MAKO Surgical Corp (MAKO) +65.64%
Chipotle Mexican Grill (CMG) +58.82%
Buffalo Wild Wings (BWLD) +53.96%
Starbucks (SBUX) +43.20%
United Health Group (UNH) +40.35%
Panera Bread Company (PNRA) +38.80%
Whole Foods Market (WFM) +37.54%
Green Mountain Coffee Roasters (GMCR) +36.49%

It definitely looks like restaurants, food, and medical care was in for 2011 looking at my best performing stocks. Also noticed that this performance is quite a bit different than last year where I had 3 stocks that were up at least 100%. Overall though I feel very good about having these good performers last year and it shows you that despite the market being relatively flat if you find the right companies you can make significant performance gains no matter what the market is doing. Looking at these stocks I really feel good about the whole group long term and while some like MAKO, GMCR, and CMG may have some pretty lofty valuations currently I think they are all good long term companies that are pretty well run. MAKO and GMCR are probably the riskiest of the bunch.

Netflix (NFLX) -60.56%
Dolby Digital (DLB) -54.26%
Exelixis Corporation (EXEL) -42.33%
Infinera Corp (INFN) -39.21%
Southern Copper Corporation (SCCO) -38.08%
PACCAR Inc (PCAR) -34.65%

And here is the flip side – top performer of 2010 Netflix was absolutely crushed in 2011 and did some serious damage to my investment performance in 2011. Another big dagger for me was the implosion of Dolby Digital that I had always felt was one of the titans in my portfolio and not a really risky stock, Netflix I knew had some room to fall, but Dolby caught me by surprise. The main reason for Dolby’s fall this last year was that it looks like Microsoft is going away from using Dolby technology in Windows 8 which is currently a good chunk of their licensing revenue.

Netflix on the other hand was forced to make some pretty strategic decisions this last year to compete in the streaming arena long term and in the process did about as poor of job as possible making this transition palatable for their customers. It’s almost like Reed Hastings was abducted or lost his mind or was shorting his own company and spent about 2 months doing everything possible to completely tick off an alienate his customer base which as we have found out is not good for business.

Long term though assuming Reed has not gone completely insane I still like Netflix’s chances though their recent actions have given me a much large pause for concern – Netflix’s magic was all about making their customers experience a seamless and enjoyable one and they have taken a number of actions recently that has gone completely against that – hopefully they learned their lesson. Netflix and Dolby were my two largest stock holding at the end of 2010 and still represent a large component of my portfolio.

In the last year I have actually entirely sold off about 10 stocks. I did have many small positions buying small increments when I had free trades with Zecco and the market was falling so nicely in 2008-2009. When Zecco announced they were getting rid of free trades I decided to use all 10 of mine up and clear out some smaller speculative positions before I transferred my accounts away to TradeKing. I also had a few companies get bought out and have made a few decisions to cull positions I maybe no longer felt as strongly about, but in general it is extremely rare for me to sell a stock.

Looking at my current allocation I feel pretty good about it – in fact I feel like in the last year I have done a good job refining my portfolio to reflect my ever evolving investment philosophy and knowledge base and for the first time I really feel somewhat comfortable that I might know what I am doing (scary scary thought).

My four largest positions are the mutual funds I hold in my 401k, after that I feel very good about my 15 biggest stock investments that account for over a third of my retirement nestegg. If there was one stock that I felt the absolute best about going forward it would definitely be Amazon which is currently my 7th largest position. I just feel that they do so many things right, have so many long term trends going their way, have a visionary leader, and innovative company spirit, and an absolute focus on making their customers happy. I think they will one day dwarf competitors such as Walmart and Apple.

Anyway here is the list 47 total investments, 5 mutual funds, 42 stocks, and a cash position.

This was money that I got and didn’t have to work for (well technically). I mean its the whole point of investing and you are probably thinking “no kidding you idiot – that’s why you invest”, but sort of like a kid who can’t understand why if they take the money they got from their grandparents for their birthday and put in the bank the bank will give them more money for what appears to be no good reason – its almost magical. Well this is sort of how I view how much money I’ve made in the market for just taking some money, not spending it, and throwing it into the stock market.

Here are my $$ returns each year I have been investing.

2006 – $3,603.49
2007 – $2,576.67
2008 – $(35,108.72)
2009 – $22,455.55
2010 – $32,127.00
2011 YTD – $20,737.30

Total money made in stock market in career – $46,391.29

Total money made in last 28 months – $75,319.85

So as you can see of my current $193,285 nestegg 24% of that has come from investment returns or basically money that just fell out of the sky and into my account.

Now granted I sort of cherry picked the dates, but I have been on an absolute tear the last 2+ years have during that time have made over $75,000 in the stock market and in just the first four months of this year I have made over $20,000 or in other words over $5,000 a month.

This to me is what really opened my eyes and was like holy crap – thats a lot of money for really no work and while its not consistent at all and I could just as easily lose $75,000 in next eight months, I’m currently making enough money in my retirement accounts that in theory I could pay my mortgage, take care of my family of five, and still have quite a bit of money left over all for doing next to nothing. The best part about all of this is I am still very young and just getting started. Again I know this is not eye opening revelation for most people and I certainly am not counting on this kind of performance going forward, but it really was eye opening for me to see the power of compounding/great investment returns/ and passive income.

Going forward I think I am actually going to keep track of that value just like I do my total nestegg, because long term thats where the majority of my money is going to come from and like I said for whatever reason it was kind of an eye opener for me.

Netflix (NFLX) +218%
Chipotle Mexican Grill (CMG) + 141%
Under Armor (UA) + 101%
IPG Photonics Corporation (IPGP) + 89%
Whole Foods Market (WFMI) + 84%

Obviously Netflix had a tremendous year, but I had three stocks that at least doubled in 2010 and two others that were really close. I actually had another handful of stocks that were up 60-70% – like I’ve mentioned before the stock market returns were really remarkable this year and last year. Of the 5 stocks above I sold 25% of my shares in Netflix and the other 4 I have not sold and do not plan no selling anytime within the next 5+ years.

and now my worst 3 for 2010

Headwaters (HW) -29%
Mindray Medical (MR) -22%
Otter Tail Corporation (OTTR) -9%

I would have included 5 for my worst but those were the only three that I could find that were in the red for the year. Ironically Headwaters and Mindray were already my two smallest holdings going into the year. I only bought $100 worth of Mindray during the big downturn and am still up 65% on it. Headwaters was one of my first individual stock picks that I found on my own and am down 85% on it and just keep it around to remind me to do research on my stocks before investing in them

Otter Tail is a diversified holding company that does have a renewable energy unit and those stocks have been hit harder this year I am not worried about its long term prospects and the -9% doesn’t include the 5.24% it paid out in dividends this year.

What a fluky year I really expected to be able to find more stocks that were down for the year – must have missed one or two but couldn’t find any others on my list. I doubt I will ever have to many years like this again.

A couple comments about what’s happened since I put out my last list. #1 Netflix completely exploded. It became my first 10 bagger and despite the recent pullback and me selling $2400 worth of stock when it hit $200 a share it is still my largest individual stock investment despite me only putting $1000 into the stock.

The second thing would be that I sold some of my stocks and have 4.59% of my retirement nestegg in cash trying to time the market kind of. Because the market has been on such an incredible tare and because some of my stocks like Netflix have very lofty PEs and because I am not planning on putting a boatload of new money into the market until we figure out what we are doing with the house I thought it would be to sell small portions of some of the stocks that really ran up so I would have some money on the sidelines to take advantage of a stock market pullback should one occur. So far this has been a really bad decision and of the stocks I have sold only Netflix has pulled back – the rest have continued their journey upward. I am not too concerned about this as even in the case of Netflix I sold only 1/4th of my position and overall this cash on the sidelines is not hurting me too much. Whether or not I will be able to redeploy it at better values will be a learning lesson for me.

Anyway here is the list 57 total investments, 4 mutual funds, 52 stocks, and a cash position.

Here is the definition of a Ten Bagger from Wikipedia

Ten bagger is an investment term coined by Peter Lynch in his book One Up On Wall Street. This refers to an investment which is worth ten times its original purchase price, and was adapted from baseball where “bag” is a casual term for “base”, and extra-base hits like doubles, triples, and home runs are colloquially called two-, three-, or four-baggers.

So in other words everytime a stock appreciates in value 100% from its original purchase price it is considered a bag. So a home run (4 bagger) in this analogy is a stock that has gone up 300% and the infamous ten bagger that Peter Lynch was shooting for was a stock that appreciated 900% or more in value from the initial purchase price.

Now you might be thinking what the heck 300% sholdn’t that be only a triple? Well this is a common mistake that many people make when thinking about stock performance – remember a 100% increase means your stock doubled. So a 200% increase means your stock tripled and so on. A 1000% increase is actually an 11 bagger. Basically subtract one from my stock went up X times and you have the percentage.

Anyway the whole goal of investing to achieve that infamous ten bagger that Peter Lynch referred to is all about having the correct long term mindset when it comes to stocks. If you are an investor who is constantly churning your portfolio over and buying and selling as the stocks move up and down – you will likely never achieve a “ten bagger” Very few stocks appreciate 900% in a short period of time so this means that you would have to purchase your investment and hang onto it for a sufficiently long period of time and resist the urge to cash out or “lock in profits” after your stock had double, tripled, etc.

Well I recently realized I was getting pretty close to having my own ten bagger in Netflix so I decided to take a look at my portfolio and analyze how many “baggers” I had sitting in my portfolio. Here is the list

8 baggers
NFLX (764%)
6 baggers
NFLX (556%)
5 baggers
CSE (480%)
4 baggers
CMG (378, 306%) BH (305%)
3 baggers
DLB (212%) BH (207%)
2 baggers
DLB (190%,112%) BH (154%) BWLD(113%) DWSN (100%) IPGP (112%) QSII (141%,100%) SINA (115%)
1 baggers
DLB (78%) MIDD (75%) PCAR (77%) QSII (89%,75%,57%) UA (82%) ATVI 84% UNH (82%,70%) BWLD (52%) DWSN (60%) EBIX(62%,50%) GWR (60%) MORN (60%) MR (71%) SBUX (62%) VLCM (77%)

So a total of 74 bags if you add them all up. While its nice to be able to grab 14 bags with just 1 stock (somewhat luck) it is also nice to see that 20 other stocks that have become baggers for me.

EDIT: I am starting to question whether there is such a thing as a 1 bagger when it comes to this methodology

You’ll also notice that many of the same stocks have become baggers for me multiple times through multiple purchases. This is because I don’t invest all of my money in a stock at one point in time at one value point. I tend to invest in stocks over time and see if my original thesis is panning out. Sometimes I add more to a stock after it has already run up and in many cases I add to a stock after it has taken a big tumble. This is sort of the opposite of what many people do who throw all of their money in at one point in time and hedge their losses with a stop loss.

I never invest a 1/4th of what I would consider a full investment in a stock at once. This allows me to make my initial purchase right away without waiting for that magical price point. If its a great company and I think has good long term prospects I will buy it. Then I will study the company, follow it and learn more about it. I also greatly leverage the other people doing this same studying at the Motley Fool.

Prime example is Netflix – I originally bought Netflix on Dec 9th, 2005 for $25.94. I then held the stock for about 18 months and was down nearly 30% on the stock before I purchased again at $19.72 on Jun 22, 2007. My only regret is I didn’t stick with the stock on the way up and keep buying it – I always seem to find something else I thought was a better deal and never got back to purchasing the rest of my full position in Netflix – oh well I’m not going to complain too much

Spiffy Pops
Another interesting investor lingo thing almost happened to me yesterday – something called a Spiffy Pop. Spiffy Pop was coined by David Gardner of the Motley Fool as a stock that doubles in value from your initial purchase price in one trading day.

I bought Netflix for $19.72 on June 22, 2007 and on October 21st Netflix gained $19.54 in that one trading session.

So my stock gained 99.1% in one day from my initial purchase price – had it closed above that magical 100% that would have been considered a Spiffy Pop. It was up as high as $21.79 but ended up closing lower. Again a spiffy pop likely isn’t going to happen for an investor unless he is patient and lets his winners run.

What about you – do you have any ten baggers or spiffy pops?

Anyway these are my top 15 holdings in my various retirement accounts as of March 2010 and the percentage of my portfolio that is invested in them. Currently these top 15 holdings make up 75%+ of my portfolio – although I do have about 45 other smaller investments that make up the remaining 25%. As you can see the top 3 holdings are mutual funds that I hold in my 401k account – the rest with the exception of UMBIX are individual stocks. I in no way condone this type of investing and highly recommend that most people just stick their money in a low cost no-load index fund or lifestyle fund.

I have not changed anything other than maybe scrounging up any extra cash I come across to stick into the market. So far if you look at my results you would say I am a complete failure as in the short term as my retirement accounts have lost almost $30,000 (30%+) in just the last few months. In fact if you include my employers matching contributions (which I don’t for my nestegg reports or $100k by 30 goal) since I started investing in 2004 I have invested just about $100,000 and at last glance my accounts were only worth $69,000. So after 4.5 years of investing and living well below my means sometimes saving nearly half my income for retirement and giving up some of life’s luxuries I have $30,000 less than I started with. If you look at this isolated point in time you could pretty much come to the conclusion that I am a complete dumbass and better come up with something better to do with my money.

I mean it has been confirmed that the sky is falling and any money you put into the stock market is better off being put through a paper shredder, lit on fire, and used for heat. No matter how optimistic I am about the fact that the markets will recover just like they have after every other single crisis that was suppose to sink this country and the world economy in the past, certainly I would be better to stop or at least slow down my investment contributions until some sign of life or recovery poked its head through the fire and brimstone we see in the market today.

I mean I am 29 years old have/had $100,000 invested in the stock market certainly I’ve done my fair share and if I am right and the market recovers I will still be lightyears ahead of my peers. Plus I can use my frugal lifestyle to store up cash reserves, maybe stock up on canned food, guns, and buy gold to bury in my backyard to prepare for the coming Armageddon.

I’d being lying to you if I haven’t at least considered the the aforementioned idea or at least some of them. I’ve watched people like Peter Schiff and Ron Paul who have been almost prophetic in the way they have predicted the current financial crisis and their vision of the future isn’t exactly balmy even after the nearly 40% drop of the market and failure of just about every major investment brokerage or bank. To be honest I’m huge Ron Paul fan and think the best thing our country could do is to put him in charge, I also think Peter Schiff is a very smart individual and the two of them understand much of what government and wall street do not.

Peter Schiff
http://www.youtube.com/watch?v=IU6PamCQ6zw
http://www.youtube.com/watch?v=EoB4BS7CGAw
Ron Paul
http://www.youtube.com/watch?v=04B3Wl2qouw

However I think even if they are right there is probably no better spot for my money than the stock market. Gold while a great fighter against inflation, has huge markups and transaction costs, is hard to get a hold of (especially if you want to physically own it), and cannot create wealth. The only thing gold does is prevent wealth loss due to inflation and when you pay upwards of 10-15% plus transaction costs to purchase gold or silver you are pretty much guaranteeing you are going to lose money on the deal. Plus you’ve got the scenario where if stuff does hit the fan and everyone’s investments and money are worthless then those being able to purchase or barter with you for your gold are going to be pretty slim.

If people like Ron Paul and Peter Schiff are right, which I believe they are then holding onto extra cash
is going to be a losing battle as inflation is going to eat up that money at rates we have not seen since the 70s or worse.

So other than buying real estate, which certainly has not been doing much lately you are pretty much left with consume and try to enjoy life now or put your money in the stock market and pray that this time isn’t any different.

I also have the luxury of despite me saving such a large amount of my income over the years, all this money was discretionary money. I do not need it for anything right now or anything in the immediate future. If I lost it all tomorrow, yes it would suck, but it would not affect my lifestyle one bit. If I was investing on a margin, HELOC, or with money I needed for expenses anytime in the next decade it would be an entirely different story.

The other point which I have not hit in this post is that by changing my investment philosophy I am pretty much guaranteeing failure or at the very least subpar returns. I had the unfortunate luck of starting my investment career at what right now is the absolute high of the stock market right before what is looking to be one of the worst if not the worst crash in our stock market history. So if I were to sell right now I would be locking in tremendous losses that would decimate my investment performance for probably the rest of my life. And really how much lower can things go

If I took the philosophy of lets just leave the money in there, but slow down or stop until some kind of recovery I would be weighting my portfolio towards the buy high end of the equation and it would likely take me a very long time to recoup my losses and my returns would be subpar because most of my purchases were at high point in the market. Plus I’ve already written you are an idiot if you try to time the market. This post is already getting too long, so I will defer to Five Cent Nickel who explains perfectly why you HAVE to keep investing regularly during market downturns. These times are our biggest opportunities!!! (assuming its not the of the world )

One final point which I will quickly make. Lets say I was one of those people who had not invested any money in the stock market and instead had lived life up, bought all the toys, big house, fancy dinners, etc. What would I have to show for it today? Would I really be any happier – would my life be anymore complete because I drove a nicer car, had a bigger house, and a bunch of useless crap stuffed in the garage and basement, because I just had to have these things that seemed cool or a must have at the moment only to turn out to be something you used only a handful of times and are now worthless. I can guarantee you the people that lived this way are probably more stressed out than I am now because they likely used lots of debt to buy these things and they probably don’t have over $60,000 of liquidable assets that can increase in value
.

I have no regrets and feel perfectly comfortably with my decision – which in the end is the most important thing. Whether I’m right or wrong I don’t think I would have done anything differently.

Many of the pension plan limitations will change for 2008 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, for others, the limitation will remain unchanged. For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $15,500. This limitation affects elective deferrals to Section 401(k) plans and to the Federal Government’s Thrift Savings Plan, among other plans.

Source (thanks H B)

Traditonal Rollover IRA – $13,245.15 (+0.32%)
My Roth IRA – $27,067.79 (+3.08%)
Wife Roth IRA – $14,183.87 (+0.38%)
Current Traditional 401k – $9,288.94 (+23.99%)

Roth/Traditional % = 64.67% (tax free)

Total Retirement Nest Egg $63,785.75 (+4.42%)