Trey Henninger | DIYInvesting
@TreyHenninger
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Host of DIY Investing Pod/ Videos: / Managed Accounts 📈 / Substack / MicroCap Investor / Focus: Quality + Value + Shareholder Friendly Management
United States
Joined April 2015
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April 2024 Portfolio Update:
Compound Annual Growth Rate = +29.4%
(Jan 2020 - Apr 2024) [4.33 years]
YTD 2024 Performance = +6.1%
Since Inception:
2023 = +53.7% (vs +26.3%) (S&P 500)
2022 = -29.3% (vs -18.11%)
2021 = +117.5% (vs +28.71%)
2020 = +22.0% (vs +18.4%)
AMA 👇
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Elon Musk borrowed $12.5 billion USD via a margin loan to complete his acquisition of $TWTR. However, he had to pledge $62.5 billion in $TSLA shares.
If Tesla's stock price falls by 43% (to $35.7 billion in value), Musk will receive a margin call.
Default $TSLA price = $570
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Why Warren Buffett isn't worried about inflation
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Things you don’t need for a 10-bagger:
- Fast Growth >20%
- First Mover
- Tech Company / Innovation
- Multiple Expansion
- A good story
Things you need for a 10-bagger:
- Self-Funding (ROE 10-15%)
- Earnings Growth
- Disciplined Capital Allocation
- Patience
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The best article about P/E ratios I’ve ever read courtesy of
@FocusedCompound
This is also likely the only article on the topic you need to read.
Wish I wrote it myself
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As a concentrated investor, I am regularly asked: How can you handle only owning 5 stocks?
A: You only need to diversify if you're wrong.
I focus entirely on making sure I'm not wrong.
High conviction, High reliability, asymmetric return bets
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The Story of my First 10-Bagger Investment:
On March 23rd, 2020, I bought shares of Solitron Devices - $SODI for $2.10 per share.
Today, March 5th, 2024, in just under 4 years, shares of Solitron closed at $21.00 per share, exactly 10x my original purchase price.
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1/ 2021 Annual Review:
Portfolio Performance = +117.5%
Benchmark: S&P 500 (+28.71%)
Since Inception Tracking:
2020 = +22.0% (vs 18.4%)
2021 = +117.5% (vs 28.71%)
Total = +165.35% (vs +52.39%)
CAGR = +62.9% (vs +23.45%)
December locked in the best annual returns of my life.
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This analysis was based on Musk's SEC disclosures here:
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What you think you need to be an investor:
- $$$$ Lots of Money
- A business degree
- Excel Modeling Skills
- CFA
- A few years as an investment banker
- A bunch of rich friends
What you actually need:
- Ability to read a 10K
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This white paper:
Liquidity As an Investment Style
Provide critical evidence for the benefits of building an illiquid portfolio especially when combined with a focus on small size and value factors.
Worth reading and a bookmark
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Value investors have “value traps.”
Why don’t Compounder Bros have “compounder traps?”
I think they should.
I nominate Serial Acquirers as the first official “compounder trap.”
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$GEOFF from
@FocusedCompound
has a great piece on whether to use: Cash Flow or Earnings or Asset Value.
Do you own a:
1. Snowball? (Earnings valuation)
2. Waterfall? (Cash flow valuation)
3. Rock? (Asset valuation)
I only want to buy and value snowballs
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Congratulations to Dan Schum
@NoNameStocks
on a 4.5 year 100-bagger with
#HemaCare
Corporation $HEMA
From $0.25 in 2015 to $25.40 buyout yesterday
I had the privilege to talk with Dan about his experience with $HEMA yesterday on my podcast.
Tune in to Episode 56 on Dec. 29th
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If you want to be a better investor:
1. Start a blog
2. Before buying a stock write down why you're buying it and publish to blog. (Can publish on a delayed basis, but write prior to purchase)
3. After all, investments publish a blog post about what you learned.
4. Repeat.
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I’m excited to have been accepted as a proud new member of
@MicroCapClub
Thank you to everyone for your support and encouragement over the past couple years!
I hope to continue to constantly improve as an investor!
Just submitted my second application to join
@MicroCapClub
Hopefully second time is the charm!
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@FocusedCompound
$SODI
Defense company produces small critical components as a small cost to large expensive equipment
Trades at ~7x earnings power
Growing revenue at double digits
Accretive acquisition at 5x earnings
Massive operating leverage
Expect reported earnings to 🚀 next 12 months
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My top 3 investment holdings represent 83% of my portfolio today.
I sleep soundly at night.
It's about what you own, not how much of it you own.
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I think $XPEL is a good example of how paying high PE multiples for fast growing stocks can be dangerous.
Here you have a company that is still guiding for 8-10% growth, but lost a third of its market cap because it's no longer double digit growth.
Xpel double miss + lowers FY 24 revenue growth projections to 8-10% from 15%.
CEO: "Clearly, Q1 was a challenging quarter for the Company, particularly in the US, where we saw a continued trend of a slowing aftermarket esp compared to the strength in H1 23"
$XPEL: -22% PM
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$SODI became my first 5-bagger today!
Halfway to my 10-bagger target.
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Holding a multibagger is a profound experience.
When a 10% gain represents a 30 or 50% gain on cost, you begin to understand how true wealth is built.
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My favorite part of sharing my investment journey publicly is that we can all invest our own way with various strategies and stocks and still make money and be excited for each other.
It’s not zero sum
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If $TSLA stock hits $570, Elon Musk will be margin called on his Twitter purchase loan.
If that occurs, he'll have two business days to either pay the entire $12.5 billion margin loan, post $3.57 billion USD in CASH, or sell his $TSLAQ collateral shares
Elon Musk borrowed $12.5 billion USD via a margin loan to complete his acquisition of $TWTR. However, he had to pledge $62.5 billion in $TSLA shares.
If Tesla's stock price falls by 43% (to $35.7 billion in value), Musk will receive a margin call.
Default $TSLA price = $570
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@quantian1
My best guess is that *IF* it is true, we'd still probably not put lead back in everything.
Subsequent research would be about replicating the effect with different elements via substitution in a way that has less environmental impacts.
The key is the pressure replication via…
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I am seeking an investment analyst role (remote or Houston-based).
I have a non-traditional (engineering) background, but my resume is my public brand (podcast, blog, videos) and performance.
Please RT or connect me to anyone who may be seeking a driven passionate investor.
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Public Service Announcement:
Insider ownership =\= Skin in the Game
If those shares were gifted, inherited, or granted as stock options they won’t see it the same as you.
Look for directors who bought their shares with cold hard cash. That’s how you bought yours.
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Buying compounders at 5x Earnings or less is such a great way to make money.
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Solitron Devices Stock: A Future 10-Bagger $SODI
MarketCap: ~$20-25m
Current Earnings Power: ~$4-5m
Video Thesis: Solitron's has potential to 10-bag as it grows revenue from ~$10m to $20m+ and earnings power from $4m+ with potential for $6-8m+ earnings in the next few years.
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Investing Tip:
Only own companies with a Return on Equity (ROE) greater than your personal expected rate of return while investing.
This puts time on your side.
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Holding a multibagger is a profound experience.
When a 10% gain represents a 30 or 50% gain on cost, you begin to understand how true wealth is built.
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Unpopular opinion: Most of my followers would be better off owning index funds.
You probably think I'm not referring to you.
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$CPRT Copart stock is one of the best companies I've reviewed in my S&P 500 video series.
- 30%+ ROE
- 20%+ ROIC
- 12% Revenue growth
- 22 % EPS growth
- operating leverage
Love at first sight
Full screen-share video review:
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1/
Grab a Latte.
It's time for rebuttal thread on investing vs speculation!
@10kdiver
style!
1/
Get a cup of coffee.
In this thread, I'll share with you my thoughts on *investing* vs *speculation* -- and how to tell them apart.
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There are 55 companies in the S&P 500 that start with the letter "A".
I recorded myself analyzing every single one of them. Here are the 14 worth your time:
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I only invest in a company when I have a massive edge.
Some argue investing “edge” doesn’t exist anymore, if ever
Yet, they conveniently exclude the types of stocks I buy from the “studies” they use as evidence
Illiquid, Nanocap, non-indexed, no institutions.
Find your edge!
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At what point do I move a sub 3% interest rate mortgage from the liability column to the asset column of my balance sheet?
Starting to definitely feel like an asset
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All stocks are worth 10x earnings until proven otherwise.
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I am convinced you can achieve a top 1% outcome in life by simply understanding these five mental models:
1. The power of incentives
2. Signaling Theory
3. Opportunity Costs
4. Compounding
5. Pareto Principle
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I view investing as planting future money trees.
A well selected stock that can compound at 15%/year will take 33 years to become a 100-bagger.
My goal is to plant a $100k seed that can grow into $10 million 33 years later.
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Grab a Latte!
Let’s talk about Leverage
👇
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It’s too late for me. SAVE yourself young ones
As Morgan Housel explains beautifully in The Psychology of Money, this convexity applies to Warren Buffett as well:
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I only invest in a company when I have a massive edge.
Some argue investing “edge” doesn’t exist anymore, if ever
Yet, they conveniently exclude the types of stocks I buy from the “studies” they use as evidence
Illiquid, Nanocap, non-indexed, no institutions.
Find your edge!
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Re: Elon Musk's margin call trigger point, it is important to recognize this is a moving target.
The margin call will occur 43% below the $TSLA stock price on the day of funding for the $TWTR acquisition.
Based on today's close of $876, trigger = $499
@TreyHenninger
Could you please update your analysis based on today’s close of 876? Is the number for default still 570 (since Elon would now be pledging more shares to put up $62.5B)?
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I really should just buy $OTCM one of these days.
Quasi monopolies are the way to go
Investing in (quasi) monopolies can be very interesting as they often have a huge economic moat.
Here you can find Buffett's monopoly investments:
H/T
@MT_Capital1
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I used to be in favor of 24/7 stock market trading.
Because I was stupid.
We need time to not think about markets.
The market hours could probably be shortened even.
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My portfolio performance has exceeded all expectations so far this year.
YTD 2021 Performance = +54.7%
2020 Return = +22.0%
S&P 500 2020 Return ~ +18.4%
Current holdings: 3
Top Holding: 43% position size
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@nolen1wh
It’s a moving target based on the closing stock price the day of funding. That would determine the number of shares in the collateral account.
I based it on a stock price of $1,000 (as it was at the time) and a 43% loss puts it at $570.
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As an individual investor, your advantage is that institutions can't buy the same stocks as you.
Don't compete with the professionals.
Play a different game.
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I have a confession.
I entered a FinTwit stock contest at the end of 2020, where you submit one long and one short.
My 2021 short: $AMC
AMA
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Twitter is powerful so I’m going to try something new.
I’m looking for a high-quality company to invest in. Qualities I want:
P/E less than 10
Double digit EPS growth
Non-cyclical
Management with skin in the game
Throw me some tickers. DMs accepted
Liquidity and size no prob
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It feels like everything I want to own is super cheap…
…and I’m too broke to have cash to buy them.
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If you want to learn anything about the railroad industry this is a great interview with the former CEO of BNSF.
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Bull market fortunes are made during bear markets.
My triple digit returns of 2021 were setup by the decisions I made in March and April 2020.
How you think
How you Act
How you allocate capital today will determine your 2023 results
Stop worrying about YTD. Build your future
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Time is the friend of the wonderful business...
...and the wonderful business is the friend of the lazy investor.
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I am massively outperforming the S&P 500 this year.
Bear market? Way ahead of you. My portfolio entered a bear market weeks ago!
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All of my stocks may be in the red, but at least the Earnings Yield on my portfolio is 16.7%
I'd put that setup against your average profitless tech stock any day.
Buckle Up.
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All great things come to an end
July was my first negative return month for the year 2021. Thus, ending an amazing 12 consecutive positive months
YTD 2021 Performance = +97.1%
2020 Return = +22.0%
S&P 500 2020 Return = +18.4%
Current holdings: 3
Top Holding: 47% position size
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Due to popular request, I've created a YouTube playlist with ONLY the S&P 500 company stocks that have met the threshold to be included in my watchlist.
Bookmark and enjoy
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Who are the investors that you automatically read everything they write?
I'll start:
@NoNameStocks
@ElementaryValue
@FocusedCompound
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This is so true.
In March, I sold my smallest position at an 80% loss. It was 1% or less of my portfolio at that point.
Yet, it was at 80% mind share of my thoughts. Cutting it loose allowed me to focus on identifying and buying a new winner.
That winner is up 73% since March
Nothing frees up your mind like dumping a loser in the portfolio.
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Volatility used to worry me.
Then I stopped speculating and started investing.
Now I look at volatility as opportunity.
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As a concentrated investor, I am regularly asked: How can you handle only owning 5 stocks?
A: You only need to diversify if you're wrong.
I focus entirely on making sure I'm not wrong.
High conviction, High reliability, asymmetric return bets
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Unpopular opinion: Banks are great for building long-term wealth.
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Numerous great lessons from
@TSOH_Investing
in this article on his investing strategy.
Highly recommend reading
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You know you own an illiquid stock when:
No shares transact on the day of the annual meeting
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Why does everyone say the drawdowns are the hardest part of holding multibaggers?
For me the hard part is when they rise quickly and become overvalued in the short term.
It’s much easier for me to hold a beaten down compounder than an exuberant one.
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I made a lot of money this month doing absolutely NOTHING.
YTD 2021 Performance = +97.8%
2020 Return = +22.0%
S&P500 2020 Return = +18.4%
Current holdings: 3
Top Holding: 50% position size
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Share the range of Market Caps for your holdings!
I’ll start: $14m - $180m
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It may surprise you, but I don’t build a 3-statement financial model prior to making my investments.
I use simply heuristics: High Quality businesses at below average prices.
15%+ ROE
PE below 15
10-15%+ growth
I enjoyed this article on the topic:
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New 🎙️ Episode:
Dan Schum Interview: HemaCare 100-Bagger in 4.5 years
@NoNameStocks
$HEMA
2015: Buy $HEMA at $0.25
2019: $HEMA sold $25.40
Listen online:
Apple 🎙️
Spotify:
YouTube:
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1/ Today, I am excited to share my stock thesis on Solitron Devices $SODI
Solitron Devices was the stock that I profiled in my accepted
@MicroCapClub
application back in November. To comply with forum rules, I have delayed sharing for a couple months.
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You think you lack knowledge, but you really lack practice.
How many 10-Ks have you read in the last month?
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I read all of
@hussmanjp
market comments because of his clarity of thought, but this is one of his best.
This article should be a reference for investors seeking First Principles for Investing and Economics.
"Incoherent thinking is a world of magic, loose theory, and superstition; where things pop into existence, vanish without a trace, and are somehow related without any need to carefully describe cause and effect."
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I sold GameStop $GME at $5 per share.
AMA
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Investing Tip:
If you want to be a better investor you need to
1. Write out your investment thesis when buying a stock.
2. Share it with others to receive feedback.
Want practice? Post your favorite current stock thesis in 280 characters or less 👇
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If you’re an investor and you’re not sourcing stock ideas from Twitter:
You are a fool.
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Be very selective in choosing to what you subscribe.
Information density versus noise is critical to clear thinking.
Removing news consumption from my life dramatically improved my investment process.
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This is probably my favorite proxy fight campaign letter of all-time.
Worth a read $PRKA
Focused Compounding Fund, LP Issues Open Letter to the Board of Parks! America, Inc.
$PRKA
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If a 9-year CAGR of 40%+ implies "luck" not "skill"...
I would be perfectly happy if I only end up "lucky"
@praxisprocess
Because it doesn’t mean he’s an investing genius like it’d imply on paper, he just got lucky for a fairly long period investing in the most inefficient part of the U.S. public markets.
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Having sold $GME at a huge loss at $5 per share, its brutal seeing it at $27 today.
The enduring lesson: Just Focus on the future. You can’t change the past.
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If you're investing domestically in the United States and don't own shares in Russian or Ukrainian stocks, then this war probably won't have any discernable effect on the long-term fundamentals of your businesses.
Act accordingly.
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Do 1 hard thing every day.
Hard work leads to wealth, health, and meaning.
I wish I had learned this younger
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Follow-on lesson: Don't buy stocks with a ROE less than your discount rate.
For me, that means avoid ROE <10%.
In addition, I want a margin of safety on that.
I only target companies with a ROE >15%.
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I begin a new series profiling every company in the S&P 500 with a 5-minute Snap Judgement YouTube video.
We're going in alphabetical order, so first up: 3M Company $MMM
This style was inspired by $GEOFF and Andrew
@FocusedCompound
.
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MicroCap Investing has the illiquidity of Real Estate Investing without the leverage or tax benefits.
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Be thankful for your health and family.
It’s worth more than you know.
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🎙️Interview with Geoff Gannon (
@FocusedCompound
)
Concentrated investing in overlooked stocks
Example Stock: NACCO $NC up 90% YTD
Also: $KARE.AT $NKR $TRUX $VLGEA $ATVI
Website:
YouTube:
Apple🎙️
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If your earnings and dividends aren’t growing 10%+ per year, I’m not interested
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When I am able to easily acquire large blocks of shares in illiquid companies…I begin to worry I’m making a mistake
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This argument by
@FocusedCompound
shows why I refuse to own bonds.
100% stocks is a huge long term advantage.
The same argument can be made even for investing in less than your best ideas. Certain arbitrage or other hedges
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Public Service Announcement:
Insider ownership =\= Skin in the Game
If those shares were gifted, inherited, or granted as stock options they won’t see it the same as you.
Look for directors who bought their shares with cold hard cash. That’s how you bought yours.
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Can someone explain to me why people are freaking out?
As I don’t own listed stocks, I don’t understand…at all.
Wake me up when the S&P drops below 2300 again.
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@artofinvestmnt
Thank you.
It’s a fascinating set of margin loan terms. This is the largest acquisition by an individual in history, so I thought it would be worth a study.
This could really blow up poorly if not turned around and Tesla stock crashes.
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Somewhat of a humbling day for me today. A stock I made money on trading the 2020 lows to 2021 highs declared bankruptcy today.
Makes me think it was likely a major mistake to ever own it, despite making a large profit on the position.
Bought $1-2 range sold in the $3-6 range
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This hit me hard this morning.
Thoughts on conviction:
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I remember when 'stock market correction' meant at LEAST a 10% drop from all-time highs.
Now apparently it means a 1% decline in a day...
Short memories we have. This is nothing.
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4 stocks here. Yep, excitement is NOT the goal.
I don't understand how people hold like 5-10 portfolio positions total, it seems boring.
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Just submitted my second application to join
@MicroCapClub
Hopefully second time is the charm!
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New rule I’m considering: Only buy stock in companies with less than 10 million shares outstanding.
Seems like a good filter
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