My Investing Strategy
Around the time we were expecting our first son, I started writing online a bit about stocks, but due to the challenges of being a first-time parent and increased work responsibilities, I was unable to sustain that momentum and I’ve been more of a lurker than anything the past couple of years, consuming all sorts of paid and non-paid writing, but contributing very little until recently. Now that we’ve just welcomed our second son, I want to get back into writing, and the natural place to start is by reintroducing myself (especially since this is a new newsletter), as well as outline my strategy and my process, at least the current iteration of it.
My name is Nick, and I write under the pen name “Capisce Capital”, a nod to my Italian roots, and also a reminder that despite all of the life experience and knowledge I’ve accumulated thus far, I have so much more to understand about the markets (and the world, for that matter). I have been actively investing since the Great COVID Crash of 2020, I got burned on a couple penny stocks after college in 2012 and missed the entire last bull run, but the flash crash was enough to pull me in, and I've gotten to relearn some hard lessons and make a lot of new mistakes over the past few years. You name it, I've probably done it. Penny stocks? Yep. SPACs? Yep (and I still hold one!). Following professional investors into positions? Yep. Trading options on earnings calls? Yep!
I'll probably plan a future series on what I call my "rookie mistakes", but one thing I've learned about myself is that some of these lessons have to be learned the hard way, with money and through experiencing the pain that comes with losing that money, or wasting that effort. Investing is a deeply personal journaly, and you have to find the playbook that works for you. I've changed my strategies a few times over the years, as a retail investor does, and I can't say I won't change again, but the key is to always be willing to adapt and learn and to treat this as more of a general framework, and not a rigid set of rules - there will always be exceptions, and there's only one scorecard; the amount of money at retirement. I no longer feel the need to compare my performance to Cathie Wood, or David Tepper, or anybody else for that matter - if I am beating the index, great; if not, I'll continue to monitor and refine my process, and if after a few years I still can't beat the market, I'll sell it all, contribute to VOO and the Qs, and just bide my time until those golden years. I contribute to my account regularly, so if I'm losing money, there is always fresh money to come in and correct my mistakes (hopefully).
When I am putting new money to work, or evaluating my portfolio as a whole, I think of my positions in four buckets:
1) Mega Caps
2) Thematic ETFs
3) Dividend Growth Focus
4) Growth stocks / Future Dividends
Mega Caps - Right now, I purchase $AMZN and $GOOGwith every pay period - I adjust how much I contribute so I can consistently purchase the same amount of each position. I use this as almost a proxy to buying the Qs; I picked Google over Apple out of preference (I'm an android guy, through and through), and also because they don't issue a dividend yet, and I expect some price appreciation if and when that announcement ever comes out, because there are a lot of dividend focused funds that own a ton of Apple and Microsoft, and not any Amazon or Google because of their predefined fund rules. Amazon's thesis is a bit similar, although I think the investments they've made the past few years will propel the next phase of their growth story, and I don't have to stretch too far to see Amazon being the largest company in the world in 10-15 years. So of the mega caps, those felt like the biggest opportunities to me. If I see some rapid price increases, perhaps my strategy would change to focus on some of the other mega caps, but right now I'm solely focused on those and getting to a much larger share count than I have today. These currently make up ~20-25% of my biweekly contributions.
Thematic ETFs - I do hold VOO and QQQ in my IRA (which is also linked through Commonstock), but I'm not actively adding to that account and so I exclude them from my strategies. I do, however, hold a few thematic ETFs, either because I couldn't decide on a stock so I bought the basket, or personal preferences. I own $CIBR for exposure to cyber security, $ESPO for exposure to gaming/esports (couldn't decide between Sony, Nintendo, etc), $EPOL and $EWI because I'm Italian, and my wife is Polish, and I believe that both countries have a lot of future potential ahead (Italy with PM Meloni at the helm can be a force to be reckoned with!). I typically add about 12-15% of my payroll contributions to these funds.
Dividend Growth Focus - I consider myself primarily a growth investor; among my largest positions are $PLTR, $AMZN, and $GOOG, and those are typically some of the positions I add to most consistently. However, I don't contribute to any retirement accounts (no 401k through work), and I'm actively contributing to this account in each paycheck, so just like the Mega Cap and Thematic ETF sections above, these are a bit of a safety net/anchor for my portfolio, which I think lets me cast a wide net and take a few more risks than I otherwise would if I just focused on my fourth bucket of Growth Stocks. This is where I'm buying blue chips, or companies with consistent appreciation and dividend growth such as $HSY, $APH, $CPRT, or $V to add a little stability and dividend growth to reap the benefits of in 20-30 years if all goes well. For these stocks, I don't really evaluate the fundamentals as close as I would my growth stocks, but I try to evaluate the safety of the dividend, the historical growth rates, and the stock performance. For example, if Visa were to double their dividend in the next decade, but the stock declined 50% (assuming I didn't add any), I'm in a huge net loss position despite the dividends I collected along the way - that's an argument for digging deeper into the financials, but for me, the investment is all about the dividend, so a low beta, blue chip stock that tends to ride the bunny slopes instead of the diamond slopes is exactly what the doctor ordered. This typically makes up 10-15% of my contributions.
Growth stocks/future dividend payers - The title of this section is a bit misleading; for example, two of the stocks that I bucket in here are $GFL and $ARIS, both of whom currently issue a dividend. I bucket them here though, because I didn't buy the stock because of the dividend, that's just a nice little feature for me. I bought into the stock because I believe in the growth prospects and being in this bucket generally means I've done more research into the company, reviewing 10-Ks, trying to understand the growth drivers, etc. I also adjusted my focus over the years to buy stocks like $TREX or #$BJ which don't issue a dividend yet, but have established businesses that generate free cash flow, and eventually will reach a point where they pivot from growth to dividends, and when they start issuing their 1-2% dividend, my dividend yield on cost should be much higher, since I bought long before the dividend came into play (this is part of my thesis with Amazon and Google, that they will spike once they issue a dividend someday, and I want my yield on cost to be > 1%).
This bucket also holds companies such as $LULU, $PLTR and $DUOL, who are likely a decade plus away from issuing dividends, if it ever; the only way I'd see a return as a shareholder would be through selling those shares, but the companies that have made this bucket are ones that I believe have long-term runways for appreciating values, and that potential outweighs the desire to buy income, especially as I'm actively contributing to the account. The stocks in this bucket make up 45-55% of my contributions.
I'm sure this will continue to change over the years, and perhaps as my confidence grows in my ability to identify growing companies that generate good returns, I can lower my "hedges" and put more eggs in the growth stock basket, but I've found this balance to be the right fit for my risk tolerance today. As I said earlier though, I treat this as more of a framework than a ruleset; I don't have a lot of hard rules in my process as I believe each company should be evaluated independently.
For example, I know people talk about selling if their stock drops below the 200 day moving average, or never averaging down on losers - I first started buying $PLTR between $20-25; if I didn't average down when it was in the single digits, I would have been underwater for the last two years on that position, rather than being up over 60% when it hit its 52-week high earlier this year. My time horizon is medium to long term for most of these positions, so if there's a short term opportunity to add more shares at a lower cost, and my thesis hasn't been broken, why wouldn't I continue to add? I think the only hard rules I've got at this point are 1) no Chinese companies, and 2) know the thesis breaker for your position, so you know when to sell.
I plan on this newsletter being more of a personal journal of my investing journey than anything, whether that be my research notes on specific positions, or an update on why I bought/sold something, or just observations of the markets as a whole. I hope my notes can be of use to others, and that subscribers can gleam value out of my time and energy, but I don’t ever plan to put this behind a paywall or get paid for this, or be any kind of financial advisor. But it will be valuable to me to go back and re-read some of my analysis, particularly ones that I get wrong, so that I can try to figure out why I got it wrong and prevent it from happening again. Welcome aboard to all of those who want to follow along! You can find me here, on Twitter/X, and on Commonstock under the same name - you can even view my entire portfolio, which includes activity from both my taxable account (actively contributed to and individual stock focused) and my traditional IRA (no new contributions, VOO and QQQ-focused). I look forward to engaging with all of you!