Portfolio Update: New Addition (BABA; November 17, 2014)

by FI Fighter on November 17, 2014

in Stock Portfolio Updates

Screen Shot 2014-09-21 at 8.51.25 PM

One thing I’ve been realizing as of late is that buying shares of stocks is a whole heck of a lot easier than buying rental property. 🙂 As such, I used today as another opportunity to pick up some more shares of Alibaba (BABA).

Payday is not until this upcoming Friday, but I thought I would jump the gun and buy some shares today, just as a hedge in case the stock keeps climbing upwards. I picked up 34 shares at $114.71/share. I now own 152 shares of BABA.

What’s the plan here? For one, I’m diversifying my portfolio away from rental properties. Two, I’m transferring some capital into a liquid investment. And lastly, I’m taking a gamble on future appreciation!

In the past, I’ve owned shares of Apple (AAPL), and Tesla Motors (TSLA). In each of those cases, I bet on the right horse… but my contributions weren’t enough to make a noticeable dent. I watched as TSLA climbed from $55/share all the way up to around $166/share. Very solid performance indeed, but with such a minuscule ownership stake, I didn’t reap any massive rewards!

As is often stated, “it takes money to make money.” You can guess right on the next hyper-growth stock all day long, but if you don’t “back up the truck“, it won’t mean much in the big picture. So, rain or shine, up or down, I’m going to be looking to add more shares of BABA to the portfolio.

Note: This is just another one of my side hustle plays, not a core investment strategy! This type of investing is definitely not something I would recommend anyone else try and duplicate. It is inherently risky… which probably goes without saying.

Now that I don’t have any more real estate deals on the horizon lined up for me, I’m just going to keep on funneling spare capital back into my brokerage account to pick up more shares of BABA. That, and perhaps some other hyper-growth stocks as they pull back. I would love to get in on TSLA again, but that stock looks a bit too frothy at the present moment…

Although my investment moves are ALWAYS subject to change (I can’t anticipate when the next real estate deal will take place), ideally, I would like to be able to keep building up my stock positions. Since I’m not going to be retiring for at least another year or so, I don’t really have a critical need for dividend growth stocks right now (the rental properties are my primary source of cash flow). Rather, it’s the substantial appreciation gains that I’m targeting. Should the need for extra cash flow become imminent sooner rather than later, of course I will cash out of the growth stocks and put the gains back into dividend growth stocks, instead.

Until then, it’s hyper-growth that I’m seeking. Higher risk, higher reward. Let’s hope the markets continue to hold up.

Fight On!

{ 14 comments… read them below or add one }

1 Jason @ Islands of InvestingNo Gravatar November 18, 2014 at 3:20 am

Hey FI Fighter,

I like your strategy of looking for some aggressive growth, with a reasonably small proportion of your portfolio. I’m glad you put that nice, big black disclaimer in you post, because I’ve heard some real horror stories about people putting their life savings into a single stock, only to see it plummet and be worth nothing!

I’m looking at some similar ‘growth’ stock investments, as my stock portfolio is still relatively small, but I don’t have the diversification of other assets that you do (other than my home I live in).

Fingers crossed for some great success from Alibaba!

Cheers,

Jason

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2 FI FighterNo Gravatar November 18, 2014 at 9:04 pm

Jason,

Yes, this strategy here is simply to allocate just a small percentage of the total portfolio to growth stocks. I definitely wouldn’t make this the basis of my overall investment strategy!

Best of luck to you on your search for the next big thing. Any growth stocks you would recommend on your radar?

Best wishes!

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3 No Nonsense LandlordNo Gravatar November 18, 2014 at 6:06 am

I used to chase many of the high-flyer stock in my early days of investing. I had days where my portfolio went up by $40K (yes, that’s $40,000 in a day). And when the .com bubble popped, they went down just as fast.

Good luck. Stay focused. Keep the majority of what you have in SPY or IVV type ETFs.

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4 FI FighterNo Gravatar November 18, 2014 at 9:06 pm

Eric,

Wow, $40k gains in one day! Yeah, I’ve heard crazy stories from the dot-com days… I was only in high school at the time, so sort of surreal for me.

Yup, I agree, a good index fund or ETF is where the majority of the portfolio should be allocated. I have most of my stock investments in 401k and Roth IRA which are those ‘boring’ index funds.

BABA is a play on growth. Hopefully $40k+ worth of capital gains in the future 🙂

Cheers!

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5 Dividend Growth InvestorNo Gravatar November 18, 2014 at 10:16 am

I am afraid that you are now recklessly speculating, rather than searching for reasonable investments. I am also afraid you might have overextended yourself with the rental properties. I am hopeful all works out well for you though, and you do not get any loss of occupancy or major repairs to do.

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6 FI FighterNo Gravatar November 18, 2014 at 9:16 pm

DGI,

I hear you… My strategy has changed a bit in the past few months. Yes, in this case you’re right, I am speculating. However, I am making sure to only allocate a portion of my capital to growth stocks… The majority of my holdings are still in index funds that track the overall market.

The rentals did require me to get creative and stretch myself a bit… Long term, I am very confident they will perform well and be worth the effort. Getting the last two units rented was an eye-opening experience, as the number of qualified applicants we were getting was tremendous. I am very bullish on Bay Area property moving forward.

To mitigate risk, yes, I will have to stash away more cash into the rainy day fund. It isn’t easy, but I’m doing my best.

Take care!

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7 BillyNo Gravatar November 18, 2014 at 10:54 am

I can understand why some of us will always trust our own instincts more than anything else. I see myself in another camp. I don’t trust my gut instinct. I try to verify against it and see whether that instinct holds any water. The problem is that we will never be truly objective when dealing with investment. If that’s the case, no one will invest in rental business because the long term ROI is almost always lower than that of stock market, and I say stock market I mean index, not individual hot stocks.

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8 FI FighterNo Gravatar November 18, 2014 at 9:20 pm

Billy,

That’s interesting… For myself, I’ve always been an instinctive person. Even with investing, I ultimately trust my gut over even quantitative numbers…

This is a riskier move, which is why I’m cognizant to also invest my money in more secure channels. I do want to hit a home run with this, so have accepted that I will need to take more risks to make it happen.

Stocks vs. rental property gets debated endlessly by investors. I don’t think there’s a clear black and white answer. You can make a ton of money and retire comfortably from both. There are too many successful real estate investors and stock investors out there for anyone to dispute that. There are plenty of mediocre investment options out there. Stocks and real estate have proven to be winners over the test of time.

All the best!

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9 My Dividend PipelineNo Gravatar November 18, 2014 at 12:33 pm

Even though I focus primarily on dividend stocks, I almost pulled the trigger on some shares back in the 80’s. In the end I decided to buy some additional shares of beaten down energy companies. BABA may be a better capital appreciation play, but I will probably stick with income producing assets.

MDP

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10 FI FighterNo Gravatar November 18, 2014 at 9:23 pm

MDP,

Yup, like you I’m also big on income producing assets. Dividends are great, but since I have most of my cash flow coming from rental properties, I felt like diversifying more for appreciation at this stage of the game.

This isn’t to say I am removing myself from DGI, but there will be a time and place for that. Right now, I am focused on capital gains… When it comes time to FI, I will probably re-allocate back into dividend growth stocks.

Take care!

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11 EvanNo Gravatar November 18, 2014 at 1:15 pm

These types of purchases are left to my investment club dollars. I can’t figure out what makes this a 280 Billion dollar company when it doesn’t even turn a profit (according to google finance). But I said the same thing about TSLA and AMZN and I was way off the mark there!

I think there is an absolute different mindset for value investors vs growth investors.

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12 FI FighterNo Gravatar November 18, 2014 at 9:30 pm

Evan,

Yes, evaluating growth stocks is quite different from dividend stocks. It’s tough to use fundamentals because growth stocks will violate those time and time again.

It’s all about growth, growth, growth, and more growth. The potential with BABA is huge. $9 billion in sales on a single day… I don’t want to miss out on the next big thing, so will take the gamble.

All the best!

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13 Mr. FrugalwoodsNo Gravatar November 19, 2014 at 5:03 am

Good luck!

Not something I’d do, but I tend to prefer the boring stuff 🙂

Is this a buy and hold, or something you’re going to continually re-evaluate going forward? That’s one of the things that keeps me away from individual stocks… I want to to be able to go off-grid for a month at a time and feel confident that I’m not missing important actionable news about my investments.

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14 HMBNo Gravatar November 20, 2014 at 4:51 am

Hey FIFighter. I have yet to look at your new real estate acquisitions, but I agree with the premise of investing for growth, even when it’s not certain. I bought shares of AAPL and TLSA last month during a lower point and have enjoyed some growth as well as dividend from APPL. However, like you, I just bought them focusing on growth and I also plan to keep them for the long term. I’m already well diversified so this is not going to leave me out to burn if things go badly. I think this too is the key; our level of tolerance for wild swings and the possibility of total loss. Would I risk all my money? No, of course not. I’m also not going to miss out on being invested in great companies that are sure to grow either. I had thought about buying some BABA shares, but my buddy who has known about them for a long time told me to be careful because of their past. We’ll see. I would have to do more research.

Good luck!
– HMB

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