Hey, stupid! Why not just buy longs and be done with it?
Yep, that’s the kind of cruel query I pose to myself after times like, oh, the past eight trading days (kicked off on the morning of 9/11, appropriately enough, when Jensen Huang talked up his own stock and kicked off a multi-trillion-dollar worldwide equity rally). The lifetime-highs-every-day rallies we get compel me, from time to time, to put together hypothetical “what if I just bought a bunch of good-looking stocks?” portfolios and track them over time. I’d like to share this updated data with you now.
The construction of these portfolios is easy to explain: I go through all my charts as I normally would, and I try to pick out the very best setups. Here, for instance, are a dozen stocks (a pretend $120,000 portfolio evenly divided into starting $10,000 positions) that I “bought” on July 31st. As you can see, in spite of us being at lifetime highs, it’s a mixed bag: 5 winners and 7 losers, yielding a small loss and an annualized -3.1% return.
Going back farther, here is a larger portfolio – – 25 stocks, evenly divided into equal $10,000 starting positions. It’s almost a mixed bag – 16 winners and 9 losers – and has thrown off a not-that-impressive 6.2% return, which comes in at 9.3% annualized.
More recently, I put together what in a way is the most “conservative” portfolio, since it is made up of consistently strong, never-seem-to-go-down stocks that I call Perma-Risers. I put this together on August 30th, and this is down as well! Indeed, it is yielding a -16.2% annualized return. Not so good for these supposed stalwarts!
Funny enough, the standout winner is from my dear departed Dad’s portfolio, which is made up of really boring stuff like Pepsi, Procter & Gamble, and Exxon. How did my 92 year old father’s performance stack up? Errr, well, up 16.5% so far, which is 22% annualized. Not bad, Dad!
My general point being, just gobbling up longs, even great-looking longs, is no panacea. This market is still resting on the shoulders of a few superstars. Simply going long and staying long isn’t necessarily a path to glory, unless you’re my father.
