETFs (Vanguard and the rest) as an example I’ve been following the thread on Mustachian portfolio

I was wondering how many of you go asign a part of your portfolio for specific stocks investments?
As an example, I’ve invested in STX with good returns > than 20% in 1 Y

2

There’s nothing wrong with picking individual stocks if you accept the higher risk, have the enough free time, energy and desire to learn about the markets and research your companies. But for the more lazy and relaxed investors low cost index funds are the way to go.

I have about 30-40% in some 30-odd companies currently. Mostly IT, staples and healthcare, which feels to me like a safer mix than general market. Bought a good part of these holdings actually only near the turn of the year: I didn’t feel like investing any more in the continuously non-stop rising general market, but staples and health care were lagging and I saw some opportunities there to park 13-th salary and bonus. Buy and hold growth-oriented investing style, which is pretty much enforced by the local swiss tax system with its 0% capital gains tax, ginormous 30+% marginal tax I’m paying on dividends, and penalties on frequent trading

Considered it, on one hand it’s undoubtably quite profitable, which is not something you can say about a random stock (one reason to dislike cap-weighted index funds). Very rewarding to shareholders with such massive dividend and buybacks. But:

  • Business sustainability is a big concern. They are a 100% HDD maker, and HDDs is an aging tech under growing threat from SSDs, which are superiour in every way except price, but become cheaper faster. One day, HDDs will be obsolete like VHS. Their sales are already in decline. Whether this has been sufficiently priced in is the big question, I think maybe not enough and it’s not just my opinion: it’s got a pretty large 13% short float.

  • Seems too cyclical to my liking. Look at their 2008 performance - they got decimated in there, sales, earnings, stock, everything went straight down the toilet, yikes…

3

I am also invested in specific stocks, using a value framework. The main bulk of these stocks are Net Net stocks (see here for a description).

Like Hedgehog, I am taking full advantage of the fact that capital gains are not taxed in Switzerland. So far I have very good results. However I could only test it over 1 year, which is obviously not enough to have a clear view of the strategy results.