March 21, 2010
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Alex Dumortier, CFA
I agree with the article that stock picking is not dead. I have come to the conclusion that I need to bypass the hype and look for the fundamentals, and the charts of stocks, funds, etc that have ties to indicii, and thereby to volutility and change.
The article on the NASDAQ Q-50 is a good example of "forced" change every 3 months, and that by selectively picking from the lists of "added' and "dropped" stocks, a rate of return that beats the S&P and the market looks like an achieveable "WOW!".
Of course I KNOW I need to dig deeper, going back father, to see what a longer track record looks like ... but at least I have a starting point.
Check it out:
Nasdaq's Q-50 Index
Putting the info into my own spreadsheets and charts, I looked back at the Nasdaq reformulation released on 12/11/2009, effective 12/21/2009 to see how the stocks added and dropped fared over the last 3 months. Shining stars on the added list: AKAM (+ 26.42%), HANS (+21.44%), and LBTYA (+31.64%) ... yep ... I had to double, and triple check the math. AND, while the "dropped" list went down, PALM (-66.27%), VSEA (-13.68%), there were some clear upside winners, even in the dropped list: SNDK (+40.71%), and MYL (+21.65%) ...
Sooooo, will this "reformulation" render the same results? I am running the math ... and I'll be happy to share my findings.