So the big issue appears to be what his overall portfolio return would be? Since we don't know the size of his account, we can't really calculate that. Note that when you and Jack say that he had to add funds, you must be assuming that he was 100% invested at some point. You really can't assume that, unless I have missed something along the line. As MM pointed out, his method produces less candidates in a bear market, so it is entirely plausible that he would not have been fully invested in 2002 for example. I don't think eating 30% drawdowns is a good idea, but if each position is only, say, 5% of the total portfolio equity, even a 30% pullback is only a 1.5% equity hit. That is within the accepted money management parameters of most professional investors. I also note that quite a few of MM's picks are very thinly traded. His habit of holding through pullbacks produces a return that is more consistent with what a big investor would receive, since an institutional holder could not just dump several days supply without crushing the stock. Such big holders are more or less forced to ride out pullbacks and exit into runups, much as MM does. Call me crazy but I don't think a 12.6% average return on a four month holding time is too shabby.
I don't think discussing one's personal net worth is really appropriate but I thank you for your kind words.
It didn't bother me at all. I knew that this was a great company that would outperform the market and I was right. I am not fearful of the market. By holding my position, I outperformed the market. The analytical skills I learned at Wharton enable me to assess a company's business model to determine the likelihood of its continued success. AMHC sold off on bad news....so what? Let some of the cowards buy high and sell low, not $$$MR. MARKET$$$. I am HUGE!!
Mr. Market, While I don't question your results or the robustness of your approach, I find something a bit troubling about much of your commentary. In particular, your incessant references to your purported "Wharton MBA" raises a rather serious red flag that must lead me to question some of your assertions. Without meaning to sound obnoxious, I too have an MBA from a top tier B-school and additionally have a J.D. from another. But, as the esteemed poet would say, BIG FREAKIN' DEAL! Honestly, the market could care less about the degrees any of us have earned or what schools may be on our diplomas. And let's be honest. There are thousands of us with MBA's from top 10 schools. And yet, in my experience, a vast majority couldn't earn a nickel in the market. So again, who cares. But beyond that, the constant trumpeting of the Wharton thing is beyond embarassing. It raises serious doubts about who you really are. Like many on this board, I've worked with and remain friends with tons of MBA's. And yet, I don't know a single one who ever talks about B-school anymore. I know I certainly don't. I mean, even my mother stopped caring about where I went to school years ago. And if I recall correctly from another thread, you claim to be about 40 with a wife and three kids. Is that really correct? If so, then I have one word for your behavior -- "wowza" (I'm sure there's a clinical term for it, but that's not my area of expertise). Perhaps this is all part of an elaborate joke that admittedly escapes me. If so, you got me and I apologize. But if not, I will be adding a new name to my ignore list. Best of luck in your future endevours. Regards, HD
Congrats on your excellent education. If education wasn't so important, why do so many parents fret over where their kids go to college? As long as our society continues to rate universities, some schools are going to be rated at the top and people are going to want to go to these schools. To answer the second part of your statement. People can have a good time, be happy most of the time and STILL make money investing/trading. Don't forget to laugh! Life is a joke, most people don't get it.
Nope. That's not a big issue. That's a done deal. That's been determined. You don't have to know how much was invested to know the % return if you have the entry/exit (or current) prices, which mm has provided. That's a good point. MM's own dates, when best scenarios sequence them out, as I did in the excel worksheet, depict that it's taken parts of almost 2 years to fully invest 14 parts of his equity - if he's segmenting his capital as you suggest he may be and not all at once. You decide if that's an efficient use of investment capital or not. But now consider this second clue: though MM hasn't ever talked about capping each investment at a small portion of his total equity, he's boasted that he makes "a lot of money" with his investments. If he makes a lot of money, by what most people would think is a lot of money, that would argue to large sizes more so than small sizes. The question becomes, How do we correlate the idea that mm invests only a small division of his total equity per investment, and then, each investment gets tied up until it caps its profit as 15% however long it takes (averaging 4 months) or is held while at a loss (however big that may become), but a good many parts of these capital segments are not even invested for anywhere up to two years (if he's not investing it all at the same time), as being able to yield in aggregate what an MBA would consider to be "a lot of money"? You may be right about that. Would these be the same money managers mm speaks of performing much better than? If he's better than those guys, why would we consider their parameters as acceptable for mm? Anyway, you're making the assumption that mm caps each investment at 5% of total equity and that may not be the case. He's been mute on that money management point, which suggests he may not have an answer for it. And if he doesn't have an answer for it, then that may be because he either doesn't really trade, or he doesn't practice that aspect of management, or he doesn't want to answer the question. But what happens in this event if we follow your scenario: all or a significant portion of his positions could fall 30% (or parts of), and that would put him in danger of having the total equity loss turn into 30% (or some significant drawdown), wouldn't it? Does that appear to you as a sound top MBA type practice?
i don't think your 'system' is tradeable, although i believe there are kernels of which to build a tradeable 'system' or strategy. i don't think anybody here cares about having 100% winning trades. they care about consistent profits, and short days between new equity highs, and low drawdowns. characteristics your system does not meet, hence the reason it is untradeable. you should keep your stock characteristics and try to refine your entries and exits.. i could see a money manager doing something similar, one who does not depend on results, but rather a % under management doing something similar, with very small per position (as someone mentioned). they are not dependent on consistent returns for their income. but then, you wouldn't have extraordinary returns because your position size is forced to be so low. bottom line is that you would have to have some other source of monthly income to invest (not trade) this way. i would guess that there are hedge funds trading high RS stocks, but just doing it better. (again, no one cares that you have 100% winners). there is a trader, who i believe is the biggest at our firm, and one of his screens is for high RS stocks. i guarantee you he does not hold through 40% drawdowns. i wish i knew more about his strategy, but do not. regardless, there is merit to the principle of buying high RS stocks at certain points, as there is to having good entry, stop loss, and profit taking rules.