A New Hope
My first attempt at early retirement, leading to a successful first year of capital management
Welcome to the first issue of Mingdom Capital! A new Substack I'm starting with the primary goal of consolidating my thoughts into writing about the current stock market as well as share research on specific companies in my portfolio.
Along the way, I hope to have the opportunity to engage with my handful of subscribers to discuss ideas and gather feedback.
In this issue:
Who am I and what’s my edge in the market?
2023 fund performance
Sneak-peak at what’s coming up next
Who am I and what edge do I have?
If you’re playing a poker game and you look around the table and can’t tell who the sucker is, it’s you.
I'm a software engineer by profession, and I've climbed various career ladders in that field for about 15 years, across tiny startups to huge corporations. As of 2023, I retired as a Director of Software Engineering at Axon (a 20B public safety tech company).
Outside of my work, one of my primary hobbies is investing, which I got a lucky start on in 2009 just after landing my first job at Microsoft. It was also just after the great financial crisis of 2008 - in fact, the first stock I ever purchased was around March or April 2009, right at the bottom.
So naturally, my first year of trading was full of wins. By early 2010, I made enough money to put down a deposit for my first house. I was just over a year out of school and feeling invincible. Even after selling out for the house purchase, I kept putting the spare money I earned into the stock market. At the time I was really into China stocks, and so was everyone else. Nearly every Chinese stock I bought in 2010 went up over 50%. Then May of 2011 came and I think that was the first time I heard of the saying “sell in May and go away”.
Too little, too late. My portfolio was largely wiped out as even the broader Chinese stock market crashed ~50%. CQQQ, an ETF to track Chinese tech stocks went from $33 in May to $18 by October of 2011. I didn't keep track well enough to know how much money I lost in 2011 but I remember thinking I was lucky that the year before I took out most of the money in the market for that first house.
This cycle of winning & euphoria to losing & despair continued many times. Although my investment philosophy and the type of positions in my portfolio are totally different now than when I started, the vast majority of my liquid capital was deployed in the stock market through the last 15 years.
Of "recent" memory, I recall fully participating in the crypto-mania of 2017, pandemic crash of 2020 and the bear market of 2022. The 2022 bear market was particularly painful as most of my portfolio was in tech & high growth stocks, which were particularly affected during that period as the Fed raised interest rates to combat inflation. And this was the first time I felt true despair as buying the dip no longer seemed to work and I was forced to re-examine my companies.
So believe me when I say that “what edge do I have?” is a question I ask myself a lot. My answer is a mix of the following:
I'm a relentless learner and synthesizer of information. My background in tech and especially working in as a people manager helped with this. In order to stay relevant, I needed to be ever curious and be a jack-of-all trades in order to effectively absorb information from one facet of an organization, then synthesize and communicate to another. I've been in the business of consuming and condensing information for a long time (yes, this is something GPTs are getting quite good at as well now) and I’ve honed my ability to see signal from noise.
My background in tech gives me an edge in the type of companies I like to invest in. This is a lucky break as tech is becoming an ever-larger piece of the overall stock market, and I don't think this trend is slowing down in the age of AI/ML. In addition, my background as a software engineer allows me to build tools on top of the massive amount of stock & financial data available. This helps me automate my process for researching companies.
It's very possible that I have no edge and have just been lucky. If that's the case, at least the written record from this newsletter will serve as a sobering reminder for the years to come.
With #3 being ever close to my mind, my goal moving forward is to gather more data over the months and years to prove that I have an edge. Regardless, I will say that through both skill and luck, I’ve accumulated enough capital at this point to have a real shot of reaching escape velocity - never needing to work for someone else again. So I’m highly incentivized to preserve that.
Next, let's take a look at Mingdom Capital's 2023 portfolio performance - which should help inspire some confidence =)
2023 returns
If this was a recession, it's probably the most predicted one ever
The above quote is from Peter Lynch, the famed Fidelity Magellan fund manager, during a CNBC interview from early 2023. It adequately sums up my feeling for 2023 - everyone was sure a recession was going to hit which will cause a further decline in stocks, but that ultimately never materialized. I was no different, and throughout the year I had positioned my portfolio cautiously and hedged using options (covered calls or long index puts).
Hindsight bias would say that I was too cautious. However, despite the caution, my portfolio had tremendous returns in 2023!
Fund performance breakdown:
I primarily manage 2 stock accounts. One actively traded (stocks and options) and another actively managed index-fund with M1 (stocks only, buy-and-hold). In addition, a huge portion of our net-worth (between my wife and I) was tied to my previous company's stock AXON. Here’s a breakdown of all 3 “funds”:
As you can see, every account outperformed the S&P index, which itself had a stellar year of being up 23%. The most aggressive and most actively managed account managed a whopping 73.8% in returns for the year, and this is with hedges!
(*) Outside of the above 3 categories, we had about 8% of our net worth in cash earning 4.5% interest and 19% in retirement accounts which performed in line with the S&P 500.
Overall, it would be an understatement to say 2023 was anything short of a stellar year. A good year to start my new career as a money manager of sorts.
So what’s next? In the next issue, I hope to dive deeper on key learnings from the past and discuss strategies for 2024 and beyond. My goal is to achieve consistent market-beating returns.
Hope you enjoyed this issue, stay tuned!