“If shoeshine boys are giving stock tips, then it’s time to get out of the market.” - Joseph Kennedy, presumably around 1929.
After which he sold out of most of his portfolio, shorted the market and banked a ton of cash. Then he proceeded to engage in pump-and-dump and insider trading while it was still cool (and not illegal).
The exact numbers are not readily available, but we can confirm two things about Kennedy’s entrepreneurial savviness:
- $4 million ($59.6 million today) was Kennedy’s net worth in 1929
- $180 million ($3.36 billion today) was Kennedy’s net worth in 1935.(Toni Koraza)
6/9/2021 (Published after-hours 6/10)
It's a nice metaphor that found it's way to the surface of this particular market bubble. I think last time we were tracking mentions of the French Revolution, so it isn't clear to me if that's a magnitude metric, a civic unrest thing, or more nonsense professionals just bring up when talking about an impending market doom.
Personally, for blind platitudes, I prefer Warren Buffet's (or was it Benjamin Graham?), "Be fearful when others are greedy and greedy when others are fearful." Good to know, but hard to apply if you're in the mass of people currently excited. For the bearish and contrarians, it's "obvious".
But . . .
When everyone/the masses has entered the market at least one of these situations exists:
- The Market is overbought
- Buyers are overly optimistic
- Upward Momentum has been sustained
- The amount of additional money (or buyers) that can enter the market has decreased
- Valuations are too high
I haven't been active much this past year or 2 because for the first time in a long time I've been 98% invested. And while that's partially because I've been developing a new strategy, I'm fundamentally a value investor and there isn't much for me to do in this high-flying market. So, by way of a general update, I'm writing this to document the positions I've recently exited or am exiting.
My historical strategies have been: Value, dip-and-flip, prognostication.
I'm adding: deep value, momentum.
. . . I'm selling.
And by selling I mean setting up exit prices to execute in the next 3-6 months in anticipation of a down in the next 6 to 18 months.
HTGC
Bough in 2019 amid founder issues. Selling and might rebuy after a crash or significant dip. But they've underperformed the market by 20% (-22.39 Alpha). After the last dip the dropped further and about a week longer than the market but popped back up with +8.88 Alpha (64.52%).
So probably not a long-term hold for me in the future.
SPY
Smallholding for diversity and tracking, returning to the kitty.
Mo
Bought in 9/2014. in 6/2017 it had returned 79.05% while the S&P returned 21.19% = +57.86 Alpha, and I first sold it around then. Currently, if I'd held it, MO would've returned 15% while the S&P has returned 110% = -95.55 Alpha. I did buy it as a counter mover, and it did counter move. They've never done what I thought they should i.e. get into cannabis. Now they're just starting to do that. So I can make the case that now is the time to get into it. Maybe worth a token purchase for consumer staples exposure, but that's a problem for future Johann to worry about. I did buy more 10/2020 @ 38 for +5.7, but I'm still getting out of it I think.
KO
Consumer staple with a 3.02% dividend has been a fine place to park money in an uncertain future. But in the dip in Feb/March 2020 it dropped with the rest of the market but didn't recover as quickly due to all the cheap/free money still floating around. Still better than Bonds. Bonds are trash.
WMT
I think I first bought this in 2007 (around $43), when I still cared what other people thought and wasn't dating my posts. Then I sold it 6/2011 @53 (+30 Alpha). Bought more 4/2012, It was doing fine until the bubble got a bunch of fresh breaths. Frankly, I just forgot to sell WMT after I reviewed the idea in 2016 at $91. So, 129.24% vs 201.81% = -72.57 Alpha. Jeeze I sucked in bull markets, good thing I'm revising my strategy.
RIOT
I bought these crypto miners as trade December 2020 for 17. But got confused about who they were in February which is why I should always do these write-ups. If the world explodes this will probably pop, so I'll hang on until then because I'm going to have enough capital gains anyway may as well wait for the pop or a year.
OTGLY
Bought on bad news of a great game being released before it was done being developed into the best game of the decade. 2.8% dividend @ 11.94, but I bought at 18 which I figured was near the bottom. naturally, it dropped more after earnings were down. The plan was for a 10-year hold. I expect some sort of pop after the first free DLC is released. That might get me in the black. Otherwise, there's still GOG and a new witcher game in 5-10 years or whatever. But the market is going to have to outperform that right? I guess I just eat the 30% loss, deduct it from all these capital gains and re-evaluate in a month or whatever - and hopefully before the DLC and consider picking it up again cheaper for a trade on higher than expected revenues.
EXC
Another one of the first stocks I bought, it treated me well during the 2008 recession but I didn't know enough to sell it off then. Since then it's just been a dragging hedge whose services are no longer required.
OLED
I meant to write this up in 2018, but I think I said it was the Truth and the light in my Corning write-up. I picked it up at 28.75 in October 2014, I think because Steve Jobs said he was going to crush OLEDs. I researched it and determined that wasn't actually possible, so I bought the dip. 678.03% vs 121.37% for +556.66 Alpha. Makes me feel better about OTGLY. Might have reached it's max and now MicroLEDs are about to be a thing. Might as well get out.
CBOE
Picked up in the last dip as a trade.
APO
Bought 5/2019 @$32.825. 50.66 vs 35.64 = +15.02 Alpha. Probably going to reinvest on the dip.
MCD
I own zero shares right now, but I want to remind myself to buy the dip.
IAU
Bought 5/2019 @52.425, up 61.83% vs 47.25% = +14.58 alpha. I Think I got in at the right time, I think getting out now isn't the worst idea. As of this writing, I am indifferent on the future.
Probably got luck here.
UNH
10/2015@110.5, up 236.3% vs 109.42% = +126.88 Alpha. Indifferent on the future. Probably not a short term, but if it drops 40-50% who knows.
BABA
12/2020@235, down 9.11% vs 13.75% = -22.86 Alpha. Probably a real future here, but litigation is in the hair in the pie. Nothing to do now, but probably worth revisiting.
AMTD/SCHW
I'm not sure how I didn't write this up, as I told everyone looking for a stock tip about it. I put 3x my normal buy amount in. Bought twice in October 2019 @36.2, the next year I got hit with the mandatory exchange with basically the same (10% more) shares. Up 118.07% vs 42.47 = +75.6 alpha. With the advent of retail investors, and my relative dividend rate of 1.99%. This is the first tough one. A lot of the disillusioned Robinhood investors went to TDA, and TDA is going to keep making money off them. 72% of shares are held by institutions because it's part of the S&P 500. So I think I'm just going to sell half and call it a free roll, unless it pops another 15% then I sell it all and re-evaluate on the flipside.
DIS
Never formally written up, but a long time holding. I'm positive on the company.
bought in 2014@85
bought a lot in 2015@~107.806
partial sale 4/2019@120.5, 52% gain 0 alpha (excluding dividends).
Bought 2/2020@113.35
Bought 2/2020@113.35
Partial sale 2/2021@190 53.24 vs 22.29 = +30.95 Alpha.
Consider reaquiring.
IVV
Legacy Reference. Out.
~25% of my portfolio currently. Holding. If inflation goes out of control, this is the place where it's hedged. Should consider buying more. I'm not certain if there is anything better than cash atm. Obviously, all of it needs to be sold at the next trough.
BUD
-3.5% I like where they're going with seltzer and what not. It's done well for me over various times, but I'm out for now.
FB
Bought the dip. Flip!
And the deep value trades which were mirrored with real money and can be found under Mr. Prognosticator. TLDR: Selling it all.
Conclusion
My average Alpha isn't phenomenal, 5 to 10%. But for my deep value strategy, the S&P has returned 13% while I've returned a median of 20% and a mean of 18 for +5% Alpha in 6 months.
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