Buddha Fund

Active way of investing into good value stocks where we regularly take profits.

Stocks will always go up and down, especially mid-caps can have big swings. We will take profits from the upswings and double down on the downswings.

1. Long-term Buddha stocks
2. BUY 1.5% near support
3. SELL 1/3 near resistance (when in profit)
4. Repeat & build

Risks

No Stop-Loss

If we pick a bad stock and goes into a downtrend we could loose money.

Bear market

In a bear market we wont be taking many profits and might have to spread out our buy-ins.

Needs

Positions needs to grow (adjust when needed)

The whole idea is that a positions keeps growing overall while taking a decent amount of profit from time to time.

If the average position of the stock / ETF isn’t growing over time we would need to make adjustments. Most likely reduce the % amount we sell at each time.

Summary

Growing position We never exit the position (unless the fundamentals change a lot) and our buy-ins keep growing if our portfolio grows.
Diversified We will invest in multiple sectors and industries from food to technology and health.
Long-term, always in the trade Basically buy and hold forever, we only sell a portion to take profits.
Narrow Selection
 With our “Buddha” requirement we easily narrow down our selection. It also gives us more peace of mind.
Rewarding Good
 We are essentially filling up a piggy bank of companies that provide good in the world and companies with good honest management. Makes investing way easier.
Less emotion
 Because we invest in good, we are less emotional when we potentially loose a bit of money.
 
Take profits regularly We will take profits each time it moves to resistance levels.
DCA / Average down Each time the stocks drops to a previous support.
Fundamental Most of our analyses will be based on fundamentals. Most importantly the sector and management.
Value stocks Stocks that have the potential to grow a lot, mostly mid-cap stocks.
 
The Wheel (future) When our portfolio is big enough we will be implementing the Wheel strategy too, where we sell options and make money even if the stock doesn’t move. The option sales will just replace our limit orders that we would have anyway. We will sell cash secured puts at the same levels we would be buying shares and sell covered calls at the levels we would be selling anyway.

Settings

BUY / DCA $225

(1.5% of total portfolio worth)

 Buy on dips, just above last support, limit order

Future: replaced with selling puts
SELL / Take Profit 1/3 of position
Just below last resistance, limit order
Only when +10% profit
Only when position is 2x DCA amount

Future: Replace with Covered Calls when portfolio big enough
Stop-Loss no
Exit If outlook changes drastically
Buy/Sell cooldown 5 days
Don’t buy and sell (or sell and buy) within 5 days

Stock Requirements

We will both invest in company stocks as well as some ETFs. ETFs will be slower but more consistent.

Buddha Fundamentals

Buddha sectors A sector that actively provides good to the world.

Examples: reusable energy, health, vegan, cleanup, …
Anti-Buddha examples: alcohol, war, tobacco, meat, …
Karma management Good CEO Honest and open CEO with no prior controversies.
Good management Upper management should be a reflection of the CEO.
Good business model Either a proven way of doing business that works or a new way of doing business that can work.
No controversies No tax evasions, mass layoffs other scummy dealings to inflate profits.
Good ESG rating They should try to be as less damaging to the world.
Happy employees When available look at Glassdoor reviews and other metrics to determine the work culture.

Exceptions can be made but our first search and screening factors will be based on Buddha.

Other Requirements

Small-mid caps Mostly mid-caps, in extreme cases we can invest in small-caps but fundamentals and outlook would have to be amazing.
Undervalued Companies that are undervalued compared to their peers. Hopefully it just means it hasn’t fully been discovered.
Future & Growth Can be things that are still in development today but can have a great market share in the future.

Optional

Having a product Having something to sell other then providing a service provides more growth opportunities.
Has a Moat Something unique or advantage against it competitors.
Not only in US market Diversify on other country exchanges

  • EU, Canada, JP, India, Australia, …
  • look for similar companies with similar stats and performance that are undervalued (mostly based on P/E)
  • also look at the government performance and population growth of that country
Evolving / expanding opportunities Companies that could possibly evolve more into other products that are related to its current products.
Multi-sector implementation Companies that can be implemented in multiple industries (semiconductors, robots, ai, hosting,…)

Screening

Screeners we can check daily or from time to time. The goal is to put stocks in our watchlist and keep track of them for a while before getting into them.

new 52w highs Companies that are doing good and probly done so for a while. If overvalued we will probably wait for a good discount.
new 52w lows Look for good companies that are just down bad, good sectors, good management. Wait for turnaround or stabilization.

  • additionally profitable P/E
r/valueinvesting Other then sometimes having a good undervalued companies its also a good plays to just learn stuff.
Sector screening if you want stocks in a specific sector we will research the whole sector.
Screen by sector Screen for small and mid-caps in the sector.
Google sector stocks Google for ‘top’ or ‘undervalued’ stocks in that sector.

Research

We will do some basic research to start. While we are maintaining and growing our position we will gradually do more in depth research.

Basic Checks

Watchlist All stocks from screeners go into a watchlist and they can be there for a while. We will just keep close track on them and wait for a good buying opportunity.
Full sector research For good sectors When we find a specific sector / industry we like we can do a full sector research. Comparing the top players and looking for undervalued lower cap stocks.
Multiple stocks We don’t have to limit to 1 stock per sector. If there are multiple good ones we can get in multiple.

Basic Checklist

Our research will be in the form of some basic checks, the more checks the more likely we will get in a position.

Karma Sector A sector that is a net-positive to the world.
Growth Sector Technology, health, … something that could be big in the future.
Karma CEO Honest, clean and open CEO?

  • only position, long tenure / founder, no controversies, …
 
Earning Growth Is earnings growing YoY and are the estimates as well.
Volume Growth over the past months is the average volume growing
Price action match Price action growth matches volume growth.
 
P/E < avg. P/E < industry average / peers. Good metric to see if not overvalued compared to peers
D/E < avg. D/E < industry average / peers. Looking if its in healthy debt compared to their competitors
EBITDA multi < avg. EBITDA multiple < industry standard / peers. Lower earnings multiple could mean undervalued.
Insider buys > sells If top management are buying a lot its a very good sign.

  • selling less important. People can have various reasons for selling, only one for buying.