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The World’s Most Talked About Stocks

September 10, 2013

Drama. Almost every day there’s an analyst report or pundit telling us why they like Apple, Blackberry (because somebody might buy it – Reuters, September 9, 2013, Fairfax, one other, approached investors on BlackBerry: source), Facebook, Netflix, LinkedIn, Zynga, Tesla, and more recently, Vodaphone (because it might be bought by AT&T – The Street, September 10,2013, From A to V: Why I’m Buying More Apple and Vodafone).

The First Question

The First Question

The first question is: Is the market so transparent that with a little bit of management, we can get +1500% in nine months by “working” a portfolio of eight stocks that they like (these eight, in particular).

The Second Question

The Second Question

And the answer is, Yes, it is.

The second question is: If we just buy all of the stocks that everybody is “talking about”, can we make +100% with no management at all. And the answer is, Yes, we can.

Five of these stocks are still in the Perpetual Bond™ (please see Exhibit 1 and 2 below), but a lot of people will be disappointed to know that three are not in the Perpetual Bond™ now, and never have been all year; these are Apple(-9%), BlackBerry(-1%), and Zynga(+34%).

You like it? OK, we'll buy it.

You like it? OK, we’ll buy it.

Moreover, we don’t want any credit (or reputation) for running a risk averse portfolio that returned +1500% in nine months; that’s a random number and all the credit goes to the market that gave it to us, and knows what it likes, and the investors whose money we now have.

For example, we have no idea why these eight stocks would have a combined market value of nearly $1 trillion (please see Exhibit 1), or what their future worth might be.

The only reason for doing this review is that we might learn something that helps us in the future as long as the market keeps on playing its favourites.

And what we have learned is to think about “You like it? OK, we’ll buy it, and a bunch of others that you like” as long as they fit into our vase.

Exhibit 1: (B)(N) The World’s Most Talked About Stocks – Prices – September 2013

The Worlds Most Talked About Stocks - Prices - September 2013

The Worlds Most Talked About Stocks – Prices – September 2013

(Please Click on the Chart to make it larger and gain if required.)

The stock prices (Exhibit 1) are prices at which we can buy and sell these stocks at the market price; in general, we don’t really care what we pay for a stock if it’s our intention to own it, and we only own it if the ambient stock prices appear to be above the price of risk (marked (B)).

What’s important is when we are going to sell it, and that occurs when the ambient stock price drops below the price of risk (marked (N)).

Because the number of stocks is small (only eight) and the prices vary between a few dollars to several hundreds of dollars, we weighted the portfolio so that about the same amount of money goes into each stock, and the weights (Shares Factor in Exhibit 2 below) are based on the average prices demonstrated in the nine months previous to December.

The reason that we have such an extraordinary return (+1500%) on the portfolio (please see the Portfolio line in Exhibit 2 below) is that we were only willing to buy Vodaphone ($744 000’s or millions depending on our budget) in December and kept a cash balance ($5,506) that we worked down and then dipped into the margin account (negative cash) to make whatever other purchases we intended to make as the year progressed.

If we take profits and sell everything, then the return is +68% after paying the margin account (please see the Total line in Exhibit 2). But, until then, the portfolio is what it is.

The indicated stop/loss (Exhibit 1) suggests that we could lose as much as 20% of our gains while the portfolio is active, and, therefore, as always, the selling discipline is important and consists of moving the stop/loss price forward and up, or possibly taking some of our profits (or dividends) to buy puts that will protect the prices on the rest.

Exhibit 2: (B)(N) The World’s Most Talked About Stocks – Portfolio – September 2013

The Worlds Most Talked About Stocks - Portfolio - September 2013

The Worlds Most Talked About Stocks – Portfolio – September 2013

(Please Click on the Chart to make it larger and gain if required.)

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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