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Hi Pro Fools,

I wanted to stop by and mention how much I am liking the Motley Fool Partnership Portfolio service. It launched back in May, and I hadn't paid much attention to it at all. I wasn't too into it when it launched, huh, another new service, bah humbug...

But! today I looked at it with fresh eyes and it's a good service with a good team (including one of our favorite people) and I thought I'd mention it to my friends here at Pro, in case you are interested in trying it out. I think that the Partnership Portfolio might not be open to new members right now, but if it does open, maybe you want to take a look. (Hey, write some options or something to pay your fees. I know that *many* of you know how to do that *very* successfully!)

The Partnership Portfolio focuses on great founder-led companies that the team expects will grow 6x in the next 10 years, or 20% annualized (did I get that right?) So it's quite a different focus than Pro's North Star, and it feels like it would be an interesting complement to a Pro portfolio.

So friends, this is the end of the commercial -- bah humbug! ;)

Check out the Partnership Portfolio if you get a chance!

Karen
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I can't find it in the list of Motley Fool services...

https://www.fool.com/services/

Can you post a link?

Thanks
Charles
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The page is here

https://www.fool.com/premium/portfolios/partnership-portfoli...

As Karen said, the focus is on CEOs. The idea is to invest in people who you want to be partners with; people who have created companies and have something to prove.

There are twenty-five companies, and the page says to buy all twenty-five, as five or ten years from now, 80% of the value of the portfolio will probably be in the top five.

Morris
See positions at: http://my.fool.com/profile/CMFTurningItBlue/info.aspx
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Hi Charles, here's a link. I don't know if it is open now or if it will reopen, but it just started in May, so it might still be open...

Karen
who doesn't do the membership stuff!


https://www.fool.com/premium/portfolios/partnership-portfoli...
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It looks like it is focused on only micro-cap stocks, and is designed for established investors with portfolios of at least $100,000. So they're expecting big returns, but it also comes with some big risks and lots of volatility (which I realize are not really the same thing). And of course, they don't say right up front how much they are charging for this service. I don't know about anyone else, but I wouldn't think it wise to devote too big of a chunk of my overall portfolio into micro-cap stocks. But it does sound interesting nonetheless.

Dan
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Do any of you follow Saul’s board? This sounds similar, maybe(?),except for the fees of course.

Paul
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Saul's board is a cool place, I like reading over there, and the high growth aspect is similar to PP. PP has a more long-term holding period and is more clean and focused.
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I also like NPI - New Paradigm Investing. Sometimes they talk politics, but it's easy to spot those posts vs. the investing posts.
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is new paradigm investing the same as Saul's board. Can some post a link to this board.

thanks,

John
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"Saul's board is a cool place, I like reading over there, and the high growth aspect is similar to PP. PP has a more long-term holding period and is more clean and focused."

Karen-
Not sure what you mean by PP being more clean(er) and focused than the super concentrated portfolios held by the lead dogs on Saul's board. According to posters, their objective is LTBH, but they scrutinize and trade when they see opportunities (in their eyes), which can lead to shorter holding periods.

Please feel free to elaborate.

Gary
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BTW, I'm not trying to challenge/confront you, I'm just interested in your perspective...
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Gary,

My read of Saul’s approach is the same as yours. He advocates a LTBH mentality but in practice, has no hesitation quickly pulling the plug when he sees either some weakness in a position or a better opportunity for his money in a new investment. Like Pro I guess, he isn’t adding new money so that’s his only choice when adding a position. Dump the weakest. It seems to be working extraordinarily well for him and others there. Comparatively, a criticism of MF services that I’ve seen is that positions are held too long. Hard to tell in the brief marketing piece I’ve seen with this service that Karen has highlighted how the buy/hold emphasis will work.

Also, Saul advocates a small number of holdings which seems pretty clean too. He feels more than 10 or 12 is too many to watch carefully. Makes good sense but concentrates risk a bit, especially if you have a hard time letting positions go (which he doesn’t!)


Paul
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a criticism of MF services that I’ve seen is that positions are held too long

TMF has done studies that prove that TMF sold too quickly. The research proved out that if TMF had never sold they would have had better returns then they have achieved to date.


Lee
Home Fool
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Lee,

Were those studies done at the service level? It seems that for Pro, this would be relatively easy to conduct as there is a real life portfolio with allocations, reinvestments etc. to compare against. I mean for example, what one does with the freed up money matters a lot as to whether you should have sold a position. With Pro that is a known. But for other services? What kinds of assumptions had to be made for that study?

This is a sincere question and I’m just seeking to understand various approaches. I’m skeptical of a generalized study that results in a conclusion that TMF sold too quickly. I’m sure there’s much more to it than that, so maybe there’s some info that’s available you could point me to? Thanks

Paul
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Hey Gary, I mean that there's a LOT of content that flows through the public board, and you have to sort it out. A paid service has more structure and advice for a member to follow. So it's like a DIY project vs. hiring a professional to do your remodeling project. Is that a decent analogy? Karen

Do whatever floats your boat!
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The whole "never sell" argument is true but skewed by the stock picking of Motley Fool. Skewed towards companies that don't go out of business, for example. Never selling means never losing unless something ceases to exist. Over a long time, absolute dollars will be exceeded, much the same way as movie box office always goes up. Inflation inflates stock prices along with them.
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what one does with the freed up money matters a lot as to whether you should have sold a position. With Pro that is a known. But for other services? What kinds of assumptions had to be made for that study?

I vaguely recall the study in question, and I think the answer was that in the backtest, they just applied the normal rules that would be followed by Stock Advisor. It was a simple "what if" test of what the SA overall return would show if those stocks hadn't been "sold."

I don't think the SA return is a good representation of real world investing - in particular, I don't believe the ROI is a time-weighted internal rate of return, but rather just an average of all the individual returns. If you're just averaging individual returns, it biases you to keep the big winners around, since they can underperform individually but still outperform at the service level due to their size.

For example - make it really simple. Say you have a recommendation service with just one stock, which is showing a 1,000% return. It reports returns as the average return of all stock picks, both active and closed (where closed returns are frozen at the time of sell). This service would show an overall return of 1,000% since there's just the one stock and no sales have been made.

Now suppose you're running this service and you're faced with these choices:

1. Sell this stock and buy something better
2. Keep this stock and buy something better

For argument's sake, let's say that you know for a fact that the current big winner is going to gain another 5% in the coming year, and the new stock you're considering will double in a year. In that case, here are the returns you can expect to see in the coming year for each of those choices:

1. Sell the stock and buy the new one - in this case you freeze that 1,000% gain, and average in the new gain of 100%: (1,000% + 100%) / 2 = 550%

2. Keep the stock and buy the new one too - in this case your big position gains 5% to grow to 1,050% total, and you also get the 100% gain on the newcomer: (1,050% + 100%) / 2 = 575%

So even though you know for a fact that your current stock will be a dog compared to the new one, you're best off keeping it around anyway.

Interestingly, the best idea of all, given this computation method, would be to not buy anything new at all, since buying something new increases the denominator, but is very unlikely to increase the numerator sufficiently to keep the same average. But in a service that is based on making periodic picks, given those two choices, the best idea is to keep the big winner, as long as you believe it will gain anything at all. Only if you really think it will reverse course and lose money should you sell it.

In a real money port, if you had the above two choices, the answer would be easy. Sell your big winner, and reinvest the proceeds into the new idea. That would get you from a 1,000% return to a 2,000% return in a year. In a real port, this is what you would do every time.

So I think the computation method that Stock Advisor uses is inherently not a good way to model real world investing. A better approach would be to use some sort of TWIRR system where you allocate a fixed amount to every idea. That initial investment amount would need to be adjusted over time for inflation and to keep up with the portfolio - maybe add 10% per year to the virtual amount of money being injected.

Rob
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Paul,

I have not seen the studies, but have seen them quoted by I believe Tom Gardner and possibly Bill Mann.


Lee
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Karen writes: "Hey Gary, I mean that there's a LOT of content that flows through the public board, and you have to sort it out. A paid service has more structure and advice for a member to follow. So it's like a DIY project vs. hiring a professional to do your remodeling project. Is that a decent analogy? Karen

Do whatever floats your boat!"

I agree with your statement on content flowing through Saul's board. Kind of like what it used to be in Pro from members, more of a community feel there vs. what the analysts have to say here. We've lost so many Pro members (either leaving the service or simply not posting much anymore), that I feel we've lost much of the community feel that exists on Saul's board (and a few other public boards).

Interestingly, I have a subscription to Stock Advisor and get a nice community feel from that service (I spend significant time on the options board there). I also find that Rule Breakers is helpful and I'm reading a lot from Bert Hochfeld these days. I may be experiencing a bit of a paradigm shift, but I'm very reluctant to chuck my Pro portfolio as our, analysts here communicate well and have served us well. That said, I now have a Saul/NPI portfolio, too.

I could go on, but that's probably enough for now.

Gary
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