Investment Contest Strategy and History

SurfinxHI

So, Coinshocked's comments in another thread, plus another piece of advice I was given last year were ringing in my head, and how much others want you to succeed at contests or whatnot. Coinshocked's premise is that if you only short a stock, it can only gain 100% if it completely fails. Baley or perhaps Cohodk told me last year that you should never do a contest with multiple stocks, as they all have to do well for you to win. He pointed out that I would have won last year if I had only one of my stocks instead of the 4 that I had chosen. Delicious irony, yes? Which stock does one pick? So, I decided to do a bit of research on the winners of this said game, and to see if one or both of these strategies are fail-proof, so to speak. Thus, the numbers:

2019
Winner -- 144% (SurfinxHI, 2 stocks)
Second -- 105% (ChrisRx, 4 stocks)

2018
Winner -- 60.10% (ChrisRx, 1 stock)
Second -- 22.51%

2017
Winner -- 105% (Baley, 1 stock)
Second -- 100% (1 stock, shorted)

2016
Winner -- 92% (s4ny; 1 stock (call position?) shorted)
Second -- 79.7%

2015
Winner -- 79.6% (Baley; 1 stock)
Second -- 33.4% (3 stocks)

2014
Winner -- 115% (Renman; 1 stock)
Second -- 59% (1 stock shorted)

2013
Winner -- 143% (Calleocho, 3 stocks)
Second -- 141.5% (Baley, 1 stock, plus 2 calls)

I couldn't find the 2012 data, sorry.

Thus, it seems to me that folks out there are producing "trueisms" that are not actually accurate, but maybe sort of, mostly accurate. For instance, "most" of these contests have been won with only one stock 5/7, but one was actually shorted. Second, shorting a position and it going to zero could have won in 3/7 contests (and in 1 case it did). And shorting was runner up in 2/7 contests as well. In 2/7 contests, the winner was 2 or more stocks, and interestingly, the highest grossing winner was with multiple stocks.

But hey....the results speak for themselves....maybe we all aught to look at what Baley is picking and take his advice for our own portfolios....(this might seriously tank his pick this year ).

Surf

10000lakes

Another thing that is not factored in for the short positions is the borrow rate that would need to be paid to obtain the shares to short. On most "normal" stocks the borrow rate would be in the low single digits on an annual basis. So maybe a 1% or 2% fee would accrue over the year. But other stocks that are assumed to go bankrupt in the near future can have borrow rates in excess of 100%. If the short position is held for the whole year and doesn't go to zero during the year the borrow fee could be greater than the decline in price. So in effect a stock could lose 80% of their value during the year, but the offsetting borrow fee that was paid would turn it into a losing position. If you want to get a rough idea of which stocks are hard to borrow you can use the link below from Interactive Brokers to see what they are currently charging for a borrow rate. Just enter the ticker symbol and search. I'm not suggesting that the contest rules need to change.

https://iborrowdesk.com/report

Coinstartled

Hey...I am down 10% one day in. With the market rallying no less. I should have the lowball prize lucked up by February.

Coinstartled

And one other thing Surf. I am sorry for challenging your short pick.

Nearly got hypnotized by the several year long bull market. If the SP500 tanks , most of the long equity plays will fold and a relatively modest short play drop, maybe 20-25%, could win the trophy.

Glad to get that off my chest.

Musky1011

I just try for the middle

SurfinxHI

@10000lakes yeah, I would have no idea how to factor that in. Just like I’ve got no good way to do puts and calls. You all are much more sophisticated than I am when it comes to that.

@Coinstartled said:
And one other thing Surf. I am sorry for challenging your short pick.

Why? You can challenge anything you want. I thought the idea of only being able to achieve 100% was interesting. In a down market, that might be a good thing. So I thought I’d look at the history of this contest. Seems to me it that it will just depend on the year....and other people’s picks....and it is still a viable strategy. As are multiple stocks.

Coinstartled

@SurfinxHI said:
@10000lakes yeah, I would have no idea how to factor that in. Just like I’ve got no good way to do puts and calls. You all are much more sophisticated than I am when it comes to that.

@Coinstartled said:
And one other thing Surf. I am sorry for challenging your short pick.

Why? You can challenge anything you want. I thought the idea of only being able to achieve 100% was interesting. In a down market, that might be a good thing. So I thought I’d look at the history of this contest. Seems to me it that it will just depend on the year....and other people’s picks....and it is still a viable strategy. As are multiple stocks.

OK, retract the apology. The island guys confuse me.

Of course real life investing is way different than trying to beat 42 guys in a winner (and loser) take all contest. In a non crash market, Tesla dropping say 30% would be a great call if it happens, but not nearly as dramatic as yout ROKU call or even the KIQ move. Of course if the market gets hammered, as it may, a reasonable win may take the silver.

...oh, and you left my NLNK pick out of your spreadsheet.

SurfinxHI

Got the NLNK. Thx

derryb

It's just a contest. Go big with a long shot or stay home.

streeter

Surf
I won 2012 with three stocks. Split equally but Sprint went from 2-->7. I also had Essex & I can't remember the third. It might have been Wells or BofA. I only pick stocks where I have skin in the game.

Right now a blind squirrel at a dartboard should make money.
This last year was berry berry good. REEMF. Out now. Company has little hope of ever making money. But it made some for me. 5cents to 90cents. Spec.

Coinstartled

@streeter said:
Right now a blind squirrel at a dartboard should make money.

You are assuming that the future will be like the past. That is always dangerous when playing the markets.

DrBuster

For my strategy I always pick 2, usually looking for one that will hold with a shot at a move, and one that should move. I'm always a long guy for what I watch outside of this, so it fits in with that usually.

3stars

My strategy is simple, pick one stock that I would never risk my own money on but could go through the roof or down the drain, and one safe stock to provide a balance. When its not real money my risk tolerance is much higher.

Baley

Hey Surf, congratulations on your big win in 2019, i think you led practically if not totally all year long.

Thanks for running the game in 2020, and good luck to all, these threads started after the yuge 2011 for the precious metals, so no major surprise they have underperformed in the nearly decade since, but hey, "they're due!" So maybe this will be a goid year..

Diversification is great for balanced safety and shooting to hit or slightly beat "the averages", while concentrated positions can magnify both gains and losses, obviously.

I tend to have a large position in my pick and sell in the goid years and add or just hold thru the bad ones, just like my shiny baubles!

3stars

Would be interesting to do a five year contest. One pick, updates on the quarter, five year span. Be curious how many picks cease to exist in that timeframe.

SurfinxHI

@3stars said:
Would be interesting to do a five year contest. One pick, updates on the quarter, five year span. Be curious how many picks cease to exist in that timeframe.

Picks, or posters? Might be a fifty fifty shot.....

Coinstartled

@SurfinxHI said:

@3stars said:
Would be interesting to do a five year contest. One pick, updates on the quarter, five year span. Be curious how many picks cease to exist in that timeframe.

Picks, or posters? Might be a fifty fifty shot.....

Heh