In an earlier post I shared my thoughts on portfolio sizing.
I have backtested a simple strategy that scales exposure to Berkshire based on P/BV - with full exposure at 1.2 BV (buyback limit) and no exposure at 2.0 BV. The latter is the best proxy for intrinsic value that I can think of that does not benefit from hindsight.
A not-very-precise backtesting of this strategy with 100 shares (1 lot) as a step yielded slightly better results than having constant full exposure to BRK. The average exposure was slightly above 50%, thus interest income from cash or investing on small margin could increase results.
For harder-to-value stocks, I will:
I have been setting up limit orders on both sides of my current positions according to this system for some time, and it seems to work reasonably well. It captured recent dips and spikes on VRX and GILD, and a smaller one on BRK but is still recovering on KORS. I am still thinking about exposure during earnings announcements (esp. after hours). And also I am deeply thinking about Matt Levine's remark that having limit orders laying around is akin to giving away free options.
For couple of reasons I plan to spend much less time researching and tracking my investments from now on. The first one is that I am increasingly wary about overall valuation of US stock market and USD. As (hopefully) stock prices catch up with my intrinsic value estimate, my sell orders would execute. In last few weeks, my leverage on IB account already went down by ~20% thanks to that.
The second reason is that I came up with a small project that I want to spend more time on going forward.
I plan therefore to periodically update my valuations, post portfolios and reenter known stocks when prices drop, but do not research new companies and spend less time tracking developments in existing investments. I will perhaps also shift away from USD, possibly into some european or EM ETFs, but I am not yet sure about their valuations. I may even consider US fixed income given higher rates, but probably with short maturities.
I have backtested a simple strategy that scales exposure to Berkshire based on P/BV - with full exposure at 1.2 BV (buyback limit) and no exposure at 2.0 BV. The latter is the best proxy for intrinsic value that I can think of that does not benefit from hindsight.
A not-very-precise backtesting of this strategy with 100 shares (1 lot) as a step yielded slightly better results than having constant full exposure to BRK. The average exposure was slightly above 50%, thus interest income from cash or investing on small margin could increase results.
For harder-to-value stocks, I will:
- estimate lowest possible price and plan full exposure at such price
- target zero exposure when price reaches intrinsic value estimate
I have been setting up limit orders on both sides of my current positions according to this system for some time, and it seems to work reasonably well. It captured recent dips and spikes on VRX and GILD, and a smaller one on BRK but is still recovering on KORS. I am still thinking about exposure during earnings announcements (esp. after hours). And also I am deeply thinking about Matt Levine's remark that having limit orders laying around is akin to giving away free options.
For couple of reasons I plan to spend much less time researching and tracking my investments from now on. The first one is that I am increasingly wary about overall valuation of US stock market and USD. As (hopefully) stock prices catch up with my intrinsic value estimate, my sell orders would execute. In last few weeks, my leverage on IB account already went down by ~20% thanks to that.
The second reason is that I came up with a small project that I want to spend more time on going forward.
I plan therefore to periodically update my valuations, post portfolios and reenter known stocks when prices drop, but do not research new companies and spend less time tracking developments in existing investments. I will perhaps also shift away from USD, possibly into some european or EM ETFs, but I am not yet sure about their valuations. I may even consider US fixed income given higher rates, but probably with short maturities.
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