What I'm Trading - Issam
A young financial analyst who understands the power of compounding, Issam builds his portfolio based on his own research and patience.
Occupation: Financial Analyst
Industry: Information and Technology
Age: 29
Location: London, United Kingdom
Hobbies/Interesting Fact About You: Sports enthusiast, Travel, love reading/learning about new technologies in the market.
Stake portfolio size: US $29,000
What was your first investment on Stake?
My first buy was Strategic Education Service (STRA). At the time of purchase (Q3 21), the education industry was still recovering from the pandemic. The company had just recently completed the acquisition of a top rated university in Australia and launched its subscription based online learning platform. These two catalysts diversified the company’s revenue sources and positioned it very well for a rebound from its pandemic lows.
In one sentence, define your investing style.
90% of my portfolio is invested in companies with great management, strong competitive advantage, good return on invested capital, and purchased at a reasonable price. The remaining 10% is allocated towards companies with the potential to disrupt their respective markets & generate higher expected return if successful.
What’s in your Stake portfolio right now?
Bath & Body Works (BBWI), Disney (DIS), GoPro (GPRO), Investor Title (ITIC), Morgan Stanley (MS), Opendoor (OPEN), PayPal (PYPL), Snapchat (SNAP), Strategic Education (STRA)
How are your returns so far?
Across the board, I’m up. My Stake portfolio is down approx. 20% (started investing in Q3’21). My other brokerage account is up 60%.
What are you watching? Why?
Lately, I have been following the latest development in Crypto and its underlying technology (i.e. blockchain). I think decentralized finance offers a compelling use case across different market such as lending, insurance, payments… So there is evidence that the cryptocurrencies can create value in our economy but what remains unclear is the appropriate price we can attach to it. Right now there is a lot of hype that is driving the price, so I am trying to learn and understand this new asset class and determine which crypto makes sense to invest in.
Do you have a trading or investing role model?
Not a role model per se, but I follow and read the latest investments/letters made/written by investors. They include the greats like Warren Buffett, Bill Ackman and Chamath Palihapitiya.
What’s a piece of advice you’d give a newbie?
Don’t take shortcuts – do your homework, research the company, its product/services, and its industry, read earnings call transcripts, analyze financials…
Don’t cut corners – building wealth takes time, avoid putting all your money into one risky bet in the hope of tripling your money in just a few weeks. Do not follow the herd or get tempted by the hype. Stick to your strategy.
If you abide by these two principles you will be in a good position to invest in only what you understand, and have a better control of your emotions when you see prices collapsing for no rational reason.
What’s one mistake you’ve made and what did you learn from it?
In February 2021, I tried to make a quick buck by going short one of the meme stocks (AMC) using put options. I ended up losing 75% of the capital invested. I learned two things from this trade. First, I am not a good trader, and trying to time the market is not for me. Second, stick to my investment strategy and invest for the long term.
If you were to buy a US stock or ETF right now, what would you buy? Why?
I would buy shares of Bath & Body Works (BBWI) for the following reasons:
– #1 Market player in the specialty home fragrance & fragrant body care in the US.
– High Operating margin (>20%) & high return on invested capital (>35%).
– Competitive advantage include strong brand power, product quality and vertically integrated supply chain.
– Company is ramping up its international expansion over the next few years which will spur growth
– Currently selling at a discounted P/E of 11.5x relative to peers trading at a 20x P/E.
Why are you in the market?
I graduated from college with a degree in Finance, so I learned very early on the importance of investing and the power of compounding. I knew that leaving my money in a savings account earning interest rate lower than the rate of inflation was not going to increase my purchasing power in the future. So I looked at different investment options (i.e. stocks, bonds, real estate…), and the stock market was the most lucrative option considering my initial capital, risk tolerance and investment horizon. As an example, if you invest $1,000 every year for 30 years in a low cost S&P500 index fund and assuming an average annual rate of return of 8% (the historical average market return) you will get approximately $122,000 (excl. dividends). That’s $30,000 of your own money plus $92,000 of capital appreciation and you have achieved that without lifting a finger. To me it was a no brainer that some of my money should be invested in the stock market.
ICYMI: make your own decisions
This is not investment advice, just my opinion. It doesn’t reflect any opinions of Stake. I’m as fresh to this as the next person off the street. Do your own research and make your own decisions.