Frequently Asked Questions

If you're looking to get rich overnight, or in a month, we cannot help you. We want to build wealth stably and carefully. It will take a lot of work and efforts, but the toughest would be time and patience. We want to help investors who have a long-term investment horizon and reasonable market risk/appetite.

Walnut Investment manages stocks, bonds and real estate portfolios totaling nearly 3 million USD in value. The Walnut Investment Core Portfolio is the largest stock portfolio under our management, most representative of our generally-practiced investment philosophy and process. We want to showcase what stocks we own, by how much, the profits and losses, and the active management process.

We structure our portfolio based on a long-term worldview (about 6 months - 1 year). The worldview is about what the world/economy will look like in the following 6-12 months, formulated based on economic and political data available. For example, we believe once the world concertedly re-opens from the pandemic, supply chain issues will get resolved, and with strong consumer balance sheet that remains, that cash will get deployed into the economy that can actually fulfil the demands. 

Once we've identified sectors that would benefit, we then structure our portfolio accordingly. For example, if we believe the economy is likely heading towards a recession, we position heavily in defensive sectors, meaning pockets of the economy that can do well even during a recession. Those include healthcare and consumer staples. Within those sectors, we select best-of-breed companies with strong balance sheet and market share positioning.

We don't put all eggs into one basket. We diversify our portfolio with other sectors. For example, we have the technology sector which is ~20% of our portfolio, and within this sector there are multiple holdings, each about 3-5% of the portfolio. We also have a financial sector, which is 10% of our portfolio, and also diversified with 2 different companies. We also have an oil/ energy sector. 

In trading, you would want to buy stocks because you want to bet that it will go up. But our portfolio is an investment portfolio, and we don't want to place bets. We pick stocks because we believe in the long-term value of the company. We don't pick stocks because we think it's going to go up today or tomorrow. Because we invest with a long-term horizon, we want to build positions with as good of a cost-basis as possible (cost basis meaning the average cost per share, and the lower the cost-basis of a position is, the better it is). Therefore, we often don't chase stocks up, rather, we believe in buying stocks on weakness. This is a variation on the common wisdom, "buy low, sell high." When building a position, we will often make several purchases on down days to improve cost basis. There are risks associated with this practice, namely, that the stock will continue falling. That's why we also don't buy all at once, but rather, buy in increments, and always be ready to buy more on the downside. 

Simple: we have to always be prepared to buy more if it goes down more. We believe that by making several purchases or sales and spreading it out over time, we can improve cost basis if the stock moves lower, or capture greater profits as a stock moves higher while protecting capital in case it starts to move lower again. You may know this as Rule No. 3 from TheStreet 25 Investing Rules, "don't buy all at once; arrogance is a sin." 

We have been investing in the stock market since 2020. We have a strong set of experience, including managing multiple investment portfolios with unique risk-reward preferences, trading stocks and options, analyzing securities. Our knowledge base is built from college education, investment books, market history. We stay up-to-date with the status of the economy and portfolio companies, as well as keeping up with strategists and analysts from major financial institutions. 

The most influential professional for us is Jim Cramer, a former Goldman Sachs employee, former fund manager of Cramer & Berkowitz, founder of TheStreet.com and now host on CNBC. Most importantly, Jim Cramer has an investment trust that we are private members of, therefore we meet with him every day and stay up-to-date with the market. Our stock-picking, buying/selling and management processes/ decisions are largely influenced by Jim Cramer's teachings. A lot of stocks in this portfolio are owned/ recommended by Jim Cramer.

The S&P Oscillator is an outside service we subscribe to. Per its website, the S&P Oscillator "is a market measure which takes a number of related variables of trading data into account, tracks development according to several moving averages, and results in an average numerical value which may be either positive or negative." 

When the Oscillator hits a reading greater than "+4%", it indicates that the market is technically said to be in an "overbought" position, leaving it susceptible to a drawdown. Typically, the market becomes overbought after a solid, broad-based rally. An overbought reading serves as a wake-up call to us that it is time to raise cash into the market's move higher. Even when the market becomes overbought, we still think it is okay to do some buying in one's favorite positions. However, the main objective here is to take out more from the market than what has been put in. 

Conversely, readings lower than "-4%" indicate that the market is technically said to be in an "oversold" position. Oversold readings typically happen after a period of selling, and we view this as a sign that it is time to do some buying - no matter how painful the market may feel - because sentiment has gotten too negative, and a relief rally could follow. 

Unfortunately, we cannot talk about the data on a more frequent basis because this is an outside subscription. However, we will periodically bring up the Oscillator when it reaches overbought/oversold territory because we believe there are portfolio management benefits to be had and we must always remain disciplined to the data.

We often talk about our worldview (our own outlook of the economy) and how we use this worldview to select and trade stocks. We think having a worldview is important, especially to de-clutter the noise seen in every day market activities. We want to share with you how we formulate our worldviews.

1. Government statistics. Indicators of economic activities such as unemployment, job openings, inflation data, sales report, etc. are very important to keep a handle on. They are essentially how economists know where we are at in an economic cycle. 

2. Earnings calls, reports from companies. Sometimes government statistics can be biased (political game), or it doesn't provide enough details that you need to know. Therefore, it is important to hear from individual companies. You have to read companies' earnings report, which come out quarterly. For example, for me to say the strength of the consumer balance in America (essentially how much money people have and are willing to spend) is the strongest that it has ever been, I read transcripts from JP Morgan and Bank of America; they say that. If you want to know how much goods people are buying, how many packages being shipped, read United Parcel Services and FedEx earnings call. If you want to know how much industrial activities are happening, read Caterpillar's (they sell equipments for these activities, and activities have to be strong for clients to order more equipments).

As mentioned in the About us section in the homepage, at WIC, we do not practice a buy-and-hold strategy but rather actively trade around our portfolio. The management of our portfolio is active, and so is the process through which we pick the names that will go into our portfolio. Here, we will provide some key bullet points that we consider when bringing in a stock to our portfolio. When writing alerts for initiating a position or buying more of a stock, we will try to incorporate these key points; if we ever leave anything open, please feel free to contact and remind us.

Beginners to investing would likely say "As long as the stock I buy has a strong and sound fundamental, wouldn't it automatically go up?" The answer is "Not that simple." There are so many factors in the modern world of investing that dictates the price action of stocks, and just "strong fundamentals" doesn't cut it. Here, we will tell some key factors that have the most influence over the stock price, and hence, what are the criteria we apply to our stocks when making buy and sell decisions: 

1. Where are we in an economic cycle?

2. Is the stock a cyclical value, a secular growth or an expensive growth? How does that fit into the economic cycle?

3. What does the company do? Is it profitable yet (we want to avoid unprofitable companies)? What is its forward price to earnings ratio (or other appropriate valuation metrics) and how does that compare to the average of the S&P 500? How does the valuation metric compare to other companies in the same sector?

4. How has the stock performed for the year comparing to the broad market, but especially comparing to its peers in the same sector? 

5. Going into earnings, the stock must beat its bottom-line estimates, but is there a potential for the stock to beat its top-line guidance?

6. Is there a turnaround story for the stock? 

1. Stocks that rallied while so many others fell.

2. Stocks on your shopping list that had refused to come down until now.

3. Stocks that failed to rally on good news because of market sentiment

1. Mastering the Market Cycle: Getting the Odds on Your Scale

2. Jim Cramer's Real Money: Sane Investing in an Insane World

3. Jim Cramer's Get Rich Carefully

4. Rich Dad Poor Dad: What the Rich Teach their Kids about Money that the Poor and Middle Class Do Not!

5. The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel

6. Fundamental Analysis for Dummies, 2nd Ed.

(not in order of preference)