Everyone in the 2019 Stock Picking Contest made money in the first quarter! Well, except Coco, but she wouldn’t have it any other way.
Thanks to the fine folks over at How the Market Works, I didn’t have to do any calculations to see our results. Let’s see how our contestants are faring:
Most of us haven’t taken any meaningful gains or losses yet, so I’m going to limit any reporting individual results by just showing current open positions.
Also, in the spirit of outsourcing, I’m not going to dive into a detailed analysis of anyone else’s portfolio – the near limitless trading would make that a Herculean task. If you would like to defend your picks or offer some additional color, please use the comments below, and I’m happy to add links to any external writeups.
In tracking individual positions, I wish How the Market Works would show short positions as a negative number of shares, but since the tool is free I can’t complain much. You can use the ancient art of arithmetic (compare profit/loss to last price v. price paid) to see if someone is long or short a specific stock.
I’ll highlight our top five, provide some color on my picks, and try to figure out what Coco is up to.
#1 Ian Bezek
Ian Bezek claimed top honors for the quarter. He narrowly beat out my youngest son who had led all two-legged competitors for almost the entire quarter (and who is back in the top slot as of press time). Ian has certainly embraced the Wild West nature of unlimited trades and shorting stocks – if we calculated his risk-adjusted return he might be down at Coco levels. Ian has taken some gains (compare his total results against his open positions), but I’m betting no one is going to demand his full transaction history.
Before you hand all of your money to Ian to manage, though, please know the lion’s share of his performance is from shorting a micro-cap medical device company with 8 employees on the one day it spiked before quickly losing half its value. As parlor tricks go, it was pretty impressive, but I’d like to see Mr. Bezek do that again!
#2 Super Little Paul – My 8 y.o. Son
My youngest son is still figuring out stocks. Whenever anyone has passed him in the contest, he’s gotten really animated and asked me to short them as individuals.
Of course, the fun part around our dinner table is that dad, who has all sorts of fancy financial credentials and many a decade of investing experience, decided to short Netflix, his best-returning pick. A solid quarter and counting, that hasn’t lost any of its humor. Hahaha.
#3 PK from Don’t Quit Your Day Job
I believe this first quarter’s result is the long-awaited answer to PK’s most heartfelt prayers: definitive proof that he is indeed smarter than Nelson.
I’ve always loved Danaher as a company, but not as a stock right now. And I fear that PK’s Facebook bet is sowing his seeds on rocky ground. He should enjoy this top position while it lasts.
Nelson picked 9 different stocks with nary a loss and all but one with double digit returns.
I hate to start projecting year-end finishes, but Nelson’s entry, with some really high yields and a big REIT punt, starts to look strong if you make certain reasonable economic and interest rate assumptions. I’m guessing he’s going to be on the medal stand.
#5 Bamble the Dog
I am slowly working my way through Bamble’s picks both to confirm that they are actually real companies and to evaluate them as investments. I hadn’t heard of most of these companies, and most of them would be far off the radar of any institutional investor. His picks are a good reminder of the potential value in small caps (with far less competition from other investors). They’re also a good argument for small and mid cap index investing, ‘cause most of us aren’t going to find and research these unknowns.
#10 Asset-Based Life
I have never shorted a stock in real life. Though I’ve identified many a terrible business and felt confident that, long-term, the stock would melt down, I’ve always remembered the quote (of uncertain provenance), ““The market can remain irrational longer than you can remain solvent.” Shorting isn’t just about identifying an overvalued stock; you also want / need the market to change its mind and agree with you sooner rather than later. I’m not willing to risk my pile on those kind of bets.
But in the stock picking contest, my wildest fantasies can come true (yep, shorting stocks is about as wild as they run). I decided to pair some long-short positions.
long Home Depot / short Lowe’s
Mainly because the valuations didn’t match my respective love and hate of my two hometown stores. This pair isn’t going so well.
long Huya / short Netflix
Huya is a Chinese streaming company (mostly games). It’s a bit of a stretch to pair it with NFLX as they’re not apples to apples, but I imagine I’m not the first to put together a spurious pair for a long / short punt. Huya is the first Chinese ADR I’ve bought, and I’ll gladly concede it may be one of Malkiel’s “castles in the air” (as I count my money and plan my exit). While Huya is doing well, my short of Netflix is not. A lack of profitability and a tightening competitive landscape don’t seem to be hitting the stock, which shows why shorting is dangerous.
long Target / short Walmart
I love Walmart and don’t like Target much, but the valuations didn’t seem fair at the start of the year. My little punt is working out just fine for now.
long LyondellBasell Industries
LYB may not be the kind of stock to fuel a stock contest surge, but I bought some with real money and thought I’d mirror that here. It’s more of a value play and may not provide a bunch of excitement, but it may help balance out some of the wackiness in the rest of my entry.
And thanks to Mr. Tako for bringing LYB to my attention many months ago!
Please note I’m long HUYA, WMT, and LYB in real life.
Last Place Spotlight: Coco Jam Travels
Coco has claimed she’d like to come in last place in this contest, and I’m happy to report she’s well on her way.
GDX is large cap gold miners. GDXJ is small cap gold miners. IAU justs tries to mimic the performance of gold. But just as you’re about to label Coco’s entry as a bunch of boring gold picks, she picks SIL, which is a bunch of silver miners. Wow.
There is a scenario where this entry starts to shine, but that scenario isn’t terribly likely. Good luck Coco.
The fortunes of war will hopefully lead to me highlighting different folks each quarter, and I’ll be sure to do a thorough recap at year’s end.
Thanks to everyone for playing!