1. A quality company keeps performing; it goes to the Compounders camp, and if it goes through a drawdown, then it lands at Rebounders portfolio.

2. Statistically speaking, companies recover, especially if the drawdown is shallower, 0-50%; then the recovery rate is 80%, and the average time for recovery is 1.5 years.

3. I’ve been beating the SPY and QQQ by using a similar strategy, but I want to do better.

4. I might use options in various forms.

Table of Content:

1. It’s Still Me

2. Why This Strategy Works

3. My Results

4. My Current Watchlist

It’s Still Me

You signed up for DIY Investor. This is still me, but unleashed.

I’m splitting what I do into two newsletters because I’ve been running two different strategies for years, and it felt right to separate them.

Rebounders is quality on sale. It’s hands-on, driven by my judgement and interests. This is me trying to understand the companies deeper and being more aware of the market while executing trades. It’s all about trying to catch that rebound from the fallen compounders.

Compounders is quality at a fair price and systematic. “Long-term, hands-off, for busy people; zoom out and check your portfolio once a year” are the words to describe this strategy. Potentially the next best thing to buying indexes in terms of time spent and returns to try to beat them.

So, a quality company keeps going up and right; it stays in the Compounders camp. If it goes through a drawdown, it ends up at the Rebounders. Once it recovers, it gets back to the Compounders watchlist or portfolio.

If I start believing the stars in the sky will help me with the right investments, I’ll use those. So, in that spirit, I might utilize charts and options flows to gauge direction. Stocks follow the fundamentals in the long run, but in the short term, it’s the traders and algos following the charts after all.

When I said interests above, this is what I meant. This newsletter will be my personal journey, with wins and mistakes, fears and joys, understanding and misunderstandings.

This newsletter will be driven by my curiosity and the desire to make money. So, expect things to change over time.

Can’t promise you’ll make money if you follow me, but I can promise that I’ll try hard to make my money work for me.

Now, let me walk you through the thinking behind Rebounders.

Why This Strategy Works

Every single company on earth goes down at some point in its life, usually more than once. Even high-quality compounders. Once they do go down, they become rebounder candidates.

GOOGL, AMZN, MSFT, META, AAPL, and the list goes on.

And of course, every drawdown isn’t the same. Sometimes, it’s well-deserved when the market overshoots to the upside and price gets ahead of the business fundamentals.

And sometimes the business performance deserves it.

Mauboussin and Callahan at Morgan Stanley ran a study on drawdowns on 6,500 US stocks going back to 1985. The overall number sucks. The median stock fell 85% at its worst, and 54% of them never got back to their old high. Not “took a while.” Never.

But that average hides the only thing that matters. Recovery odds track almost perfectly against how far the stock fell.

Especially if the drawdown is shallower, 0-50%, then the recovery rate is 80%, and the average time for recovery is 1.5 years.

A 30% drawdown is usually the market changing its mind about a business. An 85% drawdown is usually the market being right about a business. Somewhere on the way down, a rerating turns into a diagnosis. And once something is genuinely broken, it mostly stays broken, which is exactly what those recovery rates look like.

The depth of the drawdown and the recovery rates say nothing about the business quality, but I’m not willing to bet on every company, only the ones I think are quality.

Well, I’ve been doing ok using something similar. The below are my results.

My Results

I had been beating the SPY and QQQ since I started in 2020 on money-weighted returns.

The below snaps show my results from 2021 to the end of 2025 as I moved brokerages in 2021. I’ll be updating this portfolio at the end of the year.

Here are my total returns: 151% over 3 years and 96% since inception.

Annual returns: 16% since inception.

My Watchlist

There are 27 names in this watchlist, including my portfolio. One can just buy them all and call it a day. Probably check your portfolio once a year. But we don’t like it easy; that’s for losers.

My portfolio is my first watchlist, of course. It is sorted by 3-year revenue growth estimates. This is already a solid watchlist, with average revenue growth of 17% in the next 3 years and a PEG of 1.06.

CSU, KSPI, and BABA are on this list.

Then I have big tech sorted by NTM P/E: META and MSFT are undervalued and are trading below 20x, and NVDA is at 21x. I think AMZN and GOOGL are fairly valued. AAPL’s valuation doesn’t make sense to me. I’m sure the market knows something I don’t.

META and MSFT look interesting.

Then we have China. Sorted by Year 3 P/E to get a sense of where things are going. Look at those P/Es: PDD 5.8, JD 5.9, BABA 9.7, TCEHY 10.7, and BIDU 11, while their 3-year average revenue and EPS growth are around 9% and 19% annually.

JD and BIDU have around 6% revenue growth for the next 3 years, which is an easy pass for me.

BABA looks interesting. It recently round-tripped from 80 to 190 and then back to 95ish since last September.

Then we have the EM. Sorted by NTM P/E, KSPI trades at 6.7x, while NU and DLO go for 16x. This group has a consensus of 27% revenue and 22% EPS growth in the next 3 years.

All look interesting.

Software and adjacent stuff. Sorted by PEG. Some popular names top the list: ADBE, CRM, and INTU with 0.6-0.7 PEGs. Then we have ADSK, NOW, and FICO below 1 PEG. All of their PEGs are higher if you adjust for SBC, though.

Then we have the spinoffs from CSU: TOI and LMN trading at 1 and 0.7 PEG. Even though I already own CSU, I keep thinking about adding TOI and LMN. They all trade around NTM FCF2S of 18-22x.

Then there is CSGP with a 0.47 and ADYEN with a 1.17 PEG.

ADBE, CRM, INTU, and CSGP look interesting.

So, that’s it. Upgrade if you’d like to be on this journey.

Subscribe now