Responding to Hotrod1431's blog post
January 10, 2009
– Comments (7) |
RELATED TICKERS: BSC
, STSA
, RPRX
Quotes of his blog in italics
"Why do all the top or highly rated fools always pick stocks that underperform the market (basically giving a lot of red thumps down and no green thumps up)? Anyone, or should I say most, can pick a looser stock."
On the 2nd point, not everyone can pick a loser. Take the variety of us that have gotten stuck with -100 point or more losses on stuff like STSA or QCOR. Red thumbs are far more risky as people have lost upwards of 500 points on bubblish dredge such as DRYS and JRCC. A long pick locks your loss at ~100 points whereas a red thumb can lose multiples of that. While it can be easier to see junk, a faulty pick on a junk stock is far more harmful than riding a green thumb to its grave. My picks of garbage like Transmeridian (TMYE.pk) only cost me ~50 points as the S&P got so clobbered that it largely erased my loss of points. Thus green thumbs are actually smart moves until the market bottoms out at a much lower level than here. With a green thumb, you're only risking ~70 points as the 30% decline in the S&P benefits the green thumber. Thus, those of us using mostly red thumbs are actually playing with fire... our index is constantly declining and we need our red thumbs to drop even faster to keep up...
"I think ratings should be based a little more on the winner stocks that you pick."
In the long run, they are. People like we will have to use green thumbs once the bear ends or people will be beating us as they get 1,000+ points per pick on stocks that recover from the lows and reach new highs. You can't score much more than 200-250 points off a series of red thumbs generally, whereas profits off of an MSFT, INTC, or SBUX caught early would score you many thousands.
I do not usually call for a stock to underperform the market especially after bad news.
I don't either. By the time the news hits, it is too late to short. You have to call underperform on something like GET now, as I did yesterday, while the price is still elevated.
You can pick any stock that gets a little bad press or a stock that misses the mark on judgment day and then pick the stock to watch it fall for weeks or months after.
This will lose you lots of points--try it, I dare you. Prepare to face Bear Stearns like consequences (stock rockets from $3 to $10 as the buyout deal changes leaving us bears clobbered by the Bear.)
Maybe these fools are shorting stocks and that is how they do business in the market but I somehow doubt it.
I make most of my money (in this bear market) shorting the S&P, Dow, Nasdaq, and assorted garbage like AMSC, AMED, AMT, GG and so on. I posted clearly on my blog when I made my most recent short on RPRX. You could easily have followed me into that trade, I posted my pitch within an hour of buying my puts.
I am sure that I could increase my score two-fold within a month by simply picking loser stocks vs. trying to pick winners.
Let's see it. If you're so brilliant, pick a bunch of stocks to go down MORE THAN THE S&P and we'll see. If you are consistently right, buy puts on the stuff you call it on and you're set when it comes to investing.
Does anyone see this trend or does anyone out there care?
The rest of my comments are as follows:
I'd love to be a bull, but in this market, being a bull equals losing both points and money. Thus, for now, I am a bear and will make mostly down picks. However, I do love and adore 6 companies' stocks at the moment: JBLU, WNR, BIG, JAG, TXN, and USU. Most of my money that is invested on things to go up is in those 6 stocks (I have a greater portion of my money short the market as a whole and particular junk like GG, RPRX and AMED). In those 6 winning longs (hopefully), I have an airline, a refiner/gas retailer, a discount retailer, a gold miner, a semiconductor, and a uranium-utility play. Those six stocks alone give me good diversification, how many more winners must I find?
I would note I've owned the stock of all six of those for 6+ months and have the following returns (JBLU +80%, WNR +15%, BIG -20%, JAG -20%, TXN -50%, and USU +10%). Averaged, my long portfolio is beating the market, though the short picks are where I'm really doing well. In this market finding other winners outside these stocks is not worth my time.
Once the market turns, I will spend most my time investigating longs, and find a core portfolio of shorts to balance risk. In a bear market, concentrate on stuff going down, in a bull market focus on stuff going up--it really is that simple.
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