PCGS 2012 contest picks vs. Dow 30
RedTiger
Posts: 5,608 ✭
Folks know I am big fan of process. I am also a fan of education. Glancing over the 2012 returns for the Dow 30 and the forum's contest picks had me thinking. The dispersion is quite similar. It was an up year for stocks, so it is predictable that the Dow had a better average return than precious metals investors. What is surprising is the ranges and dispersion pattern is not all that different. There were 26 contest picks (2 dart throws) and there are 30 Dow stocks. For the novices, the Dow consists of 30 of the largest, most established companies based in America.
Let's look at the top five Dow vs. contest. The match ups are startling in how closely they line up. Not surprisingly, both in the contest and in the Dow, a lower priced stock drove the #1 position.
Bank America 11.61 108.81%
streeter 53.52
Home Depot 61.85 47.12%
zrlevin 50.41
Disney 49.79 32.77%
DrBuster 45.71
JPMorgan 43.97 32.24%
Tiggs2012 37.37
American Exp 57.48 21.86%
Dart throw #2 22.02
The bottom five is a bit more skewed.
Caterpillar 89.61 -1.09%
66tbird -28.87
Dupont 44.98 -1.75%
Baley -29.44
McDonalds 88.21 -12.08%
miklia -41.44
Intel 20.62 -14.97%
TwinTurbo -41.64
Hewlett Packard 14.25 -44.68%
cohodk -96.32
Averages Dow30 9.58%
Contest picks 3.41
However, eliminate the bottom two contest picks (short SHLD and put options on CMG), and the seventh lowest contest pick is Halfstrike at -0.91. Again startling to me, in how closely that lines up to the Dow results. (Halfstrike at -0.91 would line up with CAT at -1.09% and Miklia at -41.44 with HPQ at -44.68%.
So what's the point? The point is to illustrate, the element of luck involved in contests or stock picking. The Dow 30 are some of the stodgiest stocks that trade. The contest picks had all sorts of stuff, but line up the results after a year and the overall results and dispersion of results were relatively predictable. A person throwing darts at the Dow 30 would have had a 1 in 30 chance of picking the contest winner, a 4 in 30 chance of picking a 30% winner during this up stock market year. Take 30 people playing the game, and one is likely to have done so.
The famous book, A Random Walk Down Wall Street, bases an entire theory on the idea of luck, that perceived financial genius is almost all luck, and that the top stock pickers do so because luck. I don't buy the entire theory. I believe that there are good financial habits and poor ones. Unfortunately, one of the worst ones is to take hot tips from the Internet. Another bad one is spending much time or energy on contests. One good habit is journaling, which I highly recommend it, and following the contest sort of encourages. I keep my public trading blog at my signature link, where I post my real life trades, in near real time. I have done so for seven years.
Let me add, that I don't have anything to sell, don't have anything to gain from my blog. I am not a broker, or a pro trader. I am a small fish in the big ocean of the financial markets. I have been trading since 1987. Mostly the blogging is for my benefit. However, I do hope that a few readers will learn something from my trades and my observations.
Another good habit is discipline, for traders, often money management trumps stock picking or market direction in determining long term financial results. Over time a trader is going to have hot streaks and cold streaks. Don't get too excited during the hot streaks or too discouraged during the cold. If a person is at all competent or at least average, it will even out.
Let's look at the top five Dow vs. contest. The match ups are startling in how closely they line up. Not surprisingly, both in the contest and in the Dow, a lower priced stock drove the #1 position.
Bank America 11.61 108.81%
streeter 53.52
Home Depot 61.85 47.12%
zrlevin 50.41
Disney 49.79 32.77%
DrBuster 45.71
JPMorgan 43.97 32.24%
Tiggs2012 37.37
American Exp 57.48 21.86%
Dart throw #2 22.02
The bottom five is a bit more skewed.
Caterpillar 89.61 -1.09%
66tbird -28.87
Dupont 44.98 -1.75%
Baley -29.44
McDonalds 88.21 -12.08%
miklia -41.44
Intel 20.62 -14.97%
TwinTurbo -41.64
Hewlett Packard 14.25 -44.68%
cohodk -96.32
Averages Dow30 9.58%
Contest picks 3.41
However, eliminate the bottom two contest picks (short SHLD and put options on CMG), and the seventh lowest contest pick is Halfstrike at -0.91. Again startling to me, in how closely that lines up to the Dow results. (Halfstrike at -0.91 would line up with CAT at -1.09% and Miklia at -41.44 with HPQ at -44.68%.
So what's the point? The point is to illustrate, the element of luck involved in contests or stock picking. The Dow 30 are some of the stodgiest stocks that trade. The contest picks had all sorts of stuff, but line up the results after a year and the overall results and dispersion of results were relatively predictable. A person throwing darts at the Dow 30 would have had a 1 in 30 chance of picking the contest winner, a 4 in 30 chance of picking a 30% winner during this up stock market year. Take 30 people playing the game, and one is likely to have done so.
The famous book, A Random Walk Down Wall Street, bases an entire theory on the idea of luck, that perceived financial genius is almost all luck, and that the top stock pickers do so because luck. I don't buy the entire theory. I believe that there are good financial habits and poor ones. Unfortunately, one of the worst ones is to take hot tips from the Internet. Another bad one is spending much time or energy on contests. One good habit is journaling, which I highly recommend it, and following the contest sort of encourages. I keep my public trading blog at my signature link, where I post my real life trades, in near real time. I have done so for seven years.
Let me add, that I don't have anything to sell, don't have anything to gain from my blog. I am not a broker, or a pro trader. I am a small fish in the big ocean of the financial markets. I have been trading since 1987. Mostly the blogging is for my benefit. However, I do hope that a few readers will learn something from my trades and my observations.
Another good habit is discipline, for traders, often money management trumps stock picking or market direction in determining long term financial results. Over time a trader is going to have hot streaks and cold streaks. Don't get too excited during the hot streaks or too discouraged during the cold. If a person is at all competent or at least average, it will even out.
0
Comments
I talked with some friends yesterday that did in fact play my picks to hold (and still have them). They were all smiles, which was good to see, especially with one who set up a portfolio for their young son with CP. That means more to me, to help him out, than just about anything else could.
<< <i>I thought it was crazy that both dart throws did as well as they did.
I talked with some friends yesterday that did in fact play my picks to hold (and still have them). They were all smiles, which was good to see, especially with one who set up a portfolio for their young son with CP. That means more to me, to help him out, than just about anything else could. >>
Congratulations on a fine contest result and some real world benefits to your friends. I will caution you that if the tides turn and your picks start to do poorly, that good will may turn. I tend not to give stock picks for that reason. One is that I admit that I am just guessing for the most part. Another is that if my picks do poorly the ill-will is often 2x to 5x any good will from any good picks. For those interested, I am much more likely to talk about process, and how a person might go about their own research, or talk other well known and established trading systems or ways to approach the market than mention any ticker symbols.
Dart throws had a good time in 2012 because it was an up year for stocks, especially small caps. So while they did a bit better than expected, it was not all that much. A computer map of all possible dart throws might show a median of about up 15% for the year, because small caps (IWM) were up about that much.
More than few folks chided me on my no-excitement conservative contest picks (BND, GLD, VTI). I laugh at that, as if it takes any guts to pick some penny stock (under $5) or super volatile stock in a play money contest. There is also a rhyme and reason to my financial conservatism and a reason why I like to carry that flag on this forum. While I trade options, which many see as ultra risky, I tend to take the tortoise route, slow and steady, rather then the hare of super activity, that often will give the same or less results, with more activity (and more commissions). Some might even call it the chicken route. I tend to be a conservative investor and trader because of early experiences. I started trading in August 1987 just three months before the crash. Anything and everything can happen in the markets, but rarely will it happen when I expect it to. I have rate myself as having a terrible trading gut, and my logical analysis tends to only be marginally better. Thus the turtle route of playing the house odds (vs. the gamblers odds) is the slower, surer way for me.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
btw - My picks were in play with family money all year (and still are) as well, just not mine, so if things start shaking there will be plenty of eyeballs on them ready to react.