Welcome, everyone. It is time for another update of the story fund. I'll show you the damage, what's going on with. It is a lot of red across the board as we seen with the markets, we're also going to be diving into some of the scarier news going on right now.
I've tried to avoid talking about this, mostly because I'm not a political commentator and I'm not going to be in this video, but I do want to just highlight some of the things going on to give context to why the market is reacting, the way that it is. I think it's somewhat important, but as we've seen today, we have more red days in the market. Days across the board, especially for the QQQ.
The high-growth companies. This is largely been a transition from growth to Value. From speculative to non-speculative, from cash, losing businesses to cash, making businesses free cash, flow companies. That's been the transition going on. We can just see today across the board. Most things are in the red. We have Healthcare holding up, okay? And energy holding up, okay? So the energy trades doing well, as apparently prices are going to be going up. We can look at The specific
index is here. We have the S&P 500 year-to-date down 10.72 percent well into a correction at this point so that doesn't look too good. That's the S&P 500, the mixture of value and growth. In this one index, the top 500 companies, then we have the QQQ, this tilts more towards growth oriented companies, technology companies in this one's down a lot more significantly, more down. Sixteen point eight, two percent compared to the S&P 500's 72
percent. So basically right now, no matter what you're investing in unless you really did some like specific trades and to a couple commodity Industries, you're probably trading down, your portfolio is probably going down across the board, but it's going down a lot more if you're in these growth oriented companies and that's a situation going on right now, with my portfolio, I have a portfolio here full of growth oriented companies and it's currently down ten thousand
five hundred dollars which is sixteen point two. Four, Sent money, waited, if we calculate this based on a time-weighted basis with the S&P 500 compared against the story fund, this is what it looks like. You can see back in kind of November held up for a little bit. And then early this year, the end of last year, the performance started to divert, that's when I got hit with the cloud companies and I did some things to try to avoid, try to minimize losses during this time
period. And I'll go through that, but you can see that my portfolio started to sell off the S&P 500. Held a better. But now even the S&P 500, and a lot of the bigger companies started to sell off. We know that I got hit with companies like Ali, Baba Netflix was an aggressive sell-off, nothing I've ever seen before with a company like that. And a lot of people thought, Men
Netflix was terrible. You know, look at you investing in Netflix at a high valuation and then Facebook got chopped in half, and then PayPal went down, you know, 70% companies that were established companies that were at reasonable valuations are getting depart, you know, their valuation 20% 30% in a day. And we saw that happen over the past couple of months. My portfolio has somewhat paralleled, the S&P 500 on the way down. It's kind of actually over the past week, just Fallen to the
same extent. The S&P 500 has fallen over the past couple weeks from 20% to 10%. My portfolio has fallen from the three or four percent in the green to 7% in the red so both of them have fallen around 10 percent over the past week. Kind, In parallel, but I'm still trailing it. So, the hope is over the next five years. I can close in this Gap. I'm trailing spy, by around 12% right now, and I need a closing
that Gap eventually. So when I look over the past six months of my portfolio that performance in the actions I took, and I try to do some introspection and some analysis on it. I come to the conclusion that there's some things, I did write that I did good, that were smart things to do, and other things that I could do better mistakes that I've made, I want to go over those the things that I
think I did, right? Right was companies that I invested in based on their fundamentals and growth prospects that had enormous price increases enormous momentum carry their price up even further than their than their fundamentals. Would imply that last scene is the best example. In March of 2021, it went from 200 dollars. A share to November being 450 dollars, a share, it went up a hundred percent in the course of
six months. That doesn't happen that often and it wasn't Because of anything dramatically different with the company. There's no huge fundamental shift. Making this company worth twice as much. So the good thing I did in this situation and this is where I think I got it, right. The purpose of investing is making Investments. Then when they go up in value to wear their overvalued, where people are giving you very attractive offers for the company, you got to take some of those offers.
And I did, I took some of the gains with that last and in fact, the majority of them and that helped preserve the gains. So then one momentum eventually shifted and it moved the other direction. I didn't go down with those losses, right? I preserve the gains that I had. That is decent investing buying and holding does not mean you buy a company and you hold it no matter what. Even if it goes up 300% way above its fundamentals Warren Buffett to buy a Buy and Hold investor.
But if he gets such a good offer for a company, if they're willing to give him so much money for it, that it's way above its, it's overvalued. He'll take those offers you'll say okay, I'll take that money and I'll Somewhere else and I think that's what I did. Good, that's where I got it, right. A lot of them are speculative companies that I could see. We're moving up just far past their fundamentals, there's so much momentum.
Carrying them up, I locked in gains on a lot of those companies and that's the reason that I'm not more in the red, I'd be far more in the red, I'd be down 20,000, 30,000 if I
didn't lock in gains. Another way of viewing, this is my current Holdings. I'm down twenty thousand dollars on. But the reason that my overall portfolio, Leo is down 10,000 is because the previous Holdings that I had were in excess of 10,000 dollars in gains that I locked in. So selling these companies at a high made it so that I didn't have twenty thousand dollars of losses. I'm only down 10,000. So that's something where I think I got it, right.
I think I did the right thing, six months ago by taking a lot of gains in these more speculative positions as I could clearly, see the valuation diverged. So much from the fair value that it was not even close come. Like atlassian, where way, overvalued with 50 plus price to sales ratios. Even companies like Peloton which I was very excited about the fundamentals of the company, the future outlook. You know, this Dynamic change to
exercise and that type of thing. But it got to the point where it was a fifty billion dollar company and I just kept thinking 50 billion dollars for this company. That's so much money and I realized once demand had any issues. Once the story would change at all, I wanted to take gains because I thought that investors are going to be offering more money for this in the future. Future and I'm very glad I did. That was a mistake.
I think that Peloton will take years if ever to get back to its previous highs. There's a good chance. It will never return. So that part, I think I did correct. And I think I can even learn from that and do that more in the future. If you have a company that you invested in and the fair value goes like this, and the price goes like this and the price becomes. So overvalued, take some gains, it's okay. To even if it's a good company,
you'll have other opportunities. Is there will be time where people aren't so bullish on that particular company. And so if the fair value goes up slightly but the price goes up dramatically, you can take advantage of those mismatches and that's something that I did do. Now when I try to determine where I have the most room for improvement and where I can learn from, there's a couple different things that I've really hurt my performance of my
portfolio. It's three different Holdings that have really affected it spotify's one of them, this one, in my opinion, the company fundamentals have been, oh, Okay, the problem was valuation. So I bought it after it had kind of the hype of the podcast in The Joe Rogan joining on board and now that hype has gone away and it's shifted in the opposite direction of Joe Rogan being a problem in controversy and artist leaving, that's cause the stock to trade down 50% for my
by price. So that's been painful for this holding. I could be buying it at much cheaper prices today. So at this one, I should have been a little bit more patient and not bought it when there is such hype with the company. I was buying in with a lot of hype of other investors and of course when that leaves you get hurt. So Spotify in terms of fundamentals, I remain very bullish on. In my opinion, the things with Joe Rogan will pass over time. There's new concerns that will come up.
Spotify is growing their user base by 20%, they're active users by 20% their premium users by 20%, their revenue by 20%, they're growing overall, the Outlook looks good, but the different still stands, I could be buying this company at much
cheaper prices. Today than my initial buys by as a little bit more patient and look for a little bit more favorable entry points to it. So, part of the dip finder and that tool that I've been building allows me to see when sentiment is actually negative on the company buying in when it's at a dip, not when it's on a price search. And I'm going to be more aware of that in the future. The next one is Ali Baba. I've bought this company, I think two or three different times.
I did an initial by knowing that there's a good chance, it might drop in the short term, then it dropped a lot. I did another by then it dropped a lot more. Get another small by. So I've dollar cost average into this one, the original thesis of Ali. Baba was to buy when others are fearful to be greedy. When others are fearful with great companies, like Ali Baba, that the fundamentals are good, but the sentiment surrounding it
are poor. So my thesis on this was, I'm buying a company that has terrible sentiment, but the company is foundationally and fundamentally strong. That represents Ali Baba, what I didn't give enough Credence to what I didn't evaluate enough and where I think I made the mistake With this is how persistent the issues with China would be. They are not going away quickly. I thought they would go away much faster than they are.
The Chinese government is still in the way of this whole and going up. And I think it might persist for a very long time, so I got that wrong with my analysis, Ali Baba, although it's a great company and fundamentally sound has extra risk factors instead of companies within the u.s. like Amazon, that really don't have this risk factor of the Chinese government. And so it's just another hurdle for Another hurdle to go past and I think that makes it a more
difficult investment. Another thing that I do think affected, this investment was, I was more reliant on external forces with this investment. I'm more reliant on other people's research, I don't use Ali Baba. I don't have any familiarity with the product or services, I don't really have Hands-On research for the company and I was Reliant also on Charlie Munger and his thoughts on China and whatnot. So I was relying on third-party analysis. And perspective on the company.
And to me, I don't really understand this company as much as I should. So I violated that rule as well as not not investing in something that I have direct Hands-On understanding of like, Peter Lynch. So often talks about. So, in the future, I'm going to be investing more in companies where I have a Hands-On understanding of companies, like Amazon that I really myself. I use them all the time. The other one is igv.
I'm in the red on this one. I don't really consider this as much of a mistake because it's just an ETF its Market waited. It'll rebalance over time and I never try to time ETFs, really? I don't spend a lot of time trying to time entry points into ETF. So this one is down five thousand dollars, right? It could be going better.
It's a software ETF, but I plan on holding this throughout the duration of this portfolio and I think as momentum shifts away from it right now, it'll eventually shift back and this rebalance is market cap weighted. I think he'll do fine in the future. The big company that I really made a mistake on was Netflix. It's apparent by the eight thousand, five hundred dollar
lost so far. Now, Netflix is one that I was pretty blindsided by, they shared slightly lower guidance, for a growth company and that caused the stock to sell off 20% in one day. Now, Netflix is still a highly debated, highly argued company. There's investors that think that it's essentially worthless, it'll never be cash flow, free cash flow generative, it will never give shareholders returns and that's a valid perspective, they have decent Arguments for
that. There's other Sisters that are great. Investors like Bill Ackman being one of them that sees value here. Out of all the many companies that sold off. Recently, Bill Ackman bought a billion dollars of Netflix over the other mini available options. So, Netflix is a stock that has a ton of disagreement. Now, in my opinion, the thing that I did wrong on this one was obviously I was buying into a company that it's questionable
about how much free cash flow. It's going to generate during a time when liquidity is being moved out of the market and Investors are becoming more concerned about these very type of companies. So the time that I bought this was very poor choice and timing and that hurt my performance like crazy. I wish I could go back and do things differently, we can't do that.
When I look at this now and I look at the situation now with Netflix. I feel like I'm in the same situation as a lot of Facebook investors that had that as a major holding your down on the stock and you're trying to question whether or not this story in the fundamentals have really shifted. When I look at Netflix and I assess the beer case, in bulk case, the bear case is that Lex has never been a free cash, flow generative company. This is their free cash flow quarter-over-quarter.
You can see that it's not much, and over the past three quarters are losing more cash, right? So they're never going to be a business that generates a lot of returns for their shareholders. The bear cases also that the entertainment and attention-grabbing economy is overly saturated, you have Amazon Prime, you have Netflix and Disney, and Comcast and YouTube, and Tick-Tock and Facebook, and all these things trying to grab your attention. Ian Netflix is just one of them
and it's overly saturated. There's only so many people only so many hours in the day. This company can't really doesn't have a lot of room to grow and it's just way over saturated with competition. I think that's actually the best beer case, that's probably the strongest beer case for Netflix. The Bull case, is that the company's going to be free cash flow generative that they'll continue to grow their revenue over time. They'll continue to gain
subscribers. They'll continue to be able to do price increases, the global Tam remains. Large. If they get the 350 million subscribers, their revenue will grow consistently into a large extent, their ibadah looks very good. This is their ibadah and the bull cases at the free cash flow with the scalability of their content and the growth of their revenue that the free cash flow will start to resemble their ibadah over time that's the bull case of it.
Now when I do analysis of where I sit down with Netflix I try to see if the story has really changed. The price has changed a lot but has the story changed. I keep coming back to believing that right now. The story has not changed significantly enough for me to exit this position and realize the losses. I don't think All Is Lost. I agree with a lot of the arguments that Bill Ackman recently made the company still
has a large cam. There's still a lot of people that want high-quality entertainment across the globe. Netflix has a good International strategy. They will have periods of slow growth, but they've had that before. They'll also have periods of fast growth, right? If things go good or they have a break, Series. So in my opinion, the bull case hasn't changed that much if Netflix continues to grow and really does get the 350 400 million worldwide subscribers.
The company will generate free cash flow and the investors looking for that free cash flow will probably jump back on board. So as of right now, I think it was a mistake to put so much money in this company, right? As this transition was happening to more free cash flow, generative businesses. But in terms of where I stand right now, I don't plan on exiting this. Ian, I have to get more of a real confirmation that the
Dynamics have changed. There's things I didn't see in the company, there's too much competition and they're really never going to grow free cash flow if that happens and I get confirmation that the company's fundamentals really have deteriorated and the company really will never grow to be free, cash flow generative and that case, I'll realize the losses and look for other Investments. So that's a quick update on my portfolio, looking back over the past three to six months in summary.
The thing that I think I did right was when the Price moved up way past the fundamentals of many, of my companies. Taking gains, that's important to do. If the price surge has passed the fundamentals in the valuation that supports the price. That's a time to take gains when everyone else is being greedy. That's when you can take gains and protect your gains for that company and conversely over time that price will start to move
back to the fundamentals either. The fundamentals will surge up and match the price or the price is going to come back down. And for all the companies that I took As on the price, went back down to more closely match, the fundamentals. So that's just another way of saying, be fearful, when others are greedy, when sentiment is so positive on a company and the price is just surging and you're looking at the price to sales ratio in the PE ratio in you're going, wow, this is really
something else. These companies are going up like crazy. That's a time to be a seller and take gains. You can get 20 30 percent gains and companies that are going up. Because a positive sentiment the time to be greedy and start buying is when the price is way. All the fundamentals when it's selling off like crazy when nobody wants to touch these companies. I look at days like today. This is the dip finder. This comes with the patreon membership, but look at my
portfolio today. For instance, we added in a thing that shows you the current percent change on every holding updated every five minutes. And this is the daily percent change. So I jeebies down 2%. Netflix is down, 1.7% Google's down point, eight percent, Amazon's down 2.8% Ali, Baba's down. 2.4% Microsoft is down 2% and look over all the momentum with these companies twillie is down 48 percent from its 200-day. Moving average Facebook is down, 39 percent, spotify's down, 36
percent, Baba's down 32%. These are all in substantial dips. The only company out of my entire portfolio in the story fund. That's not in a massive dip. Is Apple, Microsoft is holding up, okay, it's only down three percent but apples, the only one that's not in a dip this show. You, how much momentum swings from one direction to the other six months ago? These would have all been above the zero, x axis, they would
have all been searching. That's the time to take gains when positive momentum is heavily baked into the price of the stock. When sentiment is so incredibly positive. That the price is just soaring. That's when you should be more fearful and take gains with these companies. Now's the Time to actually be buying them. This is the time to be greedy.
People are fearful right now. There's lots of bad news going on. All these companies are in massive dips, they're selling off more and more every day. And, in my opinion, I think every one of these companies is oversold, they're all Cloud companies have been punished for the past year. Now that doesn't mean that the price can't continue to move down. There's a high likelihood of it. Momentum moves One Direction for
a long period of time. But what we're seeing right now is instead of the price way up here, way above the fundamentals. Now the price for many of these companies is way below the fundamentals, way below their fair value. So Now's the Time to be greedy 6. To go was a time to be fearful. Now, moving on from that, I want to also share some thoughts on current events with the Ukraine crisis.
What's going on with the world? How this ties in with China and Russia and how I view this in terms of investing if I make any changes to it. So this is a good summary of the situation. I want to read through this. Which summarizes what's going on? I think in a very concise way, Russia's audacious military mobilization in and around, Ukraine is the first major 'scrimish of the New Order in international politics with three major powers. Is jostling for position in
ways. That threaten America premise. See the challenges are different than those the US and its network of alliances faced and the Cold War Russia and China have built up a thriving partnership, based in part on a shared interest and diminishing the u.s. power.
Now they also go on to highlight how things have changed dynamically between now in the 1950s, Russia is a critical gas supplier to Europe. So they're actually supplying fuel to all of Europe. That's a pretty powerful position to be in. China isn't impoverished war-ravaged partner but rather the world's manufacturing Powerhouse with an expanded military in deploying a huge Force against Ukraine. President Vladimir Putin is demanding that the West rewrite, the post-cold war security
agreement for Europe and demonstrating that Russia has a military capability to impose its will despite Western objections and economic sanctions. So he's basically saying that we're going to be doing this whether you like it or not to do this mr. Putin shifted military units from Russia border to China showing confidence in the relationship with Beijing. The two powers and effect are coordinating to reshape the global order to their advantage, though.
Their ties, stopped short of a formal alliance. So I think it's clear that Russia and China do have shared interests with each other. They both want to be more powerful and they can leverage their relationship to accomplish that. But it also says it stops short of the formal alliance. I don't think they have 100% trust with each other. The probably still a little bit
skeptical. This emerging order leaves the u.s. can Ending with two adversaries at once in geographically, disparate parts of the world where America has close partners and deep economic and political interests, the Biden Administration now faces, big decisions on whether to regear its priorities Step Up military spending demand allies, contribute more station additional forces abroad and develop more diverse energy sources to reduce Europe's
dependence on Moscow. It's a lot of different options that they're trying to take. So that's a quick summary of what's going on right now. It doesn't sound good. It sounds like a lot of Bad news. It's a lot of scary news, frankly. And I don't want to diminish it in any way, this is really important stuff. It changes the Dynamics and it changes our future. It changes the positioning of all the super powers and world powers. So I think this is incredibly important stuff.
I don't want to diminish that in any way, but one thing that is I think always the case with investing is there is always something to be concerned about all the time that never changes. That is something that is going to The case forever. We look at this advice again from Peter Lynch and I reference him all the time. He has this advice that I think is classic and it just lives on throughout every single year,
every generation. Because it's so consistently true, in the stock market, the most important organ is this not work, it's not the brain. There's always on the way to work the amount of bad news you can hear is on for the infinite now. So question is can you take
that? I mean, do you really have faith that 10 years, 20 years, 30 years from now, Common Stocks replace the be do you have the stomach to invest in companies through all the bad news because we know from now on the way to work, we're going to hear an infinite amount of bad news. What's going on right now with Russia, Ukraine, China, all the positioning, The Invasion, all Is incredibly bad news that again, I don't want to diminish but have you noticed something
over the past month? Have you heard a thing about Omicron about a pandemic? That was literally killing hundreds of thousands of people, the virus spreading has gone down to almost, you know, below where it has been historically. It's almost not even an issue anymore, nobody even mentions it anymore. The news seemingly overnight shift it from Omicron to the next scariest thing. The new scary thing, Russia, and an invasion in China.
Now, the 24-hour cable companies and all the news are reporting on that issue, 24/7. Because this one's done. It's old news, even though just a couple months ago, this was the scariest thing going on and the News was emphatic about this as well. So the only thing that's really consistent here is a fact that there is always something to worry about. There's always something bad in the news and you don't want to diminish any of these individual
things. This month, it's Russia, Ukraine. It's China and World economic powers and positioning and politics. Last month, it was Omicron and a deadly pandemic. You know, the next couple months is can be something different. It will transition back to interest rates that will be the big scary thing. The news makes money selling the stuff, they make money talking about it, 24/7 all the time, and getting everyone else to talk about it.
That's how they generate money. That's how they run their business. When you're investing in these companies, the time to be buying is when people are fearful. Those are when the opportunities exist. So, that's my thoughts for now. I'll see you in the next one.