Tag Archives: #Runway

Why few win big

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What?!

bl-5.

Some kind of code word?

No. More like a nightmare recap.

Say it again.

b for bravo. l for Lima. minus. 5.

What is it then?

A horror list.

One’s worst performers.

Why have it?

You pull out this list upon expenditure that crops up. Any kind of expenditure.

And then?

See if anything high-conviction shows up in bl-5.

Yes?

Disregard for now.

Look for anything low-conviction. Discard to the tune of expenditure.

Don’t you use income against expenditure?

That’s the whole thing. Income needs to go into something currently high-conviction.

Fresh purchase?

Yeah.

Why?

Good money needs to chase good things.

Worst performer money with an issue needs to take care of outgoings. This way the folio cleans up. Gets weeded. On auto.

Well, let me tell you, no one is going to do it like that. So inconvenient. Like using a leg to scratch a head.

True.

Winners do things differently.

A few people win in the market.

Very, very few win big.

To win big, almost everything we do needs to be…?

Done differently.

Correct.

Like bl-5 implementation.

Bitter pill, but if you say so.

I insist.

At least tell me what bl stands for.

Well, one’s portfolio – listed – in ascending order of performance. Cut off list after the 5 worst performers. Pinpointed info. Nothing more pulled if not required. bl is just a command I use on AI to initiate the pull. You can name the list whatever you want.

Can you finally please tell me what the bl stands for, for you?

Sure. Invert the list. bl5 command prints the five best performers. That’s my ‘buying(b) list(l) 5(best performers, no minus here)’.

My spare funds go into these.

Into the same ones again and again?

No. As you keep buying something, its buying average lowers. Let’s say, upon adequate lowering, it goes into 6th position. Now it’s not ‘outputted’ in bl5. It doesn’t get funds. What it does get is time to perform once again, on repeat, like it’s been doing, but this time on a bigger buying base. Would then mean more burgeoning for the folio.

You’re not even looking at valuations, just pumping in the funds into bl5ers?

They have the maximum runway, don’t they?

Runway?

Slots between them and bl-5. Maximum. Meaning maximum time to keep performing like they have been doing. Resulting in more and more burgeoning off a bigger and bigger base…

What if something misses?

Let it.

Might erode 50%.

Let it.

Expunge?

Only if it’s reached bl-5 and conviction’s flipped to low, and the other candidates in bl-5 are high-conviction.

So, it gets time to get its groove back and prove itself again before being bought more.

Exactly.

What if a bl5er keeps downgrading, reaches bl-5, and your bl-5 is full of high-conviction stocks?

Like the core IT world just now?

Yeah.

Well, the least-conviction one needs to be discarded then, to the tune of the expenditure.

Would it pain you?

Yes.

Why do it then?

Confronting the pain for a more lucrative tomorrow is a winning mental condition.

We can always buy the laggard back later.

When it starts performing, you mean?

Yes.

What a loss for you then.

No. Wrong thinking. Loser thinking. Imagine IT starts churning out mega results. One enters. Core IT lands in bl5. One loads up. 2 to 5 baggers in a year or two? How do the mathematics look now.

So that’s how a winner would think?

Try it out.

The most difficult thing to put into practice.

Precisely why so few win big.

Where’s this heading?

In 25 years, you’re sitting on many multibaggers with very large buying bases.

Another Angle to Noise

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Sounds simple, right?

The sheer numbers ( , baby) strategy outlined in the last post?

Well, hmmmm.

What’s simple to someone need not be so to another.

In fact, no one’s going to do it this way, perhaps, almost.

Why so?

For starters, it is the toughest thing in the world to let go of a loser.

Takes years, maybe decades, to become comfortable doing so.

For something like this to actualize, one needs to rewire completely.

Without many hits and knocks on the head, rewiring is not possible.

No one rewires just like that. Only after full tuition fees. Losses. Beatings. Lessons.

Learnt.

And then, on top, we’re being told to add the proceeds to our highest winner.

All lessons in valuation are screaming. Our normal wiring is screaming. Our fingers refuse to punch in the orders. Until we understand the logic.

Something growing rapidly proves so by being your best performer.

No one knows how much growth is left to happen.

All one has is a conjecture, an estimate, a prognosis.

At best.

Nothing more.

You do know one thing though.

This champion grower is allowed max runway in your folio, because it needs to traverse the most distance to becoming the worst performer, who is the kick-out candidate.

So your champion is given the most time to show more spurts of growth. Since you don’t know when these come, owing to the non-linear nature of high growth, you are allowed the privilege to being there the longest in your champion, in an effort to harness multiple spurts. The chances of the champ being kicked out are the lowest at this time.

Then you load up. Buying average goes down. Top guy is now number 2 or 3. No more loading next proceeds into. New number 1 gets new proceeds. Fund accumulators rotate thus. These are good enough candidates too, hovering around the top of your folio. Funds flow into strength. Thus.

After some years, certain holdings continue to perform, and reach multibagger status. You’re represented maximally as per your capacity — the strategy has seen to it. Others got some loads and started to lag. Well above exit level though. Then they catch a spurt and start topping again.

A few head below.

Some even manage an exit.

It’s ok.

You lose 60-70% on the losers exited initially. Over the years, the exit baseline moves up and up. After some years, exits are winning, not losing, since the worst performer in the folio is itself a thin winner. Trajectory is ok.

What are you winning in your top 10 after 10 years?

Are all of your top 10 multibaggers? Likely.

What’s the upside?

In a growth market?

A potentially future high-growth market?

Who claims to know?

Exactly.

Upside…

…can be anything.

Think of a number. A reasonable one seeing the nature of the market.

What’s the 60-70% lost in some holdings?

Noise, right?

Numbers, Baby

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We spoke about our shift in thinking, …

… remember?

Magic Bull has decoupled…

…in its approach.

The WWS exit pathway.

Worst weed standing.

Remember that name.

And out it goes.

Upon opportunity.

Upon expenses.

Now here’s another one.

BPS.

Best performing scrip.

Add to.

Get its buying average down, on purpose.

It’s got maximum runway, to WWS.

That’s why, add to it from proceeds, from fresh income.

Don’t look at any other metric.

Just the fact that it’s the BPS.

And add.

It’s performing.

You’re betting on continued performance.

A few quarters might dip.

Unless it demotes to WWS, it won’t be expunged.

Then 8 quarters in a row – extraordinary growth.

Remember that high growth is a non-linear entity.

To catch it, and harness it optimally, we must be…

there.

In the most manageable, highest magnitude way.

As you keep adding to your BPS, it eventually gets demoted to number two, or three, or something.

Because, buying average dips.

That’s great.

Now we have a new best performing scrip to be added to.

Sideway injections. Bombastic results from a held scrip above buying average? Add to, one lot.

New members. Bombastic YoY results and a little QoQ improvement too? Add to, one lot.

That’s the entire system.

Funds move towards strength.

No affiliations.

No married to.

You control by attenuating the speed and the magnitude of WWS exits.

All held above 25%?

Stop the expunging.

Trade something else on another platform, other underlyings or scrips, for distraction.

Or…

…go on a holiday.

Advice?

Advisor?

No room.

Also, where is the need?

Everything is right here.

Programme your AI to serve results on a platter, screened, each morning, to feed the system with sideway injections and / or potential new candidates.

All we need now…

…is guts, to follow through.

Rest is all numbers…

…baby.

Winning the Hand with 2/7

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For the first time in life…

…being fully invested…

…seems a better idea.

Dangerous?

Sure.

Can halve in no time.

That’s something we carry with ourselves into the markets.

If we are afraid of something halving, we should look at other pastures.

Why aren’t we afraid of our investments halving fast?

Ever heard of upside?

Well, what is it?

The upside. How much?

Any limits?

In a growth market?

Potential future high-growth market?

Can’t give a number. Except that, over the long term, upside is perhaps nx, with n being a big number.

That’s enough reason to be fully invested.

Full benefit of upticks.

Big uptick days, perhaps 80% of them, are closely embedded with big downtick days.

Reason to stay invested all the time.

Expenses?

Sell the worst weed standing. Spend the proceeds on expenses. The biggest loser finances expenses.

Income?

Top up the winners.

Why?

Why not the losers?

This is a shift in Magic Bull thinking.

Winners have the longest runway before potentially becoming the worst weed standing.

In that long runway, they can double, treble, n-ble. Runway then becomes ultralong.

That’s why add to the winners.

Worst weed standing pivot philosophy allows winners much time to become even bigger winners, adding to the positive loop.

What about the negative loop?

Winner stops performing.

Down.

Down.

Down.

5 notches away from being the worst weed standing.

4 notches.

3.

Starts performing.

Up.

Up.

Up.

Above buying average.

Adding to.

2 bagger.

4 bagger.

Huge runway again.

10 bagger.

Adding to, runway is phenomenal.

100 bagger.

Kachinnnnng.

Some other winner stops winning.

Below buying average.

Down.

Down.

Down.

3 notches to worst weed standing (WWS).

2.

1.

WWS status.

Expense comes up.

Out.

That’s the exit route.

One route to expunge.

The entire philosophy pivots on WWS exit status – on the small trapdoor portal provided for cleaning up the portfolio.

Emotion?

No emotion.

With regard to exit, market dictates what to do.

We just elevated the status of the biggest loser to house-cleaner-in-chief.

That’s turning our biggest loser into a winning strategy pivot.

That’s like winning the hand in Texas Hold’em with a 2/7.