TULA Investment Group

I tend to invest more heavily in small cap stocks than most investment managers. I find that investing in attractively valued, under-the-radar small cap stocks has excellent growth potential. These kinds of stocks are also more likely to be acquisition targets for larger companies. My best years have been when this has happened. Already this year I have had seven companies that are being acquired or taken private. This has resulted in daily gains of 20% to 115% for each of these acquired companies. Please see Acquired Company List for more detail on these companies.

Although I have a better chance to make outsized gain with small caps, I also buy some larger, more established companies to help keep the portfolio from becoming too volatile such as Pfizer and Walmart. These companies are very stable and provide consistent and solid returns, which act as the perfect complement to the high growth potential of the small cap stocks.

I use creative research to get an edge on selecting stocks that will perform well. By carefully observing technological, social, and political trends and purchasing stock accordingly, I have been able to make fruitful investments. My goal here is to constantly keep an eye on the changing times to discover and invest in trends before they happen.

An example of how I creatively found the next investment trend was observing and predicting what would happen as a result of increased gun violence. With each horrific and heart-breaking mass shooting we hear about - in Columbine, Aurora, Virginia Tech, Newtown, and many more - there has been a cry for more stringent gun control. As a result, gun stocks soared as gun owners and those who had considered buying a gun stocked up, fearing it may soon be illegal. In addition, I factored in the odds that Obama would win the election last November. If the Republican candidates had won, there would not be such a push for gun control which ironically would have been bad for gun stocks. The gun stocks which I invested in (Strum Ruger and Smith & Wesson) gained more than 300% over the last five years. By the way, I do not own any guns and I am not a gun enthusiast. But I am an enthusiast of making a profit!

Another example of creative research investing was my idea to look into social media in China. We all know about the explosive growth in the number of users of American social media companies like Facebook, LinkedIn and Twitter. But what about social media in other countries? In China there is an internet company called Sina which I invested in. I saw the potential for tremendous growth, as Sina owns Weibo.com, which is like the Twitter of China. As popular as social media is in the United States, it is even more important to the Chinese people. Because of their government's history of censuring the news, Weibo is a way for individuals to have a voice and be heard. At the end of 2012, Weibo had 500 million registered accounts. To put that number into perspective, that is 200 million more accounts than the entire population of the United States! 2012 revenue from Weibo was $66 million. 2013 is projected to be $300 million and 2014 is projected to be $550 million. Sina's stock is up 59% for the first 8 months of 2013.

A third strategy I employ is contrarian investing. Here, I find solid, established companies that have fallen out of favor in the market. When I see fit, I go against the grain by buying out of favor and over-sold companies that are fundamentally sound.

An example of a contrarian investment was purchasing stock in Bank of America. Nobody wanted to touch this company in 2011 and the price did fall a lot during that year. Despite continuing decline in the stock price, I purchased shares in January, June and September of 2011 as well as February of 2012. In 2012, Bank of America came roaring back, more than doubling its value and now I am in a gain position. The price fell so far that it seemed like the only way it would not make a great investment is if it went out of business and it is just too big to do that. If the government would not let AIG go out of business during the mortgage meltdown then I reasoned that B of A would also survive and in the long run prosper. I have large holdings of B of A and I could easily see holding them for another ten years as I see them putting their mortgage problems behind them and the price going back to pre-mortgage meltdown prices. If I am correct, that would mean a quadrupling of its current price. Obviously, B of A is not a small cap company but I felt that it was oversold and the contrarian investor in me saw this as a good opportunity.

To quote Ben Graham from the frontispiece to Security Analysis, "Many shall be restored that are now fallen and many shall fall that are now in honor." That is a nice summation of contrarian investing.

The market rebounded quickly from the Dot-Com crash. Over this 5 year period the S&P 500 gained an average of 13.2% while I continued to outperform the market gaining an average of 17.8% over the same period.

The dot-com bubble burst and the S&P 500 lost 22% in 2002. I lost a comparable 25% as well.

The market rebounded quickly from the Dot-Com crash. Over this 5 year period the S&P 500 gained an average of 13.2% while I continued to outperform the market gaining an average of 17.8% over the same period.

As mentioned earlier, over the last 24 years I have averaged a 14.2% annual return on investment, but I believe that actually understates my performance. During the stock meltdown of 2008 the investors that did the best were the ones that held on to their stocks. Unfortunately and understandably, many investors panicked and sold their stocks. By doing so they missed out on the 2009 and 2010 rebound. Not only did I not sell stocks at that time, I gritted my teeth and bought more stocks at the end of 2008. The market continued to tumble so I held my breath and continued to buy in early 2009. My thinking was that the market was very much oversold and that stocks were grossly undervalued. In March 2009, the market hit bottom. Because I had bought stocks when they were near the bottom, I completely recovered all my losses by the second quarter of 2010. Everything after that has been icing on the cake. Only now, six years later, has the market rebounded to its pre-crash highs. The 2008 mortgage market meltdown was actually good for me. It allowed me to opportunistically buy stocks at good values and my historical average annual return understates my performance because I was more fully invested during the 2009 and 2010 bounce back years.

After strong years in 2009 and 2010 I did post a loss in 2011. However, 2012 saw continued recovery as the market and I both made similarly strong gains. 2013 is shaping up to be one of my best years ever. I would call it the year of the acquisition. As mentioned previously, I have had seven companies bought out this year. Because of the recession, companies spent less money and consequently, many are now cash rich. As we emerge out of the recession now, this is a perfect environment for mergers and acquisitions. I am not surprised by this activity, but still am very pleased to have had seven successful acquisitions in my portfolio on the year. Please see Acquired Companies for the complete list.