My portfolio is slightly up on the day while the indexes are slightly down. Overall I think this week is going to be pretty up and down with lots of important earnings as well as options expiration. I'm not looking to do a whole lot, although yesterday I did make a bit of a short term bet that oil and oil service stocks would bounce. I'm using VERY tight stops and hoping to catch a quick bounce then exit.
I did initiate new positions in CSCO and CCRT this week though, as I've freed up some space in the portfolio the last few weeks by closing out a few. I don't know if I put them all here, but I know I closed out MA and DEO in the last few weeks, and I closed out ARG for a nice 10% gain today. I also added CWTR to my watch list. Aside from that though I anticipate being pretty quiet this week perhaps making a few very short term moves and/or initiating perhaps 1-2 other new positions since I have a 25% position in cash right now. I don't really like to game options expiration or earnings though so I'll be pretty cautious deploying my cash.
-Rizen
Wednesday, January 17, 2007
Tuesday, January 16, 2007
My Edge
I've been pretty busy the last 4-5 days, so I apologize for the lack of updates (see my poker blog for why I've been busy). Someone asked me the other day what my 'edge' is in investing, and why I feel spending the time managing my own money is more important.
I really think my current edge is two fold. I'll be up front and say that I don't think I'm better than a professional, but I expect that on a year to year basis I'll make more money than if I handed my funds over to a professional. Sounds counter-intuitive, right?
Not really. I feel my first 'edge' in investing is that I care about my money more than anyone I'd hand it off to. It seems simple, but when I hand my money over to a mutual fund investor or a hedge fund, there are other concerns that they have than simply making me the most money possible. Mutual funds are constantly concerned with bringing in new money. They get all their money in fees when you deposit in, but are not compensated at all based on performance. Now obviously when they perform better they bring in more money and get more fees, but the nature of their business tends to make them very risk averse and also leads to them doing some very artificial things (using their funds to walk up stocks they have existing stakes in at the end of quarters for instance) to boost performance for a given quarter. Mutual funds are also for the most part only allowed to own stock, not short it or use options. They also are required to keep a certain amount of their money invested at all times, regardless of market conditions.
Hedge funds are a bit different, since they are compensated based on their performance. The good ones tend to perform quite well, but they take a lot of your returns in fees (usually in the 20% range) both realized and unrealized, plus there is often a large barrier to entry (most have a minimum investment requirement in the 7 figures). They also have to deal with year end redemptions (when investors are allowed to 'cash out') which often leads them to sit on their performance if they have a good first 9-10 months and just try and preserve their lead the last 2-3 months rather than maximizing their return on invesment at all times. Hedge fund investors tend to care too much about day to day and even week to week performance as well, so they often won't put a lot of money into investments that may take some time to develop that may have great returns longer term.
I'm generalizing, and this certainly isn't true for all of them, but quite simply I believe my first edge is from the fact that I care about my money more than anyone else does, and anyone else I give my money to has motives other than just making me as much as possible.
My second edge I believe is mobility. Large institutions (in this case, mutual and hedge funds) swing around hundreds of millions or billions of dollars. When you move that much money around, you can't get in and out of positions without impacting the price, and finding buyers or sellers for everything you want can be complicated. The fact that as an individual investor I can move in and out of positions on a moment's notice without impacting the stock price is a huge advantage. I'm not even sure I can properly express what a huge advantage this is. A big mutual fund will take months buying their full position a little at a time as to not walk up the price to such a point as to not make a profit, and it can often take them weeks/months to sell positions too, often tanking the stock price in the process. I can start and close a position in the same day and not impact anything. This mobility gives me opportunites that don't exist for institutional investors.
With a lot of the new laws out there, the playing field is more level than ever for the individual investor versus the institutional investor. I'm not naive enough to think there isn't any inside information or tips that go around professionals get that I'm not privy to, but I think the advantages outweigh the disadvantages. I don't think it's for everyone, and I think a vast majority of people are better off leaving their money to professional. That being said, I believe if you have the time, inclination, and proper mindset for money that you're better off managing your own money than letting someone else do so.
In my first six months of investing I outperformed many hedge and mutual funds. Six months doesn't prove much, but I have very little doubt that with the right mind set and discipline I can continue to beat the averages and after fees do better for myself than the professionals I used to let manage my money did.
-Rizen
I really think my current edge is two fold. I'll be up front and say that I don't think I'm better than a professional, but I expect that on a year to year basis I'll make more money than if I handed my funds over to a professional. Sounds counter-intuitive, right?
Not really. I feel my first 'edge' in investing is that I care about my money more than anyone I'd hand it off to. It seems simple, but when I hand my money over to a mutual fund investor or a hedge fund, there are other concerns that they have than simply making me the most money possible. Mutual funds are constantly concerned with bringing in new money. They get all their money in fees when you deposit in, but are not compensated at all based on performance. Now obviously when they perform better they bring in more money and get more fees, but the nature of their business tends to make them very risk averse and also leads to them doing some very artificial things (using their funds to walk up stocks they have existing stakes in at the end of quarters for instance) to boost performance for a given quarter. Mutual funds are also for the most part only allowed to own stock, not short it or use options. They also are required to keep a certain amount of their money invested at all times, regardless of market conditions.
Hedge funds are a bit different, since they are compensated based on their performance. The good ones tend to perform quite well, but they take a lot of your returns in fees (usually in the 20% range) both realized and unrealized, plus there is often a large barrier to entry (most have a minimum investment requirement in the 7 figures). They also have to deal with year end redemptions (when investors are allowed to 'cash out') which often leads them to sit on their performance if they have a good first 9-10 months and just try and preserve their lead the last 2-3 months rather than maximizing their return on invesment at all times. Hedge fund investors tend to care too much about day to day and even week to week performance as well, so they often won't put a lot of money into investments that may take some time to develop that may have great returns longer term.
I'm generalizing, and this certainly isn't true for all of them, but quite simply I believe my first edge is from the fact that I care about my money more than anyone else does, and anyone else I give my money to has motives other than just making me as much as possible.
My second edge I believe is mobility. Large institutions (in this case, mutual and hedge funds) swing around hundreds of millions or billions of dollars. When you move that much money around, you can't get in and out of positions without impacting the price, and finding buyers or sellers for everything you want can be complicated. The fact that as an individual investor I can move in and out of positions on a moment's notice without impacting the stock price is a huge advantage. I'm not even sure I can properly express what a huge advantage this is. A big mutual fund will take months buying their full position a little at a time as to not walk up the price to such a point as to not make a profit, and it can often take them weeks/months to sell positions too, often tanking the stock price in the process. I can start and close a position in the same day and not impact anything. This mobility gives me opportunites that don't exist for institutional investors.
With a lot of the new laws out there, the playing field is more level than ever for the individual investor versus the institutional investor. I'm not naive enough to think there isn't any inside information or tips that go around professionals get that I'm not privy to, but I think the advantages outweigh the disadvantages. I don't think it's for everyone, and I think a vast majority of people are better off leaving their money to professional. That being said, I believe if you have the time, inclination, and proper mindset for money that you're better off managing your own money than letting someone else do so.
In my first six months of investing I outperformed many hedge and mutual funds. Six months doesn't prove much, but I have very little doubt that with the right mind set and discipline I can continue to beat the averages and after fees do better for myself than the professionals I used to let manage my money did.
-Rizen
Monday, January 8, 2007
Slight up Monday
Today was a slightly up day for all the major indexes with around a .15-.3% increase across the board. We had a dip in the open into some terrorism scare in NYC where there was a 'gas smell' I guess. The market finished strong and my portfolio was up about .75% for the day.
Most of the strength was due to VDSI spiking sharper on a positive report from Investors Business Daily today, and the bounce in HLF I was speaking of on Friday. After completely tanking Friday to the tune of about 23% by the end of the day, it bounced back close to 8% today. That's not near the amount of the loss on Friday, but the inevitable bounce I spoke of came today. A few analysts released reports saying the selloff was very overdone and reiterated their price targets as well. I'm less bullish about the stock than I used to be, but I still believe there is some upside so I'm holding on for now.
I closed out 4 trades this morning in BUD for a less than 1% loss, in MYGN for a 1.5% loss, in OGE for a 1.25% loss, and in WY for a 1.5% loss. Not a good day for trades getting stopped out, despite the overall portfolio performance. I also initiated short term trades in ROP and SIX.
That was it though, pretty much a quiet day. The indexes didn't move that much and I've done most of the buying I wanted to in the weakness in the last week or so. Nothing really happened today to change my overall outlook, although earnings season is nearly upon us and MacWorld starts soon, so I expect the coming weeks to be pretty busy for me.
-Rizen
Most of the strength was due to VDSI spiking sharper on a positive report from Investors Business Daily today, and the bounce in HLF I was speaking of on Friday. After completely tanking Friday to the tune of about 23% by the end of the day, it bounced back close to 8% today. That's not near the amount of the loss on Friday, but the inevitable bounce I spoke of came today. A few analysts released reports saying the selloff was very overdone and reiterated their price targets as well. I'm less bullish about the stock than I used to be, but I still believe there is some upside so I'm holding on for now.
I closed out 4 trades this morning in BUD for a less than 1% loss, in MYGN for a 1.5% loss, in OGE for a 1.25% loss, and in WY for a 1.5% loss. Not a good day for trades getting stopped out, despite the overall portfolio performance. I also initiated short term trades in ROP and SIX.
That was it though, pretty much a quiet day. The indexes didn't move that much and I've done most of the buying I wanted to in the weakness in the last week or so. Nothing really happened today to change my overall outlook, although earnings season is nearly upon us and MacWorld starts soon, so I expect the coming weeks to be pretty busy for me.
-Rizen
Friday, January 5, 2007
Harsh day so far
Most of the major indexes are down between .5 and 1%. The biggest harshness that's been done to my portfolio is that HLF has dropped some 20% after they announced that their sales growth in Mexico will be about half what expected, but they reiterated that their earnings will be on par. I think the 20% drop is too harsh, and I'm waiting to listen to their Q4 conference call to rush to any judgement, but at any rate I'm not going to sell into the panic. If nothing else, we'll get a bounce in 2-3 days I can sell into if I decided it's not worth holding onto.
The main concern for me is if this is a buying opportunity (their earnings are supposed to be the same since they have higher than previously anticipated margins), of in the case of HLF, which is a growth stock, is this the beginning of a growth decline. I'll need to decide this soon, as I'll either need to buy more down here to bring my cost basis down or sell off my position in 3-4 days when we get the bounce once the heavy selling panic is over. I'll feel better one way or another once I hear the conference call.
All in all it's been a slow day for me. Fridays I tend not to do a whole lot, and this weakness hasn't been pronounced enough for me to do much buying. So far today I've just initiated trades in AMAT, CAKE, and MYGN. AMAT and CAKE are pretty short term trades with very tight stops while MYGN is a bit longer term. As a reminder, for me trades are usually short term (days and/or weeks, but almost never months) where I just look to take advantage of oversold stocks or ones with good charts that I think I can catch a quick 2-5% gain on usually with about 1-2% downside risk. These are not names I'm buying because I like their long term prospects necessarily (although sometimes I do).
I also added to my longer term positions in HAL and GFIG today, both on weakness. Not much more to say than that, I may make another update after the markets close tonight, but I'm really not looking to do much this afternoon.
-Rizen
The main concern for me is if this is a buying opportunity (their earnings are supposed to be the same since they have higher than previously anticipated margins), of in the case of HLF, which is a growth stock, is this the beginning of a growth decline. I'll need to decide this soon, as I'll either need to buy more down here to bring my cost basis down or sell off my position in 3-4 days when we get the bounce once the heavy selling panic is over. I'll feel better one way or another once I hear the conference call.
All in all it's been a slow day for me. Fridays I tend not to do a whole lot, and this weakness hasn't been pronounced enough for me to do much buying. So far today I've just initiated trades in AMAT, CAKE, and MYGN. AMAT and CAKE are pretty short term trades with very tight stops while MYGN is a bit longer term. As a reminder, for me trades are usually short term (days and/or weeks, but almost never months) where I just look to take advantage of oversold stocks or ones with good charts that I think I can catch a quick 2-5% gain on usually with about 1-2% downside risk. These are not names I'm buying because I like their long term prospects necessarily (although sometimes I do).
I also added to my longer term positions in HAL and GFIG today, both on weakness. Not much more to say than that, I may make another update after the markets close tonight, but I'm really not looking to do much this afternoon.
-Rizen
Thursday, January 4, 2007
Volatility remains high
The indexes have been way up and down today. We started down, then went down pretty hard only to reverse quickly back to where we opened (but still down) then mostly tread choppy water until the last 30-60 minutes where the indexes have finally all gone into the green. Technology and the NASDAQ have been on fire most of the day though being up 1.21% as I write this.
The early action stopped me out of a few trades. I closed out my trades in CBS for a 9.5% gain, KFT for a 2% loss, MCD for a 1.5% gain, and XRX for a 2% loss. During the weakness though I added to my positions in ARRS and LWSN near the bottom and both have swung for 3-5% gains from today's bottom despite not being up much on the day.
I also trimmed my position in MA some on a nearly 3% spike today, and will probably look to trim that one into further strength in the future. I also closed out a longer term position in DEO after it hit my price target. I actually still like DEO and may buy it back if it goes lower again, but I felt the risk/reward no longer warranted the position.
I also removed BEBE from my watch list after it reported very weak same store sales numbers against a really easy compare. In general, the same store sales reports out of the retail sector were quite weak, which fits my thesis that Christmas was not as strong as many thought, and that plus the upcoming minimum wage increase (provided it gets passed) will hurt the retail sector overall early this year. All that said I believe retail is actually up at the moment despite the bad news.
-Rizen
The early action stopped me out of a few trades. I closed out my trades in CBS for a 9.5% gain, KFT for a 2% loss, MCD for a 1.5% gain, and XRX for a 2% loss. During the weakness though I added to my positions in ARRS and LWSN near the bottom and both have swung for 3-5% gains from today's bottom despite not being up much on the day.
I also trimmed my position in MA some on a nearly 3% spike today, and will probably look to trim that one into further strength in the future. I also closed out a longer term position in DEO after it hit my price target. I actually still like DEO and may buy it back if it goes lower again, but I felt the risk/reward no longer warranted the position.
I also removed BEBE from my watch list after it reported very weak same store sales numbers against a really easy compare. In general, the same store sales reports out of the retail sector were quite weak, which fits my thesis that Christmas was not as strong as many thought, and that plus the upcoming minimum wage increase (provided it gets passed) will hurt the retail sector overall early this year. All that said I believe retail is actually up at the moment despite the bad news.
-Rizen
Wednesday, January 3, 2007
Wild start to the New Year
It's an hour before market close, and it's been a wild Wednesday. The market peaked nearly 1.5-2% (depending on the index) half way through the day, and has plummeted down .5-1% (again, depending on the index). I've seen huge changes in my portfolio personally. The volatility can be nice, in that if you're active you can trade around it and turn a profit even if the market doesn't go much of anywhere. I've been caught more on the downside today, but I did do the prudent thing and trimmed 4-5 positions into this morning's strength and have added to 3-4 in the late afternoon weakness.
Let's see, I trimmed positions in ARG, DEO, JNJ, LOW, MA, and MRVL into the strength. I didn't close out any of the positions, but I had profits to protect and all of those were either getting somewhat close to my price targets or I felt the positions were too large now based on risk/reward. If they dip down lower I may look to add them back. As one user asked, this is the sort of action I consider 'trimming into strength'. When the market and/or individual stocks surge on no news or catalysts whatsoever, it's often prudent to trim and take some profits. Then, when the stocks pull back, you re-add your position if you care to and keep the profit. Worst case scenario the stock runs, you still have a position, but less of one. Best case scenario it pulls back, you get some profits from market overreaction, and you can buy it back if you choose.
Cramer says this a lot, and I really agree with it. It's arrogant to buy or sell all at once. No one can call exact tops or bottoms. If you think you're good enough to know the exact moment to buy or sell, more power to you. I don't. There are times opportunities present themselves where you must act quickly and decisively, but a vast majority of the time I choose to initiate a position, build it slowly over time with 3 or 4 separate buys, trade around it as it goes up and down adding and trimming to take advantage of volatility, then slowly selling off the position as it approaches my price target unless the thesis changes. I sell in the same 3-4 sells that I did buys, over time.
I also closed out some short term trades. I had a trade in WMT that spiked this morning so I closed it out for a nice quick 3.5% gain. I was also stopped out of 3 other trades, EGN where I protected a 2% gain, SNDK for roughly a 4% loss, and GG for break even.
I also put some money to work today adding to positions in both HAL and GW on this morning's energy downgrades. Energy has been hit really hard with the mild winter in the northeast. Both of these stocks I feel are severely undervalued and will gain long term, so I felt the weakness was a good spot to build my position a little more. First big snow storm in the NE will probably make these pop as well, at which point I might trim some into the strength. Later in the day on the massive decline I added to positions in HLF, PSPT, LWSN, NYX, and SHLD. In some of these cases, I was averaging down my cost basis (the stocks were cheaper than my average purchase price, so buying more brings my average cost down, which as long as I still believe in the stocks is a positive thing). In some of the others I felt they simply fell too much and will look to 'flip' them as they (hopefully) bounce. These are all investment positions, so flipping won't be selling off entirely, but simply trading around (unless I change my thesis on the stocks).
I also initiated trades in SNDK (which I later was stopped out of today for a loss) and PTIE. That's pretty much it. I may do some more today if I see opportunities. Overall it's looking like I'll post a loss today, but unless the indexes do something drastic in the last 40 minutes or so I will have lost significantly less than the indexes. I fell pretty good about my positions. I feel the spike today was out of line, but I feel the later selloff was a bit drastic and panicked. I'm still keeping a close eye on the action to start out the year.
-Rizen
Let's see, I trimmed positions in ARG, DEO, JNJ, LOW, MA, and MRVL into the strength. I didn't close out any of the positions, but I had profits to protect and all of those were either getting somewhat close to my price targets or I felt the positions were too large now based on risk/reward. If they dip down lower I may look to add them back. As one user asked, this is the sort of action I consider 'trimming into strength'. When the market and/or individual stocks surge on no news or catalysts whatsoever, it's often prudent to trim and take some profits. Then, when the stocks pull back, you re-add your position if you care to and keep the profit. Worst case scenario the stock runs, you still have a position, but less of one. Best case scenario it pulls back, you get some profits from market overreaction, and you can buy it back if you choose.
Cramer says this a lot, and I really agree with it. It's arrogant to buy or sell all at once. No one can call exact tops or bottoms. If you think you're good enough to know the exact moment to buy or sell, more power to you. I don't. There are times opportunities present themselves where you must act quickly and decisively, but a vast majority of the time I choose to initiate a position, build it slowly over time with 3 or 4 separate buys, trade around it as it goes up and down adding and trimming to take advantage of volatility, then slowly selling off the position as it approaches my price target unless the thesis changes. I sell in the same 3-4 sells that I did buys, over time.
I also closed out some short term trades. I had a trade in WMT that spiked this morning so I closed it out for a nice quick 3.5% gain. I was also stopped out of 3 other trades, EGN where I protected a 2% gain, SNDK for roughly a 4% loss, and GG for break even.
I also put some money to work today adding to positions in both HAL and GW on this morning's energy downgrades. Energy has been hit really hard with the mild winter in the northeast. Both of these stocks I feel are severely undervalued and will gain long term, so I felt the weakness was a good spot to build my position a little more. First big snow storm in the NE will probably make these pop as well, at which point I might trim some into the strength. Later in the day on the massive decline I added to positions in HLF, PSPT, LWSN, NYX, and SHLD. In some of these cases, I was averaging down my cost basis (the stocks were cheaper than my average purchase price, so buying more brings my average cost down, which as long as I still believe in the stocks is a positive thing). In some of the others I felt they simply fell too much and will look to 'flip' them as they (hopefully) bounce. These are all investment positions, so flipping won't be selling off entirely, but simply trading around (unless I change my thesis on the stocks).
I also initiated trades in SNDK (which I later was stopped out of today for a loss) and PTIE. That's pretty much it. I may do some more today if I see opportunities. Overall it's looking like I'll post a loss today, but unless the indexes do something drastic in the last 40 minutes or so I will have lost significantly less than the indexes. I fell pretty good about my positions. I feel the spike today was out of line, but I feel the later selloff was a bit drastic and panicked. I'm still keeping a close eye on the action to start out the year.
-Rizen
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