Three years ago on 18 December 2016, I was interviewed by The Straits Times for its “Me & My Money” column. During the interview, I mentioned six US-listed stocks that I thought would do well.
I believe that we can significantly improve our investing process if we score ourselves on our stock picks and on our forecasts – looking back, we can clearly see what went well and what went wrong. I also believe that three years is the bare minimum time-length we should use when analysing our investment decisions.
With three years having passed since my Straits Times interview, I checked how I fared, and picked up three lessons.
The stocks and my performance
Here are the six stocks and their returns (excluding dividends, and as of 15 December 2019) since the publication of my interview:
- Facebook: +62%
- Alphabet: +70%
- Amazon: +132%
- Activision Blizzard: +61%
- MercadoLibre: +266%
- Netflix: +140%
- Average: +122%
The 122% average-return produced by the group of six over the past three years equates to an impressive annual return of 30%.
I think it’s crucial to also look at how the US stock market has performed. The reason why I’m investing in individual stocks is because I want to do better than the market. If I cannot beat the market, then I should be investing in passive funds instead, such as index-tracking exchange-traded funds. Finding stocks to invest in is a fun process, but it’s also hard work and requires discipline.
Over the past three years since my Straits Times interview was published, the S&P 500, including dividends, has increased by 49% in total, or 14% per year. All six stocks I was positive on have beaten the S&P 500 – and the group’s annual return is more than double the market’s. I think that’s not too shabby!
The 3 lessons
My first key takeaway is that my sextet were huge companies even when I talked about them during my interview. With the exception of MercadoLibre and Activision Blizzard, the six stocks were also highly visible and well-known companies across the world. You’ve probably used or at least heard about the services provided by Facebook, Alphabet (the parent of Google), Amazon, and Netflix.
| Company | Market capitalisation on 18 December 2016 |
| US$345.5 billion | |
| Alphabet | US$551.6 billion |
| Amazon | US$360.1 billion |
| Activision Blizzard | US$27.1 billion |
| MercadoLibre | US$6.8 billion |
| Netflix | US$53.3 billion |
I’ve come across many investors who think that the only way to find good investment opportunities would be to look at stocks that are obscure and small. They ignore huge and well-known companies because they think that such stocks cannot be bargains due to high attention from market participants. But I think fantastic investment opportunities can come from companies of all sizes.
The second takeaway is that most of the stocks have inspirational and amazing leaders.
For example, at Facebook, there’s Mark Zuckerberg. Yes, there has been plenty of controversy surrounding him and his company in recent years. But in Facebook’s IPO prospectus, Zuckerberg included a shareholders’ letter (see page 80 of the document) that is a tour-de-force on building a company that has a purpose beyond profit. Here’s just one excerpt on the point:
“As I said above, Facebook was not originally founded to be a company. We’ve always cared primarily about our social mission, the services we’re building and the people who use them. This is a different approach for a public company to take, so I want to explain why I think it works.
I started off by writing the first version of Facebook myself because it was something I wanted to exist. Since then, most of the ideas and code that have gone into Facebook have come from the great people we’ve attracted to our team.
Most great people care primarily about building and being a part of great things, but they also want to make money. Through the process of building a team — and also building a developer community, advertising market and investor base — I’ve developed a deep appreciation for how building a strong company with a strong economic engine and strong growth can be the best way to align many people to solve important problems.
Simply put: we don’t build services to make money; we make money to build better services.”
I reserve the right to be wrong, but I believe in Zuckerberg’s letter.
At Alphabet, there’s Sergey Brin, Larry Page, and Sundar Pichai. Brin and Page, the founders of the company, recently stepped down from active management of Alphabet. But they had built an amazing firm that transformed the way the world accessed and searched for knowledge.
At Amazon, there’s Jeff Bezos. There’s also Marcos Galperin at MercadoLibre and Reed Hastings at Netflix. All three are innovative business leaders with tremendous track records. I also discussed Netflix’s management in greater depth in my investment thesis for the company. I think quality management is a key competitive advantage for a company and is a useful signal for picking long-term winners in the stock market. What do you think?
My last major takeaway is that I’ve held most of the six stocks for years before the interview was conducted (I still own them all!). From the time of my ownership to the publication of my interview with The Straits Times, they had performed pretty well – and then they continued to march higher. Peter Lynch once said that the best stock to buy may be the one you already own. How true!
| Company | Date of my first investment | Return of company from the date of my investment to my Straits Times interview | Return of S&P 500 from the date of my investment to my Straits Times interview |
| 13 July 2015 | 33% | 11% | |
| Alphabet | 29 February 2016 | 13% | 19% |
| Amazon | 15 April 2014 | 140% | 30% |
| Activision Blizzard | 26 October 2010 | 223% | 117% |
| MercadoLibre | 17 February 2015 | 18% | 12% |
| Netflix | 15 September 2011 | 414% | 109% |
I think there are two more points worth noting from my last major takeaway:
- Stocks need time to perform. MercadoLibre is a good example. After nearly two years from my first investment (from February 2015 to December 2016), the company’s return was a mere 18%. But then MercadoLibre’s stock price proceeded to rise by 266% since December 2016.
- There will always be things to worry about, but companies will still continue to grow and drive the stock market higher. Over the past three years since December 2016, we’ve had Brexit-related uncertainties, the US-China trade war, and interest rates rising and then falling. There are many more big issues the world has confronted and will have to continue to deal with. Throughout these episodes, the free cash flow of Facebook, Alphabet, and Amazon have increased by a total of 65%, 19%, and 121%. MercadoLibre and Netflix have seen their revenues grow by 167% and 131%, respectively.
A bonus takeaway
There’s also a bonus lesson here! In my interview with the Straits Times, I had identified two stocks as mistakes. Here they are and their returns (again, with dividends not included):
- Ford: -27%
- Dolby: +48%
I said in the interview that I rarely sell my stocks. This is for a good reason: I want to build and maintain the discipline of holding onto my winners for the long run. That’s how I believe that wealth can be built in the stock market and how an investment portfolio should be managed.
Yes, I recognise that holding onto the losers is not an optimal decision when investing. But if our investment framework is robust, then we’ll end up with winners that can more than make up for the losers. And selling our winners too early is a mistake in itself that we should aim to avoid as much as possible. A good way to avoid this mistake is to build the discipline to sell rarely. We have to train our discipline like how we train for physical fitness.
Sometimes not selling also works out in my favour. Look at Dolby’s return, which has matched the market. But I’m glad I identified both Dolby and Ford as mistakes because they’ve not been able to beat the returns of the S&P 500 and my group of six stocks.
The Good Investors’ conclusion
It’s been three years since my interview with the Straits Times. Three years is the shortest amount of time that I think we can use to form conclusions on investing. Ideally, we should be assessing our decisions over five years or longer.
The six stocks I mentioned in my interview, which I still own, have done well. There are instructive lessons we can gain from their performance. First, good investment opportunities can come from companies of all sizes. Second, having a great management team can be a useful signal in identifying long-term winners in the stock market. Third, we should be investing for the long run, even when there are things to worry about.
I will check back again at the five-year mark of my Straits Times interview, which will be in December 2021. Fingers-crossed that I’ll still have these handsome returns (or better) by then!
Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life.