Stock Picking (Beat Boho) Contest - V2.0

[Boho]

How many investors know the advantages of a 50/50 bet that a stock will double in price compared with buying the S&P? I don't claim too. I just use my non-expert interpretation of analyst opinions (normally more than one) as one factor. This one sounds pretty specific, as opposed to the undated value, outlook, etc. ratings that I see elsewhere, never knowing when they were updated or what was considered but which most investors may put the most weight on.

 

[sengsational]

If one is not afraid of being wrong occasionally, one can eek out a small advantage in the longer term.

 

[ERD50]

If one is not afraid of being wrong occasionally, one can eek out a small advantage in the longer term.

Only if the weighted average of the "rights" outweigh the weighted average of the "wrongs".

And 85% of professional money managers seem to fail at this.

And I'll be "wrong" even with buy&hold - "Oh, I should have got out before the crash"... But if the alternative is based on... what? I don't know how to predict the future.

If one never wants to be "wrong", they should stick to treasuries, or maybe TIPS.

-ERD50

 

[sengsational]

In the context of the game and of the human propensity to feel losses more than gains, I think it's possible to eek out a small advantage. Not that it's guaranteed to always win. What I was talking about is Boho's relative bravery (albeit in this case, with fake money) having the painful possibility of being wrong, but also the joyful possibility of being right. Some people, most of us on this forum, I'd wager, would rather not risk being "so wrong", and instead do what you suggest...buy and hold an index or something even more conservative like TIPS.

 

[Boho]

I appear much more wrong than I am by the fact that I lost so much money early in the contest, which actually doesn't matter and could be inherent in a good investment strategy. Buying during a huge swing and volatility works like that and it doesn't mean you made a bad choice. Given the forecasts of my stocks, they only have to rise a small fraction of the price target for me to make some money, but people are talking like I'd be so incredibly optimistic to hold them as they move another small fraction away from the target on momentum from days ago. People are naturally averse to this kind of trading.

 

[exnavynuke]

I appear much more wrong than I am by the fact that I lost so much money early in the contest, which actually doesn't matter and could be inherent in a good investment strategy. Buying during a huge swing and volatility works like that and it doesn't mean you made a bad choice. Given the forecasts of my stocks, they only have to rise a small fraction of the price target for me to make some money, but people are talking like I'd be so incredibly optimistic to hold them as they move another small fraction away from the target on momentum from days ago. People are naturally averse to this kind of trading.

I'm averse to the style of trading you're engaging in currently because you have no defined risk:reward strategy that makes any sense to me. "I'm only planning on getting out of this trade if it goes up *some* or I lose all my money and my timeline for this trade is completely uncertain" is an abhorrent amount of risk to me. When I was day/swing trading, I'd never, ever, ever have my planned/expected risk be 100% loss, much less pair that with a planned/expected gain that only has a projection of "maybe double at sometime in the potentially distant future IF that one thing that might happen does actually happen".

Risking the loss of $xxx,xxx for a potential gain of $xxx,xxx that is only even potentially reasonably thought to be possible in a perfectly ideal situation is something that most people with a basic understanding of statistics and/or probability, as well as risk management, would be very averse to as it doesn't make logical sense.

 

[ERD50]

In the context of the game and of the human propensity to feel losses more than gains, I think it's possible to eek out a small advantage. Not that it's guaranteed to always win. What I was talking about is Boho's relative bravery (albeit in this case, with fake money) having the painful possibility of being wrong, but also the joyful possibility of being right. ...

I'm not convinced that 'loss aversion' will help anyone to maximize gains in this scenario. Maybe. It's always 'possible' to eek out an advantage, lottery ticket winners do that, it doesn't make it a good strategy.

I also don't see where any sort of 'bravery' makes much difference, beyond being fully invested, overall. Sure, you can be 'brave' and it increases your volatility with specific stock risk, just like I can put it all on number 17. But it doesn't necessarily increase your odds to maximize gains.

I'm averse to the style of trading you're engaging in currently because you have no defined risk:reward strategy that makes any sense to me. ....

That's the key for me. Buying & selling on analysts recommendations is ummm, let's just say 'questionable'. Or 'interesting'?

I appear much more wrong than I am by the fact that I lost so much money early in the contest, which actually doesn't matter and could be inherent in a good investment strategy. ...

Now there ya' go.

That sounds more like trash talk among the guys in a pick-up game or at the bar. Not a strategy.


Again, anyone taking wild risks could end up on top in this game. That's the nature of it, just like putting it all on 17. Now if someone can pull ahead fairly early on, and maintain their lead during market drops that might say something. That would mean the gains are large enough to keep their drops above the index crowd. So they may be more volatile, but if that keeps them high enough, that's cool. I'm in better shape with 10 million that dropped to 5 M than I am with 3 M that rose to 4 M. But you gotta get to that big 10 M buffer first.

-ERD50

 

[easysurfer]

I appear much more wrong than I am by the fact that I lost so much money early in the contest, which actually doesn't matter and could be inherent in a good investment strategy. Buying during a huge swing and volatility works like that and it doesn't mean you made a bad choice. Given the forecasts of my stocks, they only have to rise a small fraction of the price target for me to make some money, but people are talking like I'd be so incredibly optimistic to hold them as they move another small fraction away from the target on momentum from days ago. People are naturally averse to this kind of trading.

For illustrative purposes of the contest, I see Boho as a hare and several others as the turtle (myself in that category). The hare still has a chance to win, but is all over the place on the leader board.

Kinda like my choice to have the contest a 3 year one as one month, one year doesn't give the entire picture.

I'm approaching the contest as though I was investing my real money. From what I gathered, Boho is too.

 

[Boho]

If my stock had risen 10% the week after I bought it, it would be seen as a good thing even if it would have risen 20% if I bought it a week earlier. Having it drop before it's likely to rise (whether or not it rises as high as the projected price target) is the same thing in my mind.

I bought it at a volatile time a day after the news that caused it to start rising, with the price target far exceeding the highest price it was going for. I bid almost 1% lower than the price it had been at for a while and it dropped to that price. Then the market changed its mind based on zero new information and it dropped more. Which market is right? I think it doesn't matter much. It's probably close enough to a fair price.

"I'm only planning on getting out of this trade if it goes up *some* or I lose all my money...

ALL my money? I don't think so.

 

[RISP]

I'm approaching the contest as though I was investing my real money. From what I gathered, Boho is too.

I honestly hope your assumption is incorrect.

 

[exnavynuke]

Boho, any plans when to cut your losses in RAD, or will you ride it down all the way if the slide continues?

With RAD? No.

ALL my money? I don't think so.

When I say all your money, I'm referring to all the money you bet on the stock, based on you saying you had no plans to cut your losses in RAD at any point. To me, that says you're plan is to either lose 100% or gain some unknown amount (with one analyst you cited suggesting it's possible if things work great you could double your money eventually).

 

[ERD50]

...

I'm approaching the contest as though I was investing my real money. From what I gathered, Boho is too.

I honestly hope your assumption is incorrect.

There are two ways to take the first comment. Yes, I think the point of this contest was to invest as if it was your real money, and act as you would in your own real account.

But I agree with RISP, for some people's sake, I sure hope they don't invest like this in real life!

-ERD50

 

[Boho]

When I say all your money, I'm referring to all the money you bet on the stock, based on you saying you had no plans to cut your losses in RAD at any point. To me, that says you're plan is to either lose 100% or gain some unknown amount (with one analyst you cited suggesting it's possible if things work great you could double your money eventually).

I read an article that specifically said that despite Rite Aid's problems they're not in danger of going bankrupt. Even if they were, I don't think ALL is lost for investors in such a case. Technically, I would get out if it seemed very likely they'd continue to nosedive or go bankrupt.

 

[exnavynuke]

I read an article that specifically said that despite Rite Aid's problems they're not in danger of going bankrupt. Even if they were, I don't think ALL is lost for investors in such a case. Technically, I would get out if it seemed very likely they'd continue to nosedive or go bankrupt.

And how do you measure "very likely they'd continue to nosedive or go bankrupt"? Have you decided that? Is it a set % decline? A set % decline in a given period? A number of articles saying bankruptcy is possible? Some other methodology?

If you haven't decided exactly when you'd get out of a trade, you have no exit strategy for a loss. I'd wager that's your current condition based on your responses here. That's not how you take a calculated risk, it's a method of "hoping for the best".

 

[RISP]

And how do you measure "very likely they'd continue to nosedive or go bankrupt"? Have you decided that? Is it a set % decline? A set % decline in a given period? A number of articles saying bankruptcy is possible? Some other methodology?

If you haven't decided exactly when you'd get out of a trade, you have no exit strategy for a loss. I'd wager that's your current condition based on your responses here. That's not how you take a calculated risk, it's a method of "hoping for the best".

This. "By failing to prepare, you are preparing to fail", as Benjamin Franklin put it so well.

I read an article that specifically said that despite Rite Aid's problems they're not in danger of going bankrupt.

You obviously put WAY too much stock into the opinion of some random talking heads.

 

[nun]

The conditional tense is being used far too much here. There's no room in investing for words like "should", "would", "could"or the inevitable "if".
It's quite funny to read some of these posts and sit around mid table having done absolutely noting other than buy two stock index funds


Sent from my iPhone using Early Retirement Forum

 

[Boho]

And how do you measure "very likely they'd continue to nosedive or go bankrupt"? Have you decided that? Is it a set % decline? A set % decline in a given period? A number of articles saying bankruptcy is possible? Some other methodology?

If you haven't decided exactly when you'd get out of a trade, you have no exit strategy for a loss. I'd wager that's your current condition based on your responses here. That's not how you take a calculated risk, it's a method of "hoping for the best".

I have no exit strategy that covers every situation. I bought hoping to sell quickly. That didn't work out, so I waited longer but it looks like a quick sell won't happen so I made it more like normal speculation and decided to bet on the deal going through. If the deal goes through and RAD rises enough for it to have been worth it for me, I won't hold much longer. I'll probably sell within two weeks of the approved deal. If the deal fails, the stock will drop but I don't believe Rite Aid will be in danger bankruptcy and I wouldn't sell at that point. I think they'd try to make another merger or something happen and I'd wait.

 

[easysurfer]

There are two ways to take the first comment. Yes, I think the point of this contest was to invest as if it was your real money, and act as you would in your own real account.

But I agree with RISP, for some people's sake, I sure hope they don't invest like this in real life!

-ERD50

Actually, I'm a bit more conservative with my investing real life than with this contest. But same approach. As for Boho's approach, seems like he's been referring back and forth about contest investments and his real investments. But I'll let him speak fully for himself .

 

[Boho]

As for Boho's approach, seems like he's been referring back and forth about contest investments and his real investments. But I'll let him speak fully for himself .

I wouldn't put 50% of my real life money into one stock like I do in the contest. With stock picking, in real life I'd think about some of my recent trades more but I'm not sure if my picks would be different. They probably would be. In real life I traded based on after hours news and placed my order early based on the pre-news closing price and sometimes on after hours and pre-market trading. I didn't do that with my latest contest trade. I don't remember if I did that with RAD.

 

[easysurfer]

For me, should clarify. My strategy is the same, but asset allocation is (not at this point of contest, but will get there eventually) is more aggressive than my real life investments.

At this point, I'm still about 40% in cash .

 

[exnavynuke]

My basic strategy is the same - bet for the long-term growth of the broad US markets. The use of leveraged funds and picking of some specific industries to leverage is NOT consistent with my real-life investment strategy however.

 

[Totoro]

I also looked at the difference between my account value and second place and thought of what I could buy.

Since I had a great few days - I'll do the same as well now. I'm ahead about 115k vs. Boho, so hardly room for a truly great car.

 

[Boho]

I meant $134. At least it went up and I didn't bet $500,000 again.

 

[Boho]

One more day to see if my real life and contest pick, DRAD, will rise or fall based on its quarterly report. I don't have much of it in the contest because it's a microcap and the volume restrictions stopped me from buying much and I also sold some for a profit recently, but still... Google News isn't so good at researching stocks. I sent them this complaint:

Searching Google News for a stock symbol, such as DRAD, often brings old news results that the publisher dates as new. Currently, the first result in my search for DRAD is an article from https://www.baseball-news-blog.com titled "Digirad Corporation (DRAD) Upgraded by Zacks Investment Research to “Hold”" Posted on Aug 1st, 2017. The first sentence of the article mentions that it's about "a report released on Monday, July 3rd." Another search result points to an identical article from https://transcriptdaily.com.

More recent news for DRAD, which wasn't found at all when using DRAD as the search term, would have been an article titled "Digirad Corporation to Release 2017 Second Quarter Financial Results on August 4, 2017." A link to that article can currently be found on Google News by specifically searching for the phrase "(NASDAQRAD) will release financial results for its second quarter ended June 30, 2017, before the market opens on Friday, August 4, 2017"

 

[easysurfer]

One more day to see if my real life and contest pick, DRAD, will rise or fall based on its quarterly report. I don't have much of it in the contest because it's a microcap and the volume restrictions stopped me from buying much and I also sold some for a profit recently, but still... Google News isn't so good at researching stocks. I sent them this complaint:

Any response back from Google?

Maybe you'd get something like "Please do not make investment decisions based on our news stories" .