Ten bagger

[RetiredAtThirty-eight]

Lucky guess....if it was skill, we would all own a private island. What you don't hear about in a thread like this is the ones that didn't work out....instead of 10X how about 1/10X.

That makes zero sense (that if picking winners were skill we would all own our own private island).

That's akin to saying "If writing a best-seller was a skill, all writers would be wealthy".

I've had plenty of investments that didn't work out but I dump them like a hot potato if there is any evidence I didn't buy what I thought I bought. I don't hope they get back to even, I dump them ASAP. And I don't sell a single share of my winners unless I need the money.

There is definitely skill involved, anyone who says otherwise is probably a terrible investor who can't figure out why they lose so much given how 'intelligent' they view themselves.

I will say this, intelligence doesn't guarantee you will be a good investor. Personally, I believe it has to do more with how well one is able to detach themselves from money. People who are afraid to lose once in a while or who are overly greedy tend to be poor investors.

 

[Fermion]

I really haven't decided if it is skill or luck. Maybe it is a smidgen of each.

 

[RetiredAtThirty-eight]

I really haven't decided if it is skill or luck. Maybe it is a smidgen of each.

I am not an active trader, it's very hard to time the market or individual stocks, but I am an active stock picker. I select a very few companies that I think will have superior growth rates and hold them as long as possible (until I think their above-average growth is played out). It has little to do with the share price and everything to do with what I think their future prospects are. I do not sell simply because it seems over-valued if I think there is more growth left.

This has worked very well for me over the last 30 years. I don't think it's luck, it's just pragmatism and knowing what I can and can't do. If it didn't work I would have had to come out of retirement years ago because I have almost zero income that I don't generate with my brokerage account.

There is an element of luck in terms of individual returns but, if you position yourself properly, luck is not required to succeed overall. A good strategy accounts for the fact that some investments won't pan out and others will over-deliver.

 

[tdv2]

That makes zero sense (that if picking winners were skill we would all own our own private island).

That's akin to saying "If writing a best-seller was a skill, all writers would be wealthy".

I've had plenty of investments that didn't work out but I dump them like a hot potato if there is any evidence I didn't buy what I thought I bought. I don't hope they get back to even, I dump them ASAP. And I don't sell a single share of my winners unless I need the money.

There is definitely skill involved, anyone who says otherwise is probably a terrible investor who can't figure out why they lose so much given how 'intelligent' they view themselves.

I will say this, intelligence doesn't guarantee you will be a good investor. Personally, I believe it has to do more with how well one is able to detach themselves from money. People who are afraid to lose once in a while or who are overly greedy tend to be poor investors.

It makes complete sense. Consider this, if you have skill to pick winners over losers even 0.1% of the time then you should be able to beat the market as a whole. Decades of research with mountains of data suggest otherwise. If you think picking AAPL or another great stock is skill then you need to compare how all the picks one selects perform to the investments in that market. The more picks you make the closer to the mean you trend.

Put me in your category of terrible investors because I choose to claim zero skill, no trying to pick winners, no trying to enter and exit positions that didn't work, no timing events, etc. I have learned over time that intelligence or expertise is a fallacy in a world that is not regular or predictable. I have been holding US Total Stock Market index, International Total Stock index, and US total bond index for 20 years now and have received the market rate of return less ~0.03% in fees annually with excellent tax efficiency. If this lack of intelligence makes me a terrible investor, I'm in. Full disclosure, I have tried to pick individual stocks in my early investing lifetime with mixed results.....had my share of big winners and big losers also.

 

[tdv2]

I understand it differently. However I do recognize your point.

I understood that behavioral economics suggests, afaik.
That loss aversion is an important concept associated with prospect theory and is encapsulated in the expression “losses loom larger than gains” (Kahneman & Tversky, 1979).
It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining. People are more willing to take risks (or behave dishonestly; e.g. Schindler & Pfattheicher, 2016) to avoid a loss than to make a gain. Loss aversion has been used to explain the endowment effect and sunk cost fallacy, and it may also play a role in the status quo bias.

As is known: Everyones different!

Good luck & Best wishes...

I have read the same research. They tested it multiple ways and found that the pain associated with a loss is 2 times greater than the equivalent gain as you stated. The biases you point out are real and tend to have us make decisions that are not optimal and in some cases irrational.

 

[sengsational]

My Uncle got Apple on the IPO. I know he held it a long time, but not sure how much, if any, he held continuously. I'm sure that bag # is a big one

 

[Markola]

My Uncle got Apple on the IPO. I know he held it a long time, but not sure how much, if any, he held continuously. I'm sure that bag # is a big one

He would have had to either forget about it or have been omniscient to keep it in the 90s when Apple was running on fumes without Steve Jobs. Don’t feel bad. My great grandfather owned a drug store in Georgia in the early 1900s and passed on a chance to buy Coca Cola stock that a traveling broker was peddling to all the pharmacies.

 

[OldShooter]

... I understood that behavioral economics suggests, afaik.
That loss aversion is an important concept associated with prospect theory and is encapsulated in the expression “losses loom larger than gains” (Kahneman & Tversky, 1979).
It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining. People are more willing to take risks (or behave dishonestly; e.g. Schindler & Pfattheicher, 2016) to avoid a loss than to make a gain. Loss aversion has been used to explain the endowment effect and sunk cost fallacy, and it may also play a role in the status quo bias. ...

Actually this is not in conflict with the neurochemical data. I have read all that stuff too, including Thaler's Misbehaving and Kahneman's Thinking Fast and Slow. I think the loss aversion and the neurochemical factors both exist. Possibly in different proportions for different individuals and in different situations.

Most of the loss aversion data is prospective -- people being offered choices and making a loss-avoiding choice rather than a mathematically/probability "correct" choice. The neurochemical factors are retrospective -- the dopamine reward comes after the "win" and doesn't come after a loss.

But there is definitely overlap. Many times, though, the neurochemical stimulii trump the loss aversion. That is why there are "problem gamblers' who are so addicted to the dopamine that they are insensitive to losses -- even to the point of gambling with embezzled money.

... There is an element of luck in terms of individual returns but, if you position yourself properly, luck is not required to succeed overall. A good strategy accounts for the fact that some investments won't pan out and others will over-deliver.

If you have data to support that assertion I would be interested to see it.

Among the half-century of data I have seen are almost 20 years of semiannual S&P SPIVA reports, comparing the stock-picking performance of professionals against the market averages and the companion S&P "Manager Persistence" reports analyzing the predictive value of stock pickers' past performance. The conclusions are crystal clear when looking at any of the reports. On average, stock-pickers underperform and their results from period to period are random (or worse).

So any data you have would need to rebut decades of S&P results and also the technical opinions of several Nobel laureates.

Alternatively you could argue, correctly, that stock picking can make money for the picker. Nothing in the data would argue with this. All the data says is that most pickers are not lucky enough to make as much money as a passive investor would.

Or you could cite anecdotes where a stock picker made money. There are thousands of those on the internet every day. Nothing about the data would refute this either. In fact, randomness predicts it.

 

[RetiredAtThirty-eight]

Actually this is not in conflict with the neurochemical data. I have read all that stuff too, including Thaler's Misbehaving and Kahneman's Thinking Fast and Slow. I think the loss aversion and the neurochemical factors both exist. Possibly in different proportions for different individuals and in different situations.

Most of the loss aversion data is prospective -- people being offered choices and making a loss-avoiding choice rather than a mathematically/probability "correct" choice. The neurochemical factors are retrospective -- the dopamine reward comes after the "win" and doesn't come after a loss.

But there is definitely overlap. Many times, though, the neurochemical stimulii trump the loss aversion. That is why there are "problem gamblers' who are so addicted to the dopamine that they are insensitive to losses -- even to the point of gambling with embezzled money.

If you have data to support that assertion I would be interested to see it.

Among the half-century of data I have seen are almost 20 years of semiannual S&P SPIVA reports, comparing the stock-picking performance of professionals against the market averages and the companion S&P "Manager Persistence" reports analyzing the predictive value of stock pickers' past performance. The conclusions are crystal clear when looking at any of the reports. On average, stock-pickers underperform and their results from period to period are random (or worse).

So any data you have would need to rebut decades of S&P results and also the technical opinions of several Nobel laureates.

Alternatively you could argue, correctly, that stock picking can make money for the picker. Nothing in the data would argue with this. All the data says is that most pickers are not lucky enough to make as much money as a passive investor would.

Or you could cite anecdotes where a stock picker made money. There are thousands of those on the internet every day. Nothing about the data would refute this either. In fact, randomness predicts it.

I agree that, on average, active stock pickers perform worse than the market. That's not to say that some don't have the skill to do consistently better. What's required is to overcome the human factors that make the average picker perform worse than the market.

Consider this: All you have to do is exactly the opposite of the average stock picker to beat the market. To be clear, I'm not advocating that everyone try to do this - simply that some can.

 

[RetiredAtThirty-eight]

If you have data to support that assertion I would be interested to see it.

Among the half-century of data I have seen are almost 20 years of semiannual S&P SPIVA reports, comparing the stock-picking performance of professionals against the market averages and the companion S&P "Manager Persistence" reports analyzing the predictive value of stock pickers' past performance. The conclusions are crystal clear when looking at any of the reports. On average, stock-pickers underperform and their results from period to period are random (or worse).

Let's not use fuzzy thinking here. No one claimed the average stock picker beats the market. Whether an individual can use skill to consistently beat the market is a separate question from whether the average picker succeeds.

A good stock picker has learned to avoid the common human fallacies that cause most to fail. No one said it was easy, simply that some people can do it consistently.

Take the worst investor in the world. This is someone who consistently loses far more money than the indexes make over time. Now, do the opposite of what this terrible investor does. Voila! You have an investor that makes more than the indexes! Don't confuse what the average stock picker does with what is possible for a skilled stock picker to do and don't confuse skill with luck.

 

[OldShooter]

... That's not to say that some don't have the skill to do consistently better. ...

I refer you to the video I linked in post #45. Doctors Frank and Fama have been unable to detect any skilled stock pickers after studying thousands of fund managers' results. You can't prove a negative, so there may be some out there, which Ken Frank acknowledges, but they are so rare as to be undetectable. Maybe they are all keeping a low profile by the pool on their yachts or on their private tropical islands.

 

[OldShooter]

... Don't confuse what the average stock picker does with what is possible for a skilled stock picker to do and don't confuse skill with luck.

I'm still looking for your data/to support this assertion that skilled stock pickers exist in any significant number.

One often-cited example of a stock picker who once looked pretty good was Bill Miller at Legg Mason: https://www.reuters.com/article/us-...ck-at-play-in-investing-idUSTRE7AH03G20111118

 

[RetiredAtThirty-eight]

I'm still looking for your data/to support this assertion that skilled stock pickers exist in any significant number.

One often-cited example of a stock picker who once looked pretty good was Bill Miller at Legg Mason: https://www.reuters.com/article/us-...ck-at-play-in-investing-idUSTRE7AH03G20111118

I've never heard of Bill Miller.

I have a dim view of fund managers. Which is why I don't let them touch my funds. Additionally, funds have a lot of restrictive rules that can hurt returns.

Fund managers mostly follow the herd (of which they are in the middle of). They rarely have any vision.

The human brain evolved over millions of years through natural selection with survival and the ability to procreate as the selection criteria. It didn't evolve to be good at building wealth (except to the extent that wealth can help one to survive and procreate). The net result is the human brain is absolutely terrible at investing - it has a lot of natural built-in mechanisms that hinder successful investing. Only those who can counter those mechanisms (act in a way contrary to them) can be successful stock pickers. The fact that not many do is only evidence as to how beholden most people are to their human nature.

Do skilled stock pickers exist? Absolutely! In "significant numbers"? It depends upon your definition of "significant". To my way of thinking, the fact that they exist in numbers less than what you will get when throwing darts at a board does not imply they are not significant-it implies the challenge of rising above innate human qualities that work against the goal is a significant challenge that not many can do. It doesn't mean all successful stock pickers are merely lucky.

 

[OldShooter]

... Do skilled stock pickers exist? Absolutely! ...

Your saying that over and over (and over) does not make it true. I get it that you believe it is true. There are those who believe that the moon landing was faked and those that believe that the earth is flat. There is really nothing special about people who believe things that are unproven.

If you ever come up with some data to support your belief, please PM me. I would be sincerely interested, as would Fama and French I think. But I am done here.

 

[RetiredAtThirty-eight]

Your saying that over and over (and over) does not make it true. I get it that you believe it is true. There are those who believe that the moon landing was faked and those that believe that the earth is flat. There is really nothing special about people who believe things that are unproven.

If you ever come up with some data to support your belief, please PM me. I would be sincerely interested, as would Fama and French I think. But I am done here.

You are conflating the evidence that shows they don't exist with any frequency greater than chance (true) with whether they do exist. I've explained why this is (humans have a built-in tendency to be terrible stock pickers). That does not prove that some people can't overcome that tendency.

Here's an example:

Men are faster runners (on average) than women. That is true. Does that mean a woman who is faster than a man is only faster through blind luck, not due to superior training?

Look at Warren Buffet, to believe his lifetime of picking stocks (and it's a long one) was a fluke is to suspend credibility. Warren doesn't believe in timing the market and neither do I. We both believe a skilled investor can beat the market.

I can see you will not be changing your mind and that is fine by me. But it doesn't imply you are correctly interpreting the available data. In fact, you are misunderstanding it.

 

[kcowan]

Still up 150%+!!

I am not complaining just that is does not belong in this thread whereas 6x might have?

 

[tdv2]

I agree that, on average, active stock pickers perform worse than the market. That's not to say that some don't have the skill to do consistently better. What's required is to overcome the human factors that make the average picker perform worse than the market.

Consider this: All you have to do is exactly the opposite of the average stock picker to beat the market. To be clear, I'm not advocating that everyone try to do this - simply that some can.

If it was just as simple as eliminating the human factors you could easily write an algorithm and eliminate the biases.....still doesn't work. I too would also like to see the data that demonstrates this skill you speak of. Just saying it without any support doesn't make it true. I too am done here.

 

[USGrant1962]

...

Consider this: All you have to do is exactly the opposite of the average stock picker to beat the market. To be clear, I'm not advocating that everyone try to do this - simply that some can.

What exactly the the opposite of average?

 

[dixter]

Think my best one ever was back when American Airlines declared Bankrupt....

according to Etrade I made 170,200% on that deal..

the next one was right after 9/11 when Ford hit $1.00.... sold it for $15

 

[Doc0]

I bought a penny stock in 2009 for 4 cents a share. Sold it in 2015 at 70 cents a share. 17 bagger. I took half the profits and bought BRK.B at about 130 and a new car for my kids. Took the other half and bought BTC at $275 in summer 2015. When BTC hit about 13K in winter 2017, I sold my principal and kept the profit invested and put the principal in BRK.B so eventually my entire principal was invested in BRK.B and my profit was in appreciated BTC. This is called a free trade since I have nothing but profit at risk. I don't remember what the price of the second slug of BRK.B cost. Today my BTC is 9500/coin, at zero cost basis.

 

[Gadabout]

My best brag is NFLX - acquired @ $4.47 - closed at over $436. today. I have taken enough from it over the years that whatever happens with the rest, it sure doesn't owe me anything. It is the stock that gave me confidence to make picks that "experts" cautioned against.

 

[Fermion]

I don't think you can apply the statistics for fund stock pickers to individual stock pickers. The fund pickers have to deal in volume and that makes it very hard to avoid the stockinberg uncertainty principle.

They put an order to buy 20,000,000 shares of a stock that only trades 500,000 a day in normal volume, it is not going to get filled at a good price.

I on the other hand can buy 5,000 shares of it without moving the needle.

 

[dixter]

I think we are missing the FED buying up the corporate bonds at the moment.... I looked at the Ford Bond that still pays 9.98% coupon.... when the virus started hitting the bond market that Bond dropped to $550 on 4/7/20.... some lucky buyer locked in 385,000 shrs, the FED has been propping up corporate bonds now and today that bond is priced at $1261 with a coupon of 9.98% and a mature date of 2047 thats $21 million into $48.5 million plus $38,423 per yr on the coupon payouts.... lucky buyer

 

[SMiller]

For me, AAPL, ADBE, AEE, AMZN, BRK.B, CC, CMG, COST, CTVA, DD, ENSG, NFLX, NKE, NVDA, PFE and WIX are all up more than 100%. My best is Amazon which I first bought in 2010 and has returned 1,364%. That one has definitely helped my returns during COVID.

 

[Jeb-NY]

Apple was my biggest loss. I always did my own picking and trading but decided to go with a broker that a couple of my friends was having good results with. I decided to start slow and invested $10K with him, promising more when I saw what he could do. He managed in about 2 years to turn it into $5k, but that was not the big loss. He talked me out of buying Apple at what now would have been a split adjusted price of $1 per share. Then later talked me out of it again at $2 split adjusted. I bailed for the loss of of $5k and went into mutual funds and stop playing with individual stocks and didn't realize what he really cost me till years later. I figure at most I would have bought $4k worth of Apple stock so if I would have hung onto it.....