Ride the Wave 22 - Stock Market Winners

~1.67M Covid19 USA cases

Hello,

This one will be short. I’m resting up for a busy work week and recovering from an exhausting holiday beach weekend. 🏖️👙


Proven Winners

Disclaimer: I am not an expert. Financial decisions based on my newsletter are your responsibility. I write this letter for educational purposes. Formulate a plan that works for you.

The position size won’t equal 100%. I have small positions that I like to watch/track and build to. Once a company’s position size is greater than $VTI/VOO, I will add it to the table.


Journal

$DS - Drive Shack was crushed 📉 during the Covid shock. Pre-covid, the Raleigh location stayed packed. The golf, music, tv, restaurant setup is brilliant.


Selling activity since last post:

  • $DIS - tax harvesting

  • $PLAY - 6% trailing stop in preparation for Mega Backdoor Roth Conversion. 6% trailing stop executed quicker than I wanted. Let’s go up to 7.

    • $PLAY sold at $11.07. Currently it trades @ $12.18.


What I’m up to

Building a second brain with Notion. 🧠🗒️


📺:

Star Wars: The Rise of Skywalker - turned this into an episode 6-9 Star Wars marathon. Some fanatics hate these newer ones, but still watch because they’re devotees. It’s mind blowing to me how much Star Wars content there is and yet to come. $DIS.

Game of Zones 🏀

Never Have I Ever - teenage comedy drama that’s freshened my perspective. An easy one to passively watch.

Defending Jacob - had high expectations for this crime drama. The first few episodes are kind of slow, but they keep you hooked. It got real during episode 7.

Bad Education - a wild true story with star acting. I enjoy true stories that seem to stick to the facts because the truth often gets stretched @MJ - The Last Dance.

Outer Banks - fun action/drama series. Also, the most ridiculous and inaccurate show I’ve seen in a long time. Pops lived on the NC coast during his teenage years and helped point out the ridiculousness.

Shark Tank and The King of Queens - 2 shows on my Mount Rushmore of TV.


This newsletter was fueled by dark chocolate! 😋

📚📚 recs!

Thanks for reading!

✌️ Luke

Ride the Wave 21 - Stock Market Winners

~1.52M Covid19 USA cases

Robinhood announced fractional shares last week. It’s hard to notice in the midst of this Covid battle, but drastic changes are happening for the better.

Don’t try to time. Get and stay in. This has me thinking a multiple expansion may happen. More on P/E and multiple expansion below.


Proven Winners

Disclaimer: I am not an expert. Financial decisions based on my newsletter are your responsibility. I write this letter for educational purposes. Formulate a plan that works for you.

The position size won’t equal 100%. I have small positions that I like to watch/track and build to. Once a company’s position size is greater than $VTI/VOO, I will add it to the table.


Journal

Thought: Winners win.

Investing in the S&P500 will keep you in the winners.

Claiming the entire market is overpriced is a dangerously popular reason to sell. It makes the game tougher than needed. The randomness isn’t comprehendable. What looks expensive today maybe was cheap in the past. Make a plan that gives you the best night’s sleep and stick to it.


$SQ - Square

$EBAY - Seth Klarman’s portfolio.


Selling activity since last post:

  • $ZM - low switching costs.

  • $TSE, $BCPC, $ANET, $MCFT, $MU - 5% trailing stop in preparation for Mega Backdoor Roth Conversion. I haven’t been satisfied with these 5% trailing stops because of how quickly it is getting me out. Will try an uncommon # like 6.

    • $MCFT, for example, sold at $9.57. Currently it trades @ $11.44.


What I’m up to

Distancing myself from the news. 🌞📰🐕


Online fun: 👽🎲♟️🎮

Hopefully this infographic won’t be useful for much longer.


This newsletter was fueled by dark chocolate! 😋

Bought and gave 100% a try - it’s not bad, but also not as enjoyable.

📚📚 recs!

Thanks for reading!

✌️ Luke

Ride the Wave 20 - Stock Market Winners

~1.36M Covid19 USA cases

Happy Mother’s Day! Nothing better than mothers. Treat them well!

Volatility usually is not a concern for long term investors, but this craziness has my Money Market account at an all-time high. Earning interest at a .70% rate 😅

Instead of fooling around in this market like Portnoy,

I plan to store cash in a money market account for the rest of 2020. The primary reasons are:

  • a move DT Raleigh in July will increase expenses

  • to save for a significant after-tax 401(k) contribution in December 2020 and do a Mega Backdoor Roth Conversion (more details below)

This approach means I am ok with whatever stocks do between now and December. Prices go up, prices go down. Doesn’t matter. It’s a short-term game that is not worth playing.

Each paycheck is still contributing to a S&P500 fund in my 401(k).


Proven Winners

Bought $AMZN and $VTI.

Disclaimer: I am not an expert. Financial decisions based on my newsletter are your responsibility. I write this letter for educational purposes. Formulate a plan that works for you.

The position size won’t equal 100%. I have small positions that I like to watch/track and build to. Once a company’s position size is greater than $VTI/VOO, I will add it to the table.


Journal

$XOM - to track what is going on with gas. Plan to sell by the end of 2020.

Selling activity since last post:

This mass selling is to prep for a Mega Backdoor Roth Conversion. Also, so I can move money into Proven Winners.

  • $CMG - Restaurants are a tough business. I'm not entirely sold Chipotle can keep the success they’ve built on the food delivery front. Chipotle can be a winner and has handled chaos well in the past, but figure you can invest in better industries/companies with lower expectations - $AMZN.

  • $BIDU - tax harvesting.

  • $FCAU, $MU, $BRBR - so I can buy $VTI in ROTH.

  • Individual positions in 401(k) - transferred these positions to a S&P500 fund since I will do a Mega Backdoor Roth Conversion every ~6 months.

  • $ROKU, $DLX, $HGV, $NKE, $TSE, $UIS, $UTHR - so I can buy $AMZN in ROTH.


Mega Backdoor Roth Conversion

(this not financial advice)

Below is my experience and what I believe is good advice. I’ve had 2 employers and neither have offered a ROTH 401(k) option. I want to get as much $$$ in ROTH accounts as I can which is why I’m sharing this.

To Get Started.

  • this tax advantage is incredible

  • the sooner you can get started, the better

  • 2020 max employer + employee 401(k) contribution is $57k

    • for those under 50

Best article I read about this trick.

  • ask 401(k) plan administrator if/how you can contribute the max

    Ask if rollover is possible? yes (italics are answers based on my situation)

    • this may not be common

  • Can the rollover be set to automatically happen? once every 6 months

  • Any fees/taxes to do this? yes, on the earnings

  • Please confirm the pro rata IRS rule will not trigger fees? talk to a financial advisor

    • The IRS has a pro rata rule regarding traditional to roth ira conversions

      • your tax bill from a traditional ira to a roth ira rollover incurs a lot more tax than just the earnings

        • i do not have a traditional ira.

          • this clears me from any fees or taxes. Outside of the tax on earnings.

    • Rollovers of After-Tax Contributions in Retirement Plans

      • I am good since I am only rolling over after-tax

  • What’s the deal with pro rata if you don't have a traditional ira?

    • “This could quite possibly be the golden goose of the whole arrangement. Since your contributions in excess of $19,000 are made on an after-tax basis, you can convert the non-deductible portion of your 401(k) to a Roth IRA…and do so without incurring any income tax liability on the conversion!”

    • “One potential problem with this transaction is the IRA pro-rata rule. Basically, you’re not allowed to earmark only non-deductible contributions for a conversion. So if you have existing pre-tax IRAs, you’ll be forced to convert some of your deductible contributions as well.

      Say, for instance, that you have $90,000 in Traditional IRA assets, which came from deductible contributions. Then you put in $10,000 as a non-deductible contribution with the intention to roll it into a Roth IRA.

      But when you do a conversion, you can’t convert just the $10,000 non-deductible contribution. You’ll actually have to roll over a total of 10% of your Traditional IRA assets, spread evenly across deductible and non-deductible contributions. So you’ll actually roll over $9,000 of deductible contributions and $1,000 of non-deductible contributions.

      To get around this in the future, you’ll need to either roll all your Traditional IRAs over to a Roth account, or roll your Traditional IRAs to an employer-sponsored 401(k). The first option can cost you a lot in taxes (especially since you’re already in a high tax bracket), and the second could cost you earnings if your 401(k) doesn’t have great investment options.”

Final thoughts.

Linked this article a second time and copied and paste most of it within this letter. Read it.

  • “But that doesn’t necessarily mean that a backdoor Roth will work best for you. Here’s when you might try it:

    • If you don’t have other pre-tax IRAs to worry about, then a backdoor Roth won’t cost you much at all in taxes, making it an ideal option.

    • If you can roll your pre-tax IRA into your employer’s plan without losing valuable investment options, then you benefit from a backdoor Roth (but only after those assets are converted).

    • If you’re self-employed and newly starting a Solo-401(k) into which you can roll your pre-tax IRA assets, then using a backdoor Roth for additional retirement savings could be helpful.”

  • “As with any complex retirement move, it’s a good idea to consult with a tax professional before you attempt to actually use the backdoor Roth method. But now you know that investing in a Roth IRA is, indeed, an option, even if you’re over the IRS’s income limits.”


Beat the S&P500 by riding the winners. This is my plan to build wealth using simple trend following tactics like adding to winners, cutting losers, and buying companies that I know and understand.

No idea where/how to start investing, email me!


This newsletter was fueled by dark chocolate! 😋

Recently found out I enjoy 95% and have been eating a lot of it! Hopefully I have enough stocked up since it won’t ship well in the summer. 🌞

📚📚 recs!

Thanks for reading!

✌️ Luke

Ride the Wave 19 - Stock Market Winners

~698K Covid19 USA cases

Optimistic week for me. Still cautious about the pandemic and have no clue where we are headed. The markets don’t seem to care how long the recovery will take as long as they know it will recover.

If the worst is over, then Covid-19 and Spanish Flu share a crazy similar 30%+ drawdown and V shape recovery.


Proven Winners

Bought $AMZN and $DIS.

Disclaimer: I am not an expert. Financial decisions based on my newsletter are your responsibility. I write this letter for educational purposes. Formulate a plan that works for you.

The position size won’t equal 100%. I have small positions that I like to watch/track and build to. Once a company’s position size is greater than $VTI/VOO, I will add it to the table.


Journal

Thought: Would you want to invest more in a company you own if it went down 10+%?

If not, why do you own?

SPCE - Virgin Galactic

Chamath owns.

DIS -


Minor sells this week:

  • $IFF - tax harvesting.

  • $TSE, $GM, $BNED - during a downturn, strong get stronger. Weak die.

  • $SNAP - think they'll struggle to make money kind of like Twitter. Ads on Snapchat are annoying. $PINS 👀📈

  • $ZM - same reasons as last week - too much hype.


What I’m up to

Who remembers Cholera? 🤢😷🤒🌡️🏥

Covid deaths vs. other epidemics.

Now the visual with Spanish Flu. 🤯💀


Figuring out ways to record notes: 📓🗒️🤓🖋️

The iPhone app Otter is legit.


Beat the S&P500 by riding the winners. This is my plan to build wealth using simple trend following tactics like adding to winners, cutting losers, and buying companies that I know and understand.

No idea where/how to start investing, email me!


📚📚 recs!

Thanks for reading!

✌️ Luke

Ride the Wave 18 - Stock Market Winners

~511K Covid19 USA cases

Beat the S&P500 by riding the winners. This is my plan to build wealth using simple trend following tactics like adding to winners, cutting losers, and buying companies that I know and understand.

No idea where/how to start investing, email me!


Stay invested in the long game! Timing the market is unpredictable and a guessing game.


Proven Winners

Disclaimer: I am not an expert. Financial decisions based on my newsletter are your responsibility. I write this letter for educational purposes. Formulate a plan that works for you.

The position size won’t equal 100%. I have small positions that I like to watch/track and build to. Once a company’s position size is greater than $VTI/VOO, I will add it to the table.


Journal

SQ - Jack Dorsey, the Twitter and Square CEO, made headlines this week for generously donating $1B of his ~$3.5B net worth. Dorsey is quite impressive and his company Square looks to be changing the game. I haven’t used the Cash app much, but plan to very soon. My favorite feature of Cash app is it lets those who are unbanked invest in companies for as little as a $1 with no fees. If interested in downloading, use this link and we’ll both get $5!

SIX - Six Flags


Minor sells this week:

  • $WK - tax harvesting

  • $INTU - shady company. I don’t trust them and it’s hard to win back trust. If customers don't trust them, how can they be a longtime winner.

  • $BMY - outside my circle of competence (looks like great company)

  • $ZM - feel like there is too much hype. The expectations are unreal and they face tough competition. None of these necessarily matter with a great founder and great product, but I'd rather build to this position when expectations are lower.


What I’m up to

Some Good News:

Jim from the Office delivering funny and feel good news for us while we deal with the pandemic.


Some Feel Good Stories:

David Ayres

Is a 42-year-old who beat cancer twice and had a kidney transplant. He’s also an emergency goalie. Per NHL rules, there are 2 guys in the stands at all games that are ready to be an emergency backup for either team.

On 2/22, the Carolina Hurricanes needed him in Toronto. Ironically, David has ties to the Toronto Maple Leafs. He is a Zamboni driver for the Toronto Marlies, their American Hockey League team affiliate, and works maintenance at the Marlies’ arena. He has even spent the last eight years as a practice goalie for the Maple Leafs and Marlies.

With David Ayres in goal, he lets up 2 goals on the first 2 shots. He then stonewalls Toronto and the Hurricanes win. David

  • becomes first and only emergency backup goaltender to record a win in NHL history

  • gets standing ovation from the home crowd he just beat

  • has a day proclaimed after him and becomes a legendary jersey purchase for thousands of fans

  • practices with Toronto the day after beating them


Keanon Lowe 🏅


David Wells Perfect Game 🍻


This newsletter was made while chewing 5 Gum! 💙

📚📚 recs!

Thanks for reading!

✌️ Luke

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