Investing Unscripted Podcast 124: Evolving as an Investor

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Jason Hall: Hey everybody, welcome back to Investing Unscripted, where we ask and answer the hard questions about investing. I'm Jason Hall, joined as nearly almost always by my good friend Jeff Santoro, the voice of the people. Hey Jeff. 

Jeff Santoro: Hey. How are you? 

Jason Hall: I'm good. The house is a little bit chaotic right now. My son brought a friend home. My son's seven. Anybody who's ever been around seven year old boys knows what that means. 

Jeff Santoro: That could explain why you hit the record button and then said to me. I don't even know what this show is about.

Jason Hall: Yeah, uh, the math checks out.

Jeff Santoro: So if people wonder where we got the name Investing Unscripted, it's because it's pretty unscripted.

Truth in marketing. That's exactly right. But we do actually have, we actually [00:02:00] do have a show idea. We, we, we did actually kind of plan it. Sort of. We did. No, 

Jason Hall: we, we planned it. We didn't kind of plan it. And we have a name for it. Becoming The investing butterfly you are meant to be. 

Jeff Santoro: That is a terrible, we're not aiming at that.

Jason Hall: No, we're not. We're not, but that's what I'm going to stay on the show. The idea for this show was inspired— who inspired this one?

Jeff Santoro: Me. Actually. I don't remember. Actually, no. I don't remember who.

Jason Hall: This show was inspired by me, Jeff. One of the things that we talked about is we, we have these regular conversations around not just planning content, content, but we're actually friends, air quote, friends.

In the real life. In the real life, the real life in the real life. But you know, we talk about investing a lot and we talk about our philosophy and in addition to talking about companies and, stocks. But one of the things that I kind of realized was since I'm kind of the pro here, the, you know, long term investor I work in the investing industry.

[00:03:00] Jeff to a far higher degree than you do, Jeff. I mean, it's my full time gig. A lot of the conversations that we've had over the past couple of years have been around my experience and experiences. And with you, we've talked about parts of your evolution as an investor. Kind of in fits and starts and bits and pieces across different episodes.

But one of the things that we haven't really done is spend more time talking. Specifically about your evolution, maybe in a whole show. So I'm going to weigh in a lot because I can't not talk. 

Jeff Santoro: Yeah, no, no. We know any, any regular listener knows that that is a fact. 

Jason Hall: But I think this is a good opportunity to talk through your evolution as an investor.

Over the past few years, I've set something I've said before. That thing's absolutely the truth is that you've evolved far more quickly than I did as an investor. There's a lot of ways we could kind of unpack that one that we're not going to even touch. But I think it is pretty remarkable the evolution that you've gone through.

And, um, Let's, let's do that. [00:04:00] 

Jeff Santoro: I wouldn't say it's remarkable, but I think what's interesting, I hope is interesting. How bad you were to begin with. I was not that bad. I mean, come on, I wasn't buying, I wasn't like Yolo’ing penny stocks. No, but I, I think the way I think about it is this, right? So I bought my first individual stock at age 40 in February of 2020.

And it is now what, October of 2024. And we started this podcast. More than two years ago, so I I've somewhere around half of my stock investing life has been spent Talking about my stock investing life on a podcast that at least an amount of people listen to so I've sort of evolved in the public. And yeah, I don't know to what degree I've evolved smartly or successfully is probably in partial partially due to the fact that I've been able to talk about it with you and other people and out loud and get feedback and things like that.

And I'm. I'm not [00:05:00] in my twenties figuring things out. Like I think if you know, you made the comment that I've evolved more quickly than you do when you were a beginner, but you are also younger and, and it was a different time and that you were a different place in life. And if I had been a stock investor, when I was in my twenties, I would have been a completely different, uh, type of investor I'm imagining.

Right. So, so even though I was newer to buying stocks, I wasn't new to understanding how the market worked and things like that. So. Yeah. So let's talk through and, you know, the, the ways in which things have evolved for me over the last couple of years. And I think for you too it'll be fun to hear maybe not so much what's changed in your process over the last four years, like it will be for me, but over the last five or 10 or 15, right.

Cause you, you have a longer. longer history with it. So, uh, but before we do that real quick, uh, housekeeping, just want to remind everyone that we have a newsletter you can subscribe to. We have a YouTube channel you can check out. And most importantly, uh, share the show with a friend, uh, send it to him if you think this is a great [00:06:00] episode.

And send it to him. If you don't think this is a great episode, honestly, regardless, just send it to them. And five 

Jason Hall: star rating. It's kind of like if you eat something that tastes really terrible and then you insist that your friends have to try it too. Right. Like, Oh, this is disgusting. You have to try it.

Right. Yeah. Right. We're okay. We're okay with that. Yeah. Just as long as you make people try. 

Jeff Santoro: And then, you know, a five star rating on the, on Apple podcasts and a review and a five star rating on Spotify is also a really great way to help the show. All right. Without that out of the way, Jason, where would you like to start?

So let's, 

Jason Hall: again, I kind of want to do this under the, kind of the framework of, of where you were and where you are and talk through, you Um, how that's evolved. I just, I really think Jeff, I think a lot of our listeners are going to, going to kind of be able to relate to that, maybe see themselves. It's somewhere along that same journey that you're, that you're taking where you are now or maybe where you started or somewhere in between.

So let's start with just the idea of buying a stock, thinking about making the [00:07:00] decision What do you buy? Last week's show we talked about finding ideas, right? So let's say, I don't want to rehash that, that episode, but let's say you found a couple of ideas and they all look interesting to you now, maybe you own some, Maybe you don't.

Maybe you have a small position in some. Maybe you have a large position in some, but they're all compelling to you as buys. How do you, how do you make decisions what you're going to buy? 

Jeff Santoro: All right, well, let me start with how I used to buy and then I'll talk about what I do now and how that's changed. So I joked earlier that I don't think I was terrible as a brand new investor.

And I only say that because I was at least smart enough to know that I shouldn't spend a lot of money as a new, as a new beginner, right? So I joke a lot about how I was buying literally 5 worth of companies when I started. You 

Jason Hall: didn't show up in Vegas with a suitcase with your life savings in cash. 

Jeff Santoro: I started, I literally started with 50 [00:08:00] in a Robin Hood account.

That was, that was the, how I, this whole thing started. And, and some of that was free money from Robin Hood. Yeah. Well, no, I didn't get any free money, but they gave me, um, gave you a share of a share of GoPro stock, which I go pro trading for 4 at the time or something like that. So when 

Jason Hall: I, when I opened my Robin Hood account I elected to get a free share of Ford.

Yeah. That is the only share of stock. That is the only share of any stock that has ever been in my Robinhood account. 

Jeff Santoro: Well, honestly, so this is a little bit of a tangent, but I think it's worth going into. We are unscripted. I actually really liked the Robinhood app and I think that's part of the appeal, right?

It's, it's, it's. Fun to look at and it's got a nice user interface and and it was a good place to start. The reason I switched honestly was partially because I knew that some of the other options out there had just better research. And because once I got obsessed with the learning aspect of it, I needed a little bit more than just like top 100 lists, which is what Robin Hood was providing.

And also I wanted access [00:09:00] to fractional shares because I, I, I said earlier, I did, I wasn't trading penny stocks. I kind of was not trading, but like I was buying penny stocks because when you start with 50 and you can't buy fractional shares. You're buying things that are five and 10. 

Jason Hall: Yeah. So no, no buying Ken sale capital or Mercado Libre or Google alphabet.

None of that. None of that. None of those. Yeah. 

Jeff Santoro: And I, I knew fractional share trading was coming to Robin hood. Cause at that point they were advertising it. And I think I was on the wait list to get it. And I might've even gotten it before I completely switched out of it, but I wanted that sooner.

So I ended up, that's how I ended up with fidelity, honestly. But anyway, so. When I was deciding what to buy when I was newer, it was more about, I want to buy everything. So anything that piqued my interest in any way, I would buy. And I would, I was especially interested in things that I understood and knew.

And I think that's probably pretty normal for a lot of people. Like I was, you [00:10:00] know, one of the first stocks I bought. On my own was Apple. And then I bought I don't even know, but that was one of the earliest ones because I like Apple and I use their products and I have this distinct memory for some reason of in college at one point saying to myself, I should figure out what, how to buy stocks and get Apple because I feel like, you know, That would be a good stock to own.

Jason Hall: You were right.

Jeff Santoro: Yes. This was probably 1998, 1999. That would have been a really good time to buy, to buy Apple. 

Jason Hall: Very, very right. Yeah. 

Jeff Santoro: So that was sort of like, and I, there really wasn't much more thought than that. It was how much money can I buy? You know, how much kind of money can I spend right now on this?

And even when I got a little bit more grown up. I was still buying tiny amounts of money because I hadn't really fully figured out how much I wanted to be investing or where I wanted to be investing. Now what I do, honestly, I've, if you fast forward to like right now, I've become very, very, very, very picky [00:11:00] and I almost exclusively just buy more of what I already own.

I've probably, we talked about this last week. I'm probably. On average by one to three new stocks over the course of like a year. That's how much my pace has slowed in terms of adding new positions. I, I, I would be willing to bet I'm going to end up selling more than I buy over the next year because I just, I'm, I'm just, I've, I've lived enough of an investor's life and seen enough things in my short four years here to, to realize you don't really don't have to swing at every pitch.

So I've become much, much pickier. So in terms of what to buy it, for me, it's almost exclusively just adding to what's in my portfolio. And I have a way of deciding what that is. I do have a pretty short. List of stocks that I keep that a watch list, so to speak, that I'm just, I'm interested in. Like I've talked about this a bazillion times.

I'll keep saying it. The one that I'm dying to buy once I feel comfortable with the valuation is Costco. And then I have some others that I'm just, I want to [00:12:00] keep learning about and keeping an eye on like end phase is one that I've always been really interested in. And I haven't been able to pull the trigger on it.

And I. I also haven't spent an incredible amount of time diving into it. It's one of those stocks. I have like a high level interest in because I, I like the idea that we could get more, more energy from solar, and I like the idea of rooftop solar panels. Cause that feels like, why wouldn't you take advantage of the big fireball?

Jason Hall: You're starting to get more kind of skin in the game too. I think you have an electric car now and like, yeah, all of those. 

Jeff Santoro: And I'll never do the the roof solar, just cause it would have to be on the front of my house. And I don't want to see that, but that's just a personal choice. I don't mind the way they look, but I want them on the back. 

Jason Hall: I'm actually really lucky in that regard that our solar panels, the back of our house faces the south side. It's really, yeah, that's a big 

Jeff Santoro: piece of it too, is I really, I'm not interested in showering out. 20 grand or 30, whatever it is to- 

Jason Hall: You're not interested in saving the world for your children. Okay. No, that's fine.

Jeff Santoro: Nope. Nope. Nope. Nope. If you've met my children, [00:13:00] you'd know why. I can say that cause they don't listen to this. so I don't, I don't want to keep rambling, but that's kind of where, in terms of what to buy, that's sort of where I am right now.

I'm, I'm mostly adding to my current positions and being very picky if I add, add a new company. 

Jason Hall: Well, just a couple of observations. Number one, the period that you started investing in, we saw the fastest 32, 33 percent drawdown. I don't know if it was the fastest, I think it was the fastest, even faster than black Monday back in 87 when the market felt like 27 percent one day and it kept falling, right?

It was down more than 30 percent from the high, but I think it took. 45 days or closer to two months. And we saw this massive, like 34 percent drawdown in 32 days or something like that. And then the combination of, of, uh, stimulus that started flowing in from the, from the federal government and those States were doing stuff too.

And the fact that there were no sports, there were no things. And we were all at home. The markets were insane. I've never seen anything like [00:14:00] it in my entire life. And yeah, 

Jeff Santoro: it was, and what was wild about it for me was like, I, I'm going to sound like a hipster here. Like I got obsessed with investing kind of before the rest of the world did.

It felt like, you know, cause they like pro jam before they sold out. Right. Like you haven't heard of this thing called investing. Um, but No, but it's true. Cause it was like the middle of February and it was because of a conversation with a colleague. I've told that story before. And, and then it was like, then the pandemic happens like three weeks later and.

All of a sudden everyone's locked at home and they're like, Oh, investing sounds fun. You know? So it was like, I was sort of along for that ride, but not for the same reason that most people were. Yeah. Yeah. You, you got on 

Jason Hall: the train before then and you, and you did right. But and I, I can tell you this. So I've told my story before about early in my investing career, going to Europe for like 17 days with my wife and Making a point to go past this is long ago enough that you like international rates for data were crazy and everybody didn't just have an [00:15:00] iPhone.

This was actually before the iPhone came out. So I couldn't just whip out my, my blackberry. And check stock prices like I'd have to take a laptop and go to a McDonald's in Paris, which that's what every wife wants to do is go to McDonald's in Paris, right? Every day. 

Jeff Santoro: Yeah, famous for its McDonald's.

I think it 

Jason Hall: is. It really is. But not so, but. So I, because I was going through exactly what you were talking about. It's like you, you want to know what's happening with your portfolio. You, you, you want to get out quick. If things look bad, you want to get in. If your favorite stock idea of you, you get you feel like that urgency that it's just it's almost like a physical force pushing you to act.

It takes, it takes time to, and that's one of the things I was talking about. It's the difference between you and me and that four years is it was really five or six years into my investing career. Before I really started to be able to pace myself and one of the things that I did is building frameworks and a structure [00:16:00] and we've talked a ton about that on the show to create incentives for me to have good behaviors and also to create friction to make it harder for me to do things that weren't in my.

Best behavior, like selling my best winner and justifying and saying, well, it's doubled. So I'm going to take half off the table, which I'm not at a table. It's my investment in a company that I think can grow 

Jeff Santoro: just so I can 

Jason Hall: have money to buy some stupid stock that I think is going to do better. 

Jeff Santoro: And I think if you, so I think to me, there's two ways people, there's more than two, but there's two kind of like most commonly expressed ways that I've heard where people sort get into investing.

Right. So one is like what I did, which is 50 bucks, a Robin hood account, start small and just kind of see what happens. Right. And that's what I was doing. I was buying things. I was selling things. I remember that first week, like after I bought my first couple of stocks, like every free second I had at work, I was like opening the Robin hood app because I was so fascinated, like I [00:17:00] didn't, this is how naive I was in terms of like, Again, I've been investing for 20 years in retirement accounts, but you, I would get a quarterly statement.

I didn't check up on it. I had no idea something could go up even 4 percent in a day, right? Right. And when you're investing in February, March, April, May, and June of 2020, for the first time, things were going on 

Jason Hall: markets moving by mid single 

Jeff Santoro: digits. And it blew my mind. Cause everything. I was relating it to was sort of like, I was comparing everything in my head to like interest rates, you know, like I was saying to myself, like, well, I can't get more than whatever it was at that time.

I can't get more than 0. 75 percent interest in my savings account. And then when I see, like, Okay. The 4 stock I bought three days ago is up 8%. I was like, that's a thing. Like I had no right. I had no idea. So I feel like, but that was kind of, I'm kind of happy. I was in such a volatile time because it showed me like, what's possible.

And then when it calmed down, eventually I was like, Oh, okay. That was an [00:18:00] outlier. And then I think there's other, another way people approach it is typically like, I'm going to do a lot of academic research first. I'm going to read one up on wall street and the intelligent investor and whatever. I'm going to read three or four books and then maybe I'll buy a neat, uh, a mutual fund, you know, and then maybe, you know, so it's like, yeah, sort of like do the learning on the front end and then you go into it a little bit more.

knowledgeable. And I don't know which is better. It probably depends on your personality to me for, for me, I needed to do it. Like I needed to be buying things and selling things and just kind of experiencing it myself. I think if I had read all the books first, I might have gotten bored and just been like, I'm out.

Um, I needed that sort of like hook on the front end. So, 

Jason Hall: well, let's circle back to that question, that question. So thinking about your process now, how it's evolved from like. Go, go, go, grab that, got to buy some, got to buy a little bit, want to buy everything [00:19:00] to where you are now being so much more disciplined about it.

What are the factors that usually kind of come down on when you're looking at multiple positions for different reasons and thinking about maybe like a waterfall of this stock over that stock over that stock? What does that look like? 

Jeff Santoro: All right. So I think I've explained this before, but I'm going to do it again briefly.

I'm curious if any listener thinks that my method is stupid. I want to know, I want you to, you know, you know, you 

Jason Hall: said any listener, not anybody. So you've excluded me from giving you my opinion. 

Jeff Santoro: I don't care about what you think. 

Jason Hall: Well then I 

Jeff Santoro: think it's stupid. So here's what I do. This is, I'll try to explain it succinctly.

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Uh, I sort my portfolio based on a quick formula that I have, which is basically the amount I own divided by how much that stock has beat the S and P 500. I believe that's the numerator and the denominator, and it just gives it a number. So it basically something that has done really well, but I don't own a lot of we'll sort to the top and something that's done very poorly.

That I don't own a lot of will sort [00:22:00] to the bottom and then it's interesting because that sends like so it's like a 

Jason Hall: buy signals like this is this stock is a winning stock. It has gone up. David Gardner has talked about this before. That's one of his key indicators, right? For a stock 

Jeff Santoro: that could be a compelling by and it's I'll give a hat tip to.

to two people. And it is ties to David Gardner. This is not my idea. So Brian Withers, who we've had on the show recently, actually just maybe a month or two ago to talk about how his process has evolved. Uh, he made a really great spreadsheet that he, uh, gave away for free or still gave it to the world for Motley Fool members.

And it, he had a column called the Aziz ratio. And this is because there was a. a person who wrote into the mailbag for David Gardner's rule breaker investing podcast. And he came up with this, what I just said, divide the, the position size by the amount is beat the S and P 500. You get this percentage 

Jason Hall: of your portfolio over [00:23:00] outperform or 

Jeff Santoro: performance against the S and P.

Correct. And it was his, and then what this, this listener Aziz said was, I think he said, if I remember, this was years ago now, basically like he puts, He literally dollar cost averages in and puts like a dollar into whatever sorts at the top every day, right? so Brian incorporated this in the spreadsheet and I I've always used it.

I just think it's a really interesting way to sort. So it's not entirely based on performance, but highlights like where you might want to add money. So it's, it's built around the philosophy of adding to your winners, right? So that's what I do as a first step. And then essentially from there, I make a framework driven, but not rules driven decision based on the valuation of the stocks near the top relative to the valuation I paid for it.

What I, for my existing position. So for example, if I, if I bought Amazon twice and I paid, uh, 20 times earnings the first time, [00:24:00] and I bought, and I, and I, uh, paid 10 times earnings the second time I have an average on my spreadsheet of 15 and if, and if it falls below that, then Below 15 and it's near the top.

I'll consider adding to it. Does that make sense? 

Jason Hall: Yes, we also for anybody listening. We also realize that Amazon has neither Traded for 10 nor 20 times earnings in its entire entire existence. That is what we like to call 

Jeff Santoro: an example Yeah, I had to use very simple numbers because I don't math But and then I it so I do that for a couple different metrics.

It's not just price to earnings and again, none of it is formulaic, even though I'm using formulas. It's not like, Oh, it's near the top and it checks all these boxes. It's an automatic by that's just sort of the higher hierarchy at which I look at them. Yeah. And sometimes I don't, sometimes I go way to the bottom. And I say to myself, I think this company, I'm excited about something about this company.

I like what management's doing. You have conviction. Here's an example. Nvidia for me is near the top [00:25:00] all the time. When I do this sort, it's close to, but not yet cheaper than I bought it for. So I've not added to it in a while. PayPal is near the bottom. Because it's not done well and I have not put a lot of money into it relative to the rest of my portfolio.

But recently, like not this month, but within the last couple of months I added a bunch to PayPal even though it was at the bottom because I listened to the earnings call and I read the last couple press releases and earnings releases and I've updated my spreadsheet that I keep for all my stocks. And I was like, I really like the way this is heading.

Like it seems like they're turning the corner. So again, it's not a rule. Yeah, it's, it's a framework like we've talked about and sometimes I throw it out the window and, and I buy by gut feel, you 

Jason Hall: know, so I'm going to bring David Gardner up again. We've, we've used his, uh, talking about averaging up. David Gardner is famous for saying, uh, dips only by dips.

Um. [00:26:00] Only 

Jeff Santoro: dips wait for dips. That's the book. Only 

Jason Hall: dips wait for dips. Right? Right. That's a good way to put it. I'm gonna invert that. I'm gonna Charlie Munger invert that. Only idiots only average up.

But they're both true. Yeah. They're both, they're both very true. Well, I remember, 

Jeff Santoro: I remember when I first started doing this, I asked you what you thought about it and your first response was, I like it, I think it's fine, but my worry is that it'll prevent you from identifying a super undervalued.

Opportunity. Yeah. Uh, yeah. 

Jason Hall: And the other, the other risk too is if you're only shopping off the top of that list, you could also just be investing in stocks that have run. Too far, too quickly. And we don't know if that's the case with Nvidia right now, because we don't know what's going to happen with the cycle for AI over the next few years, but sometimes that happens and it takes you a long time to, to kind of grow your way out of, out of those investments.

So again, that's, this is where frameworks come in, right? It's you're not using [00:27:00] rules because rules just tell you what to do and having a framework and frameworks in place. You have a process that leads you to making better decisions. 

Jeff Santoro: And, and I've been burned by it, by my process to, and I have a good example of that.

So for like several months, the top sorted stock I owned was Celsius Celsius holdings, the energy drink company. And it was massively, not only did it sort to the top because it had done super well thought I had not. Put a lot into it. It also was cheaper than my average purchase on every metric I track.

And I'm not talking like they started making money. Yeah. And it wasn't like 1 percent cheaper, 2 percent cheaper. It was like, like price to sales was like 40 percent cheaper and price to earnings was like 60. I mean, it was just like screaming at me for months. Like add to this, add to this, add to this.

And finally I was like, okay, like I'm going to buy it. And it almost immediately dropped. Right. I, and I don't know if I [00:28:00] would have added to it if it hadn't been constantly sorting to the top with these, like percentage is telling me it was cheap, or cheaper than I had paid for. So, you know, I, well, sometimes that's a lesson you can only, 

Jason Hall: you can only learn by 

Jeff Santoro: experiencing 

Jason Hall: it.

Right. 

Jeff Santoro: Yeah. Yeah. Yeah. 

Jason Hall: Yeah. No, I think that's, that's right. So I do 

Jeff Santoro: now in it. Go ahead. I was just gonna say, that's what I do now when I'm deciding like what, uh, or like what to add to in my portfolio. 

Jason Hall: Well, and I think that answers the when to buy too, right? Because you're looking for certain value points.

You're looking to add to, to winning businesses when the valuation gets even better than where you bought. Even if the stock price is appreciated and you're averaging up. But also being mindful of keeping a watch list and following the businesses as well to look for those opportunities like what you and I both agree we think could be happening with PayPal, where the turnaround is starting to get traction, they're leveraging the powerful franchise they have and driving better profits. 

Jeff Santoro: , I would add to the when part [00:29:00] too, because I think that's another way that when you buy, yeah. And this we've, we've talked about this a lot. Like I went from buying the second the money hit my account. That was like how I started to every week. on Wednesdays.

And, uh, now I do, I would say probably on average just twice a month and, but it's not on a set time or day. It's just kind of, I let it, unless something crazy happens, like if, if we have like those two consecutive days in the beginning of August when the market dropped a lot, I at least went and looked and I decided not to buy anything.

And in retrospect, I probably should have. But I don't preplan it anymore. It's just kind of like, when do I have the time? To take 20 minutes and look through my portfolio and sometimes that is only twice a month because you, you know, when I have time, the market's not open. So, right. So I, I would say like, I was just gonna, I would say like for me now, it's, it's just sort of when, whenever I do is, it's fine.

And honestly, if I, [00:30:00] if I go through and, you know, Most of the stuff is just not compelling to me that I just sometimes I do a whole bunch of. Thinking about it and then I don't buy anything and I come another, I wait a week and check in again and see if anything's changed. 

Jason Hall: So we're coming up on about a year from where you really started making that transition from, you had already made the transition from buying every week to once a month was kind of your goal, to really starting to think hard about wanting to make larger individual investments, invest with more conviction.

And you've substantially evolved from over there, but my question about that just kind of lay in that history over the past year and a half or so, would you say that changing your habits and changing your process around buying less often, but when you are making those investments, there are larger investments.

Has helped you with that urge to buy more things more often? 

Jeff Santoro: Yes. Yeah, cuz like when you're spending a hundred dollars, it For I [00:31:00] don't know that's probably a lot to some people but like for me for my investing where I am in life Like that's not an incredible amount of money It's really easy to be like that screw it whatever I'll roll the dice on this because what's the worst that can happen like this is less than a half of 1 percent of Probably even more smaller than that of my in, of my like, investment portfolio, right?

When you start making that individual decision be, you know, even like a half a percent or a third of a percent of your portfolio then you're like, okay, well maybe a little less Yolo , a little more research. So it, it has made me more careful, more thoughtful and, and helped it be easier and more, make more sense to be.

more spaced out with it. but the other thing too is that's tied to that is I know more than I did four years ago and I'll know more four years from now. And as I've thought more and learned more about like my overall invested money, right? Not just my tiny little stock portfolio, but my four Oh three B and [00:32:00] my wife's four Oh one K.

And the cash we have saved up and all that kind of stuff. I I've more and more come around to I can take more risk With this part of my invested wealth, because it is 10 percent of my invested wealth, you know, not the kind of risk where like a bad day can send me to zero, you know, like running a more 

Jason Hall: concentrated portfolio, investing larger amounts in individual companies, that sort of thing.

Jeff Santoro: Like even the Celsius thing that I just talked about, like I'm bummed out by that. Like, I don't, I'm not happy that I bought it the day before it proceeded to drop like 50 percent over the next six months or whatever. But it's. It's not going to kill me, you know, and, and there's a chance that that all turns around and I'm very happy that I had that amount PepsiCo is going to be happy about it.

Yeah, I know. That's the when, when they eventually buy, they buy them out. Yeah. 

Jason Hall: Yeah. We'll see. Yeah. We'll see how that goes. Let's, let's look at the other end of, of investing decisions. And that's, that is selling. So there's the what to [00:33:00] sell and when. At the point you you're at in your investing journey, Jeff, if you're selling a stock, I mean, I can only think of these are the three reasons that you and I've talked about you selling a stock.

The number one is that you don't want to own the business anymore, right? The thesis is broken. You've lost interest in following it and you never had enough conviction to keep it. So you've, you've chosen. I want to exit the business. Ownership of this business. The, another one is because again, we've talked about the, your style of investing in that it's 10 percent of your invested wealth is stocks that you're picking owning like multiples of the mag seven, unless you're convinced that that specific one is going to beat the market because you already own a lot of them through, um, index funds.

Owning those doesn't necessarily make sense. And there was a third one, , um, you've reached a financial goal and you are turning a stock into money. 

Jeff Santoro: and I want to hear how you've evolved on selling too. But like for me, whether I was conscious of it or not at the time, or whether I was fooling myself [00:34:00] or not at the time.

You know, early in my journey, I'm sure I was selling for all sorts of stupid, all sorts of stupid reasons. Right. You were. Yeah. The price was, the price went down or, you know, like that kind of stuff. Um, and I'm not saying I can remember doing the exact same things and I, I'm sure I will make that mistake moving forward.

I try not to make price or stock performance based sell decisions as much as I can. And again, that's like a. It's easier for me to hold something that's gone down 90 percent if I want to, because again, one stock in my portfolio down 90 percent is not going to bankrupt me. You know, if I had 50, 000 in outset medical and it went down 90%, I'd be pretty pissed off.

Right. Um, but I think I have like a thousand dollars in outside medical. So that's made it easier to, to hold on to companies where like, at least I feel like there's something I still want to stick around and watch. Yeah. But you know, to my earlier point about kind of buying [00:35:00] everything when I was newer, I still have some, I are not as many now, but like over the past year and a half, two years, I, I still had a lot of those positions.

You know, when, when I got hired as a contractor for Motley Fool, like one of the benefits we have is we can see like all the portfolio services. So like I took 1, 000 back in 2021 and just bought all 40 stocks in one of the services just to kind of experience that. Not 1, 000 each. I want to be clear.

No, no, no. A total of 1, 000. You cut that 1, 000 into 40 parts. Yeah. And I didn't even, I even did the, I even spent a thousand over several months. Like I just sort of like took what I was saving each. Yeah. Choice a month and just a thousand dollars worth of that over several weeks into this thing. Um, and I still had, I still actually do own some of those positions.

Some of them have been stocks that have a high con, high conviction. Like I bought Kintel Capital from that and I love that company. Right. But the ones I've sold over the past year, year and a half have just been, you know, The ones I bought from that, [00:36:00] and I never bought them for any reason other than it was part of the service and I didn't have any, you know, some souls sort of weeding.

Some of those out. But sometimes I sell something just cause I've learned enough about it that I don't want to own it anymore. Like I get the ick about management or something like that. And I'm just like, nah, I'm good. This is not of interest to me anymore. You know, I'm down to 40 stocks, I believe.

And I can see that even getting trimmed further, but I still own, you know, outset, which is a massive loser. Cause I want to, I want the company to like, I still root for it. So I'm going to hold that one and, and, and see what happens. So, 

Jason Hall: yeah, the only thing that I would add for me, and again, this gets back to that kind of, uh, stage in, in my investing career and also the fact that I'm managing the vast majority of my family's invested wealth is I have reached that point.

Where I don't know what the market is going to deliver over the next decade, [00:37:00] but I know roughly what I need right to hit financial, like I'm, I'm at that point now where I can lay it out. I've talked about this on another, the show we did, Jason just bought a bunch of bonds. We laid this out, so I'm not going to get into much detail here, but because I've gotten to that point, I can look at stocks in my portfolio.

Uh, NVIDIA is, is, is an example where I still see lots of opportunity, but over the next five or so years, I still have a lot of question marks and uncertainty. I could see myself exiting my full position or selling another half of it. But even knowing that, you know, a year and a half ago, it was the wrong decision or a year ago.

It was the wrong decision. When I cut my position in half, thinking holistically about where I am going forward, I could be completely happy being wrong and seeing the stock continue to March ever higher. Knowing that in my portfolio, it's a, I don't know, a 20 bagger. It's done what I needed to do. Now I can take some of the proceeds from that.

And start investing [00:38:00] it in fixed income or a little bit more secure, yieldy kind of things. Because again, I don't know what the market's going to do. I don't know how AI is going to play out in the near term. I don't even know, you know, what's going to happen over the next decade in terms of who the real winners are going to be from the multiples today.

But I know what I need, right? You're not quite there yet, right? Where you're still thinking, you know, in decades and multiple decades, right? A lot younger than you. You are younger than me. You're less old. I also don't have a pension. I'm glad you 

Jeff Santoro: brought up, I'm glad you brought up Nvidia because that, that's the, a really good example of If, if the exact same returns had happened in my portfolio with NVIDIA in 2021 as happened in 2024 or you know, whatever the comparable period would be, I would have been probably itching to sell, but not because of like the reasons you're talking about just because Oh my God, this is up 500%.

Like that's insane. Like I, I, there's no way it could, I wouldn't have known enough to know no, it could, it could 20 bag. Like I wouldn't have known that. Right. But you know, when you and I were. Talking [00:39:00] about Nvidia recently, you know, we talk a lot on this show about saving for retirement because that's the main reason most people invest, but it's also not the only reason people invest.

Like you, you'll hear stories About people who they've owned what pick the company They've owned Apple for 30 years and they sell some Apple or all of Apple and they pay for freaking college 

Jason Hall: Yeah, 

Jeff Santoro: right like that's also why you invest, you 

Jason Hall: know, like I have a friend I have a friend that has more than a million dollars in Apple wealth Because he loved Apple products.

Exactly. The thing you were talking about when you were in college 

Jeff Santoro: enough to actually buy it. 

Jason Hall: No, he was old enough and had enough money to do it. He owned a business at the time and he invested some number of thousands, not even a lot of money, but it was enough that it's a million dollars now. And his dividend yield on his cost basis is, I don't know, 30%.

It's. Kind of bananas, but yeah, like it's all about stages of, of your investing life where you have to make these decisions. [00:40:00] So I think that's the key. So, so that's the, what, and I guess the, the wind, so, so. I do want to hear you talk about the when, when to sell part, because this is probably the thing that I think we've maybe had some of the more fun pointed, mostly text exchanges but some conversations about when you're thinking about selling a stock.

Jeff Santoro: Hey everybody. We'll be right back. But first a word from our sponsors. Heads up folks. Interest rates are falling, but you can still lock in a 6 percent or higher yield with a diversified portfolio of high yield and investment grade corporate bonds on Public.com. You might want to act fast because your yield isn't locked in until the time of purchase.

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Hey, investing unscripted listeners. My name is Brett. One of the hosts of the Chit Chat Stocks podcast. If you love investing unscripted, we think you will love listening to Chit Chat Stocks. On our show, we research individual stocks, interview investing experts, and well chitchat about investing every single week from hot stocks, such as Nvidia and Celsius, the hidden small cap gems.

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Jeff Santoro: So I'm going to pretend like I've. Evolved as a seller. Honestly, before recently, like I would say like the first two and a half to three years that I was buying stocks, like I was most likely to sell the stock when I was bored and looking at my portfolio, right? So day off from work and [00:42:00] my kids are at school and I'm just like, ah, let's see what's going on and you know, I'm going to, maybe I'll spend some time doing some investing and then all of a sudden I'm like, I buy a stock and I'm like, I want to buy more stocks.

What can I sell to? Buy more stock. What can I sell to buy? And then all of a sudden it's like, you know what? I always hated this company. You know, I start to make excuses. And you know, again, I'm sure I will do that again. And I'm sure I'll look back at something I did recently and say, no, that really wasn't a good reason.

But for me now, like I'm more likely to think about selling after I've Learn something about the company that has prompted me to want to sell. And that, that learn is not the price movement. Yeah. So for example the, the, one of the, I think the most recent stock I sold, and it's actually one of the ones I have in my in the portfolio contest, uh, which is, uh, progeny.

It's a company I really like from like the, tell the story of the stock perspective, right? They help. They basically if you have health insurance at your company, that includes their fertility [00:43:00] benefits, they help people with fertility stuff. Right. So that's cool. Like I'm happy that people do that. I have a friend who.

That's who their, uh, life, that's who their health insurance uses for that stuff. And they're actually using them at right now to try to have a kid. I listened to the Q2 earnings call back in July or August, whenever it was. And it was just, I got like a weird, like a weird vibe about Matt. Like it just, it was just the way that the CEO was answering questions.

Like he couldn't really answer, like they, he kept getting pressed on why things were happening with the business. And his answer for most things was like, yeah, I don't really know. You know, and I, I was like, that's weird. Usually they know you appreciate the honesty, but you're the CEO. Right. And then, you know, I had gotten some other anecdotal evidence that from someone and, and I just, I started to develop like an ick about management.

And I started to not be, I was like, you know, maybe this is not and so I ended up just, I sold it. Like I, again, it was [00:44:00] one of those there's plenty of fish in the sea. There's other stocks in my portfolio and I, I would rather, I don't know if that's the right decision, you know, that maybe I, it was just like a, I misinterpreted the vibes and the company's fine.

But. I at least I'm telling myself right now and we can come back and check on this if I was wrong that I had a good reason to sell and it wasn't because, oh, the stock's down X percent now I have to be perfectly honest if it was up 400 percent of my portfolio, like NVIDIA is, I don't know that I would have sold it if I'm being 100 percent honest because that's the law.

That's a lot harder. Yeah. You know, I would have probably talked myself out of that feeling I had and or said something to myself like, well, I'll keep an eye on it. If it ever gets down near zero, I'll sell it before it becomes a loss. You know? 

Jason Hall: Well, that's one of my favorite things about, about the concept of averaging up and winners keep continuing to win is that they usually do like that is a, that is a, I don't know what the number [00:45:00] is, but it's a bare percentage of, of stocks.

Like in the major indices like the S and P 500 or, uh, Russell 3000 or whatever that that create almost all of the economic value. Like it's a small percentage that actually generate the outperformance versus the market. The average most stocks go down, like the average stock loses money. So that's why diversification and.

being rigorous about picking stocks matter so much. And, but I think you're right as a general rule, like selling winning stocks, it's the knee jerk reaction. Again, that whole, I mentioned like the, the traders mentality of taking money off the table. It's the exact opposite of, of what works because winning businesses generally continue to do it, right?

They continue to win and make money and grow over time. So no, I think that's right. 

Jeff Santoro: The other, the other thing I, I think a realization I had to come to was I think my perception before I started to like really learn about all this was that there was a I don't know. Like if you were a publicly traded company, you must be legit.

Like I, the, I, the idea that like [00:46:00] there's just garbage penny stock companies out there, like where they don't really have a business and they just, but somehow people own their stock. Like the fact that companies could come public for nefarious reasons, right. Just to like enrich the share, you know, enrich the CEO and cause there's thousands and thousands of stocks like you've never heard of that are tiny and have basically no business.

There's that, there was that story a couple of years ago about the, the, the publicly traded stock. It was just a deli in New Jersey. Yeah. Yeah. So it's I had no idea that that was I had this like grandiose thing in my head about like what a publicly traded company was like, because in my mind, everything, you know, it's like publicly traded companies are like Amazon and Apple and Microsoft.

So I think that was another, the idea that like you might, I might accidentally own just like a trash company, wasn't a thing. I believe could be possible when I was new. So and I'm probably, I probably owned some bad businesses early on that I, cause I just didn't, I thought that I thought Oh, it's publicly traded.

It's gotta be legit. They're not all legit. 

Jason Hall: There's one more like when to [00:47:00] sell a stock thing that has I've, I've come to accept and that's, I do like to try to find turnaround opportunities when I can. And the problem with the turnaround is you can always find an excuse why it hasn't started working yet.

And you can hold that back, right? And you can double down on the loser. And I've started to be more rigorous about when there's clear evidence that the turn on is not working, not falling for the not working yet. Aspects and, and moving and moving on I'll use Walgreens, uh, Boots Alliance as an example.

That's one that I invested in. I thought the dividend was safe. I thought Roz Brewer was going to be the right leader. She had a great background in retailing, customer service coming from Starbucks. Uh, apparently none of her, her skillset really translated well and the business continued to deteriorate under her leadership.

They brought somebody new in with a background in, in healthcare , and pharmacy benefit management, all that kind of stuff. [00:48:00] And they slashed the dividend . And I made the decision that I'm like, you know what, it's time to move on.

I've been wrong. Maybe, maybe they're going to get it together, but let there be signs that things are working before you invest. And if you're, if you're, If it's taken a long time and there's no progress, move on, right? Move on to better hunting grounds. 

Jeff Santoro: Yeah. Cause I think especially with a turnaround, you hopefully buy that company, not just because it has been beaten down, but because you believe there is some.

Thing that's going to happen, that's going to turn the business around. And if you have identified that, then you just have to keep an eye for that thing to happen. Like I'm not trying to brag about being right about Amazon at the end of 2022. I said to myself, there's no way they're going to continue forever to be operating.

income or operating, uh, income negative in the e commerce business forever. 

Jason Hall: Yeah. 

Jeff Santoro: Like I just, I get why they are now. They doubled their footprint in two [00:49:00] years, pandemic, all that stuff. So like I identified that was the thing I thought could turn around. And so I think if I had seen three or four quarters later, it was still deteriorating.

I would have been wrong. And I, I like to think I would have sold at that point. So I, and I think you probably went into the Walgreens thing with a similar. thing in mind. I think these things will happen. And then when they didn't, it's almost easier, I think, to when you're buying something that you think will turn around, because you're kind of forced into thinking about what, what is the turnaround.

Whereas if you just buy a stock that's going up, you're not really worried about as much specific thing, right? You can get caught up in like revenue growth or something like that, even though you're missing margin compression or something like that. Yeah. 

Jason Hall: Yeah. No, that's exactly right. I mean, it gets just back around to our psychology, right?

We're confirmation biases, how we're wired to look for reasons we're right. And we're almost always going to be leaning in towards whatever that our biases anyway. That really, I guess the core of it is like what you said, looking for reasons that you're wrong, like [00:50:00] constantly looking for reasons that you're wrong.

And with those turnaround kind of situations, yeah, I think it's easier to objectively see them. I think you're right about that. 

Jeff Santoro: All right. I'm going to, I'm going to flip the script here because. I want to ask you one of the last questions we have here on our outline because I'm actually really, I don't think we've ever talked about this.

So I've talked a lot about how I'm very nerdy and meticulous about keeping a spreadsheet on every company that I own and updating it every quarter with all the metrics and blah, blah, blah. And I know you, you notoriously don't do any of that. I've checked that you are like a raccoon on meth when it comes to investing and you just randomly go on vendors and buy or sell a bunch of stuff.

Yeah. once a year, twice a year. But I'm curious, has your method of sort of tracking what you own suits did their method? I was, I was even trying to do that. Has it changed? Like when you were in your first, like five years as an investor, did you actually track things as I don't like more and you've and you've sort of learned over time.

I don't need this to pay as much as close of [00:51:00] attention because I, I sort of have the muscle memory to keep track of it on the fly as I go. Or were you always sort of just read it, remember it, move on kind of a person. 

Jason Hall: Yeah, I've never journaled. And early in my investing career, I was way too, you know, the tail wagging the dog where the stock price is the tail, right?

Where I'm following the stock price and I'm acting too often on what the stock price is done. And then I guess it was. 2010, 2011, somewhere around there, we went through a period where coming out of the financial crisis, it was 2011 or 2012 where the economy was getting healthier, but there was like double ditch, double dip.

Recession was a concern. Do you remember the pigs, Portugal, Italy, Ireland, Greece? Yeah, yeah, yeah, yeah. And Spain, maybe? Where there was like these companies or these, these countries are going to go bankrupt. They're going to, it's going to, the EU is going to fall apart. I think there are all these real, very serious concerns that were still lingering from the financial [00:52:00] crisis.

And the market went sideways for a long time. It was just not good. And a lot of stocks that I bought were doing the same thing. And yeah. That was when I really realized that I have to find more patients and really start focusing on the underlying business and know what I own. And I was able to start building some conviction based on knowing the companies.

And then, you know, that's where it was really, the bottom was 2009, but really when the economy, And the economic results, it wasn't just margin, you know, multiple expansion, like normalization of multiples from those crazy lows in the, during the financial crisis, just to coming back to better, but like real business growth and profit growth was really like 2012 when that really started happening.

And luckily I learned that lesson before I just sold everything and. Did something dumb. And, and it's, it's paid off. But the way that I've approached and that also that started overlapping when I started doing this, started writing. So even though I don't journal [00:53:00] for myself, you're writing and learning about, yeah, you write, you know, I don't know, a hundred articles, 50 articles a month.

And you're doubling your output during earning season. You start really, you know, in really internalizing a lot more about the companies that you follow when you're writing about them regularly. But I've still, I don't. I mean, the one thing that I will say I do, and it's kind of tied to what you were talking about with like the Aziz ratio.

I don't use the Aziz ratio, but I certainly look at sorting my portfolio based on companies that are largest in terms of the value of my port. Percentage of the market value of my portfolio and then looking at those companies based on the percentage of cost basis I've invested and say, okay, are there winners that I have done really well for me that I have, have not been, that I need to be owning more of, right?

Being thoughtful about that. And then also inverting it and looking downstream. It's like, okay, these, these are companies that I've invested a lot and they've not done well. What did I miss? What did I get wrong? What can I learn from that and apply to making better investing decisions going [00:54:00] forward? 

Jeff Santoro: Yeah.

The reason I wanted to know if you are ever a little bit more of a tracker is because sometimes I'll do now I'm at the point now where like it takes me 90 seconds, two minutes to just fill in the new quarters information, right? It's not a time intensive thing. Like it takes a long time to develop it at the front end, but then every quarter it's a few minutes, right?

Yeah. There are times when I do it and then I look at it and I'm just like, yeah, everything's fine. All right. There's no like deep insight. I'm getting quarter to quarter. I'm just sort of like looking at everything and asking myself some quick questions like, and nine times out of 10, I'm like, yeah, everything, even if things are down and it was a bad quarter, like I'm not, I know enough to know that that's not a reason in and of itself to sell, right?

Because yeah, I, I remember thinking, I, it's funny, one of the few times I did journal something, I found it recently, I wrote about, I spent like a, an hour and I just like really wrote a lot of stuff about Nvidia and it was before all the AI stuff. And my concluding little summary was something along the lines of like, not a great [00:55:00] quarter, hasn't been good for a little while.

I think the business will be okay. It's pretty diversified, you know, so, if gaming doesn't do well, but automated does, or data centers is weak, but professional visualization is good I think they'll be kind of okay. And it was probably two or three quarters before, like, that first huge AI data center quarter.

Jason Hall: It's not diversified anymore. No, no, I know. But that's what I'm saying. I'm just, I'm just saying, but that's how huge this has been. 

Jeff Santoro: Yes. Agreed. But my, my point is. I've, when I look, when I see a quarter that's down this is why no, not to, you know, because I mean, I know it's a cyclical industry, but you, I can, I've done, I've, I've owned companies long enough now that I can go back and see Oh, it went up and then it dipped down for three quarters and then it just kind of turned back around.

Cause that's how business goes sometimes. 

Jason Hall: Right. So that's exactly right. Yep. , I think that's basically uh, that's basically it. Any last words before we wrap it up? 

Jeff Santoro: No. I, I don't like that [00:56:00] I talked so much on this episode, but if, you know, if it was helpful for anyone, I'm glad. I think, being able to talk through the way things have evolved. I think what's interesting is maybe we should do this like once a year, kind of like check in. Because I'd, I'd imagine a year from now, I'll, I'll feel differently about some aspect of this. I think the pace of the change will probably slow over time.

I don't think I'll be as drastically different four years from now as I was four years ago. Yeah, it's like a verbal, uh, yeah. Yeah. It's a journal for me to talk through the way I've thought about stuff. So yeah, I hope people thought it was helpful. 

Jason Hall: A vernal. It was a vernal. 

Jeff Santoro: It's a yes. If you want to call it that. That's, that's fine with me. 

Jason Hall: I don't. It's terrible. I'm not going to do. I'm not going to call it that Jeff. I made a sushi metaphor last, uh, last time. I'm going to make a booze metaphor this time. I think this is, this is better than the butterfly, right? , the metamorphosis of the butterfly, I'm setting it up to sound like it's going to be corny, but I do think that investing over a long time is like distillation. I think you steadily concentrate down the more and [00:57:00] more of who you are in your focus And what matters to you and what you're good at and avoiding what you're bad at.. I really do. I think it's more of a distillation process than anything. 

Jeff Santoro: Yeah I said I wanted people to reach out if they thought this was You know, if they've had any feedback for the things I talked about. But I would be curious to know from our listeners, how much they think they've changed over the course of their investing time.

Like I feel like I've changed a lot and I don't know if that's just because I have the benefit of talking about it a lot, right. And thinking about it and writing about it. But I'm curious for someone who, who doesn't have that outlet, has our listeners processes changed? If anyone wants to, you know, shoot us an email, I mean, we have a mailbag coming up, so this would be a good way to either share and, or ask a question.

But I'm curious if anyone else has, has felt like they've changed a lot over the first couple of years of their investing or, or the last few. 

Jason Hall: I don't know about everybody else, Jeff Santoro, but I'm enjoying watching you process from rotgut whiskey to fine aged bourbon. You just need some more time in the barrel.

Jeff Santoro: I feel like we're going to have a branded whiskey down [00:58:00] the road based on this idea. 

Jason Hall: Ooh, let's make it happen. Okay. Friends, as always, we love to give our answers to these hard investing questions, walk down the journey that we're taking. sharing our experiences along the way. Jeff, I really enjoyed this conversation with you, but as always, got to remind everybody, this is Jeff's journey.

So Jeff's answers, my answers thrown in here too, it's up to you to find your own answers to these hard investing questions. As always, I believe in you, you can do it. Okay, Jeff, we'll see you next time. 

Jeff Santoro: See you next time.