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TMFMmbop (97.59)

Champion of the World Contest: UPDATE

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May 19, 2009 – Comments (3) | RELATED TICKERS: JST , APWR , FSIN



That's Erin. A few minutes after this photo was taken, the skateboard wheels rolled over her hair. Good times. Just wanted to put that out there. Now, onto the CAPS Champion of the World Contest update! (If you haven't entered yet, what are you waiting for. Full rules are here.)

The standings
The current Champion of the World Top 5 Are:

1. IBDvalueinvestin
2. Tyrone 85
3. EScroogeJr
4. 7thStreet
5. TotoMMB

IBD has jumped out to an early lead thanks to a barrage of 58 picks, including heavy emphasis on being long emerging markets. Current top scorers are long Jinpan (JST) -- a maker of transformers in China (no, not the cool Optimus Prime type) -- and A-Power (APWR) -- a company that does distributed power generation and altenergy in China. Both of these companies should benefit as China works to modernize and expand its electricity grid to meet growing energy needs, and one or both may get Global Gains team contest write-ups down the line if you're interested in learning more about them.

What this means for you
If you're interested in winning the contest, think about a few macro themes that you think will be catalystsover the next year, and then pick as many half-decent companies with reasonable balance sheets that should benefit from the catalyst. (Call this the Jim Rogers approach.) Such a strategy removes some of the individual company/execution risk and has the potential to juice your score and accuracy if you're correct about the theme since all of the stocks would move up together.

If you're wrong, however, the correlation will sink you.

If that Chinese electricity grid theme interests you, look at Jinpan and A-Power as well as at companies such as ABB (ABB), China Fire & Security (CFSG), Fushi Copperweld (FSIN), and perhaps even some of the solar companies.

As always, the Golden Buddha wishes you luck (and advises that if you're bodying up a longboard, don't let the wheels roll over your hair)...

3 Comments – Post Your Own

#1) On May 19, 2009 at 12:10 PM, vitrified (99.60) wrote:

Good advice (and, again, good comedic lead story).  For proof of concept of the "macro theme" play, just look at my regular CAPS chart.  Near the bottom of the market, I loaded up my picks with dozens of good companies in the oil services, exploration and drilling industries.  Fortunately for my ranking, that theme has played out as I expected, and my CAPS score shot up a couple thousand points.

I think it goes to show that you don't need to be a genius to score big (in CAPS or in your real portfolio); you just need to be right about one or more of these "macro themes" and then parse through the companies in those sectors.  I didn't spend a lot of time--just looked at their P/E ratios, growth and a few other indicators and learned enough about what they did to understand their story.

I have adopted a similar focus here now that the the pick limit has been increased to 100, as I believe that this theme has more room to play out (i.e., I don't think oil prices will stop at $60/barrel).  I expect my accuracy will either be over 80% or under 20% depending on whether I am right or wrong.

Meanwhile, congratulations to IBD.  He/she has been spectacular thus far. 

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#2) On May 19, 2009 at 12:37 PM, TMFMmbop (97.59) wrote:

There's no reason you can't apply a similar approach to your portfolio these days, particularly as the ETF sector grows and allows you to make (this is going to sound oxymoronic, but it's not) targeted broad bets. Indeed, this was how Jim Rogers approached frontier economies. He writes in Investment Biker, "If you believe in a country, you should buy shares of every decent stock on its exchange. If you’ve got the right concept going for you, they’re all going to move up together."

Similarly, David Swensen targets broad asset classes in running the Yale Endowment. Yes, he picks managers who may pick specific stocks, but his magic, I think, has generally been in having very smart broad asset allocation policies that shift over time.

Tim

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#3) On May 19, 2009 at 1:48 PM, vitrified (99.60) wrote:

Agreed.  And I think CAPS is useful in this regard in that it gives you a chance to try out approaches like this that you might not initially want to risk with your real-money portfolio.

I don't so much mean that you find out whether or not you are a sharp forecaster, but rather you can determine whether you have the mindset, temperament and discipline to make it work (or you can get the practice to develop those qualities).  When my CAPS rating dropped to 6% as oil kept dropping, I started to feel like a dunce; but the experience helped to reinforce the lesson that success isn't measured in short-term market fluctuations but rather in the long term as fair valuations are eventually realized and to therefore keep the faith in the face of near-term headwinds. 

And I just started reading Investment Biker.  As I was reading a few pages during lunch, I picked up a few tips for successfully negotiating a black-market currency exchange--lots of useful (and actionable) insights and advice for investing and more. 

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