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Tuesday, October 11, 2016

Mirroring the Indices

My portfolio has basically been mirroring the S&P 500 for the past 2 months. It's a pretty boring allocation, to say the least. 

I was pretty hesitant to give an update; really, nothing has changed. There are some interesting little things to look out for, however. Skechers has not yet gained positive momentum, and their price action over the past quarter has been relatively flat. Currently it's trading at below its 50 and 200 day moving averages. They might be able to bust out a really good quarterly report on October 20th, and although they currently have pretty solid growth projections, a beat might be a really good catalyst. Of course, the effect on my portfolio would be just about negligible, but it still would be interesting to see.

The project with the professor has gone very well. He has been quite impressed with my work, and I am now working for his research institute by compiling historical bond prices from old periodicals. I will definitely be keeping in contact with him. I have gotten to be quite interested in seeing how the academic side of finance and economics could play a role in helping portfolio and fund managers make better decisions. 

I have been pretty busy with schoolwork, college applications, and the institute research. But I am obviously pretty comfortable with the conservative allocation I have currently, so I don't anticipate significant changes coming soon.

Saturday, August 13, 2016

Slight Change

A change has been made. It won't really have that much an effect on performance, as it's pretty inconsequential, but I wanted to procure a stronger representation of large and mega cap companies in the mix with the new holding. It makes my overall position quite more defined, as currently I am not interested in holding positions in any more small caps other than what I am already involved in.

All the funds from SPY and XLP have been switched into VYM. With SPY, the entire S&P 500 was represented, meaning that I was still involved with some small caps. XLP was a sector-based ETF that focused on Consumer Staples; when I entered it I used it as more of a hedge against a selloff, as Consumer Staples temper them quite better than the overall market. Currently, it isn't a desire to put as much weight on that particular sector anymore.

VYM is a high dividend yield ETF, which again, has most of its holdings in large and mega cap companies that churn out consistent dividends.

Skechers, the only riskier holding, has been left untouched. Even though it already isn't a very significant position in itself, I did want to tone down the risk profile of the portfolio overall a bit with the change, however small the change is. 

It's currently a pretty boring composition, and has been for a while. I anticipate it will continue as well; I have a research project to work on that has required and will continue to require a significant amount of my time, even after the school year begins. 

I said before that I would hopefully get into more of some swing trading a portion of the portfolio over the summer for both increased risk and involvement, as to be fair, I am relatively young so my risk tolerance is definitely higher than what my current composition would suggest. That has not happened. I just haven't found a large enough block of time where I felt comfortable enough to enter short-term positions again, and to dedicate the fair amount of time towards planning and monitoring them.

Saturday, July 23, 2016

Inherent Risks

I was very busy yesterday, so I'll have to write this today.

Before anything is said, an important thing that needs to get across is the fact that I knew what I was getting into when I selected an individual company to invest a portion of my portfolio into. With positions like these, one is exposed to multiple tiers of risk. Instead of only being involved with overall market risk and/or sector risk through mutual funds and ETFs, I would have to deal with individual company risk as well. "Picking" a stock inherently is more risky, and making sure that the value of the position sizes dedicated to an individual stock compared to that of the entire portfolio is relatively small is necessary for proper risk management.

Now, how does this all relate to that of my situation? Where does this apply to me?

Skechers had an earnings report Thursday, yesterday night, after the market closed, and I kept holding it by market close of that day before the release came out for 2 main reasons:
  1. I had already clearly identified my holding period; I am not interested in selling prematurely.
  2. To try and predict and anticipate earnings releases is literally gambling; the company could very well have exceeded expectations today as well. I am not interested in trying to time the stock.
I guess unluckily, they did release an earnings disappointment. The company released a negative surprise of just under 6% in their EPS, and noted how higher expenses hurt their margins, as well as how fluctuations in forex prices (probably Brexit) negatively affected their bottom line. Their domestic wholesale business had a decline of around 5.4%. But I think that the most notable thing to consider is the history of their earnings reports. In the past four quarters they have either met or exceeded expectations. In Q2 2015 especially, they blew them away. There was likely the trend of this continuing that was heavily factored into the share price, and this recent quarter may have really let some hopeful people down.

Nonetheless, the stock dropped around 15% after-hours after the release came out, and dropped another 7% just right after the market opened today. It rose 0.8% after hours. That's a pretty significant fall. And although I believe overwhelmingly in the idea that these markets are pretty efficient in giving a relatively fair value at just about all times, let's just say I still have strong conviction in the longer term prospects of this company. They still increased gross profit by 11% YOY, increased their margins, and have an ever-increasing international presence with their stores, which for me is one of the main keys to the next chapter of this company's growth potential. I'm hoping it will be another Krispy Kreme.

I was thinking of averaging down and selling off some of my positions in my broader ETFs to increase my position in Skechers, but I really didn't want to mess with my underlying allocation percentages, so I did not and probably won't. However, I do not plan on cutting off the position anytime soon. 

But all in all, although this is a pretty significant drop in terms of the company's share price itself, because I don't have a large position in it currently, and this really is the only considerably "speculative" position I own, I'm not too hurt. Again, I have already clearly defined the holding period for this stock and have no interest in trying to trade it for short-term periods. The stock could very well trend downwards for a period of time, but it still wouldn't really be that big of an issue for me.

On another note, I mentioned before in a past entry that the Brexit was on everyone's minds, and that the markets were in a serious fear over impending collapse with it as the catalyst. Well, just 2 days ago, before this quarterly earnings report came out, Skechers was trading at a value even higher than it was just pre-Brexit. The major indices such as the S&P500 and the DJIA have already recovered their losses and more. Although I still think the Brexit still is a serious issue that will have significant repercussions on Britain's economy especially, I think it's fair to say that all of that talk of "imminent destruction" and "sell while you can" was definitely a bit overblown.

Monday, July 4, 2016


It turns out that there are more people than I thought who know about this and go to my high school. I thought I would write a post somewhat directed towards them to remedy some of the most important glaring misconceptions that I hear about all the time. However, I won’t necessarily be going over all of them; it won’t be a rant. Sorry in advance if this seems like a fluff post, because it is. If you’re looking for info regarding my portfolio, just keep scrolling through.

Just because a company is objectively good doesn’t necessarily mean it’s a good investment. The market is pretty smart; expected things are taken into consideration.

My most controversial of the statements. I like to refer to an incredibly profound quote that I found a long time ago, so long ago to the point where I don't even remember where I found it. I still printed out and it’s been with me since.

“When you place a bet in the market, you’re never just betting on the future of the company you’ve bought or shorted, although this is how it is often cast. Rather, you’re betting on the misalignment of the average investor’s perception of that company’s future with its actual future; that is, you stand to profit only to the extent that the current valuation of the company is “wrong”. As such, you’re really placing a double bet, in the sense that you’re betting on two very separate things, each of which is extremely difficult to predict at all, much less quantify. The first has to do with the future of the company: How will its revenue flow change over the next few quarters, or over the next five to ten years? How big can this company really get, and why? But the second, very separate aspect has to do with other investors: to what extent do people over and underestimate the potential of this company, and why?”

Companies can be priced for perfection, or even beyond it. One of the main examples which comes to mind is Tesla, which is trading at a negative PE (currently losing money) and a >60 forward PE. Although just about everyone can see that Tesla obviously probably has a very bright future ahead of them in continuing to expand their electric car sales and customer base, other people know that too. It will already be factored into the valuation.

Another glaring insight that is simply wrong is when insights are believed to be genuine and individual, that the rest of the market doesn’t know about it yet, even though it really is just an obvious connection to make that doesn’t require a particularly high level of intelligence to see.

Aside from the fact that one should already realize that when others’ money is on the line, they will be far more keen to research and know about a subject, one must realize that the markets are very up-to-date, even more so than what many may think. Others definitely already know that releasing a new iPhone will increase aggregate revenue and profits, or that Halloween will increase sales for confectioners. These aren’t breakthrough insights by any means, and it would be a fundamental error to try and trade on them. Like the quote says, it is the deviation from the past expectation that causes changes in pricing, not the expectation itself.

Price alone does not deem a stock expensive.

The price of a stock is simply the market cap of a company, or its net worth, divided by its shares outstanding, or amount of shares in circulation, which is a completely arbitrary value. Hypothetically, a company with a net worth of $1 million could be split up into two shares of $500,000 each, or into 1 million shares of $1 each. It’s not like each share in the former example is “more expensive”, as you are getting far more value per share in that example.

It’s like choosing to split a pizza up into 4 slices worth $2 each or 8 slices worth $1 each. You would still be getting the same net value amount of pizza if you spent your $2 on one slice sized at the 1/4th of the pizza for $2 or two slices sized at the 1/8th of the pizza for $1 each.

People determine if stocks are expensive based on other underlying factors, such as Earnings per Share (EPS, = Net Income/Shares Outstanding), EBITDA (earnings before interest, taxes, depreciation, and amortization), Sales revenue, Book Value, and Growth Rates. These figures are displayed through ratios, like the P/E ratio (Price to Earnings ratio, = Price per share/Earnings per share - basically asking, how much are each of this company’s shares generating in earnings?)

Basically, the most important thing to do is not see a lofty price per share and instantly think that the stock is expensive. It’s how the price per share is related to other underlying factors of the business which determines that.

Jordan Belfort was not a trader, a portfolio manager, a banker, or even a legitimate broker. Contrary to what that film’s title implies, his connection to “Wall Street” is marginal at most.

It doesn’t happen as much as before, but there used to be a palpable sort of idolization of this guy at least among the people I know, Jordan Belfort. I remember people saying that he was totally “raw”, someone who had mastered Wall Street, whose only mistake was getting swallowed up with the ideal lifestyle that is commonly associated with it.

He’s nothing but a con artist. His business was not affected if his clients lost money. And in fact, because he was pitching penny stocks, which are simply known to be crappy investments in general, the claim that he wanted his clients to lose money is justified.

And I mean, on a personal note, how can you really see this guy as some sort of role model? Dipping excessively into drugs, scamming others, abusing and eventually divorcing your wife, and causing havoc in your family isn’t a small deal. I mean, I get that he threw immaculate parties and became rich, and that’s something just about every high school boy thinks is cool and desirable, but there still is so much more to being an adult than living out the wild and rebellious teenager’s dream. Having a wife, family, and clients should be important. One should take care of the people who have entrusted him or her with the important things they have themselves. This guy hopelessly failed in the fiduciary and intimate aspects of his life.

It’s not that easy; nothing ever is.

Like I said before in the first section, the markets and the people involved in them are generally pretty smart. I wouldn’t say that they are always outright perfect, but they are smarter than many might think at first.

There is no magic money-making day-trading strategy where ordinary people can just “make $12,563 a week day-trading at home”, or a magic system which guarantees profits.

For the overwhelming most part, there is no magic, money-making stock that everyone else has ignored and that only you know about, or a certain event/concept/idea that only you have predicted. It is becoming rapidly increasingly difficult to gain an upper hand in the markets. I can cite examples of firms spending an exorbitant amount of time and or money in hopes to, but that list would be very long.

It’s not that hard; nothing ever is.

I want to leave you with a more optimistic note. With the advent of information technology and the internet, there is an ever increasing abundance of information regarding finance and the markets. Although the markets are becoming ever-increasingly competitive, everyone now has the means to learn much more than someone 50-60 years ago with an electronic device and the internet.

Again, there is no perfect system. There is no magic number of screens to have, or a magic trading software one has to pay for in order to invest successfully. One can get by with publicly available financial websites like Yahoo Finance, along with a spreadsheet application like Excel, and not be anywhere near as behind the professionals with Bloomberg Terminals as he or she may think.

Apps like Robinhood are specifically bringing commission-free trading to the masses, specifically young people. Couple that with the recent advent of ETFs that bring an unprecedented amount of diversification in an accessible tradable package, I think that everyone should get started, or at least involved, with the act of investing.

Saturday, June 25, 2016

Elaboration on Plans, Thoughts on News and Hysteria

In retrospect, the amount of information that was posted in the past entry was what I believe to be insufficient; I think that explicitly saying some of the concepts that I believe in and my action plan regarding the Brexit is necessary. Pardon the relative incompleteness of the last post; it was getting late and I had work to turn in the next day.

So let's get back to the subject at hand. The decision from the voting populace of the United Kingdom to leave the European Union, or the Brexit, however tacky that name may be, is making headlines and causing a large amount of worry in the markets, causing a 610 point, or 3.4%, drop in the DJIA.  In financial news websites, like Yahoo Finance for example, article headlines are riddled with the term. People are writing about how the Brexit will affect the economy, how Trump's policies will affect the Brexit, how the global markets have "tumbled", how it has affected Obama, Mexico, etc. 

At some point I was expecting these writers to talk about how their pets' livelihoods would be in jeopardy.

In an investing forum that I frequented when I first started getting into investing, there was a post with a list of suicide hotlines and their respective hotlines. Another post is titled, "Brexit is happening. Time to panic."

It really can't be denied; these people are sounding like drama queens. They have no backbone. It's not the end of the world. Take a walk. Before I posted yesterday's entry, I thought that I had over-dramatized the event, but little did I know what would happen on the internet the next day: Sensationalist articles with an undertone of hysteria.

I mentioned above that there was a 3.4% drop in the DJIA of 610 points, which came to fruition right as the opening bell rang for the trading day. Now, that may seem crazy, but one should remember that the effects of yesterday still only puts us at down merely 2% for the week and 3% for the month. Now, I am not saying that this is it, and that the market has nowhere further to drop due to this event, but now is not the time to panic. One should never panic, ever. If someone is already getting seriously scared and wetting themselves over today's drop, that speaks miles about whether or not he or she should actually be involved with the markets in the first place.

A second thing I want to touch on is that one should look at these news articles and headlines with serious scrutiny and never take the the things they say and implications they make at face value. There are multiple reasons for this.
  • Reported news is old news. By the time you are reading it, the implications that have been made (if they are based on legitimate reasoning and facts) have already been priced into the market. You are too late. You cannot win against these giant firms whose main goal is to process vast volumes of information in milliseconds and act on them in an even shorter time.
  • If there's one thing I have learned from my experience with financial news and analysis, or even just my entirety of political and academic experiences, it's that an overwhelming majority if not all issues and topics can be debated feasibly on both sides with facts to back them up. There is a virtually infinite amount of information on the internet alone. Nothing can be deemed a certainty.
  • There is also a huge conflict of interest between news corporations and the investor. The former wants views, clicks, ratings, or people to read their papers. The latter for the most part just wants to know how they will make money, how they might lose money, and if their investment is at risk. So what do the news outlets do? Sensationalism! They do not care if you act in the best interest of yourself and your portfolio, or better suited to after reading their posts and updates.
The third topic at hand is related to portfolio management.

I am a contrarian, and I especially enjoy the idea of growth at a reasonable price. Therefore, when the market goes down, when stocks have a bad day, someone with my outlook would be very ecstatic as that means stocks are cheaper. That's why I was sounding somewhat positive in the next post. Crises like 2008-2009 and 2000-2001 have always been fantastic buying opportunities in retrospect. Just wanted to clear that out of the way. This core concept has worked out for me many times before. If you would like to understand more of it, I highly recommend "The Intelligent Investor" by Ben Graham - one of the best.

I've been hearing about how people are dumping their shares, how people are looking to clear their holdings completely. They are trying to time the market. They anticipate that the market will continue to drop, and they are looking to buy back in at a lower price at some point in the future. Trying to time the market like this due to fear will never yield desirable results - it will more likely than not drag someone into the routine of buying high and selling low. It is a fool's game. No one knows what the market will look like in the future for sure. Nada. 

Now for this Brexit, I think it would be fair to say that it is pretty significant. This is a country with international exposure being planned to rewrite its relationship and stance in the global economy. But the degree to which it will impact the market can and will never be feasibly predicted accurately in advance. While following it, I strongly believed that in the end, they would vote to remain. My decision to maintain the allocation of my portfolio to my positions reflects my implied bet. But still, I don't believe that things will really get that bad with regards to the end result on this issue.

So here's my game plan. I am still holding my positions; I do not plan on selling them anytime soon. I believe in the long term prospects of my major holdings, and I would not have invested in them in the first place if I haven't. I'm not interested in trying to time the market - I'm sure I will hear stories of people who successfully will and do, but in my experience as well as conceptually I stand firm in my belief that it never works out consistently.

If things get bad, they will get better. One of the most palpable tells of if things are at their worst is if there is "blood on the streets". And honestly, I have been taken aback by the sheer amount of fear I saw online today. The F&G index dropped 24 points. 

When comparing this event to 2008, the biggest difference is that when the events began to unfold back then is that a vast majority of people were still claiming that the "economy was still strong fundamentally" and that there is "nothing to worry about". For me, today it has been the complete opposite. People left and right are saying that our world is about to end. And I've seen this pattern before; I've seen people repeat this exact same sentiment over recent events such as Greece's bailouts, the Chinese shadow-banking "crisis", and in response to various well-known pundits predicting collapse. None of their predictions came to fruition.

That's it - for what I mainly wanted to cover.

In addition, I have found out recently that a lot more of my classmates and friends than I originally thought know about this site; I'm thinking of writing a general misconceptions post for them. 

There are a lot of things they believe or think that I want to correct. 

Friday, June 24, 2016

Brexit Short Update

OThis will be a short post. What just happened is pretty groundbreaking - political and economic relations between the UK and EU will be drastically changed in the time to come. I anticipate considerable short-term volatility and turmoil in global markets, centered in the UK.

I am a contrarian. Depending on how bad things really get, and to what extent the market will take this news negatively, but at the very least I know they will, I may consider this a buying opportunity. It can already be evidenced by the 9% drop in GBP/USD in the past 6 hours. Nikkei also dropped 7%.  I may be looking to initiate a position in a FTSE-tracking ETF, or possibly scope out some overly-battered companies in the future. Positions haven't changed yet.

People, money, and products from UK corporations will now have a harder time moving around. Money flow through UK banks are going to be no exception, and that is especially significant given that currently 63% of UK exports are attributed to EU membership. Immigration policies will be rewritten. Too many things are now planned to change to feasibly list.

It is important to stay level-headed. Times of turmoil will end up being opportunities in retrospect. I am actually very excited and intrigued; this is a significant event, and the bounds of its repercussions are yet to be realized. But who knows? Maybe it won't really even be as big of a deal as many would think.

Monday, June 6, 2016


To begin with, before anything else, wow. Almost at 21,000 views. Pretty crazy. And trust me, those clicks definitely weren't all me. Thanks. I'm looking through my past posts and boy, some of them are really cringey. Still pretty interesting to read though. It actually is serving one of its main purposes as a trading journal where I can review successes and errors quite well, so I've got that going for me.

I've also got the fact that school ended quite a while ago, which is nice as now I will finally have some more time to dedicate towards finance. I'm really looking to really begin putting a lot more time in it, by writing more articles on Seeking Alpha at a much faster rate than during the school year, as well as seriously scrutinizing my personal portfolio for the coming months. Who knows? Although my current positions in ETFs have done pretty well for me so far, I might be motivated to liquidate them and make open more available funds for some short-term swings based on technicals for a short period of time, as mentioned before. However, I definitely am not in any hurry to dump them. Currently, I don't see any irrational exuberance floating around regarding the market, and the technicals regarding the S&P 500 (one of my main positions) don't show any sign of a short-term period of being overbought.

(click to enlarge)

In fact, analysis suggests that it's currently testing resistance and might even break out of 210. The market has been in a stagnant channel throughout this past year and hasn't moved over 4% over the past year or YTD, so this could be its time for that. There's also a possibility that there's a bullish inverse head and shoulders pattern with ~Dec 14 and ~May 9 as the shoulders, and ~Feb 8 as the head. I am highly skeptical of that happening, as a similar bullish pattern happened in the past (it's included in the chart) and nothing came of that. 

These chart patterns always for me are speculative observations in which a concrete strategy should be employed with clearly defined entry, cutoff, and exit points. But given that I am already in this position, with a longer holding period in mind, I'm not really paying attention to that. 

As evidenced by the performance of the SP500 and DJIA over the past year and YTD, it's not been a blowout bull-fest this year like in the past few. But still, performance has been positive. I anticipate will not be too easy for me to find what I believe are true deals on growth stocks or havens that have been beaten down by an over pessimistic market. My positions in these ETFs are a pretty conservative (and easy) way for me to get significant diversification and relatively okay results. Currently up 8.43% on SPY, and 4.75% on XLP. Not amazing, but I wanted to play this first part of 2016 pretty close to the chest.

(click to enlarge)

SKX after the post-earnings pop sunk down a bit, but over the past week and a half recuperated a significant amount of those gains. No relevant technical analysis can be found here. It's relatively stagnant, a horizontal price channel is forming, RSI is near middle-ground, and although there was a recent bullish MACD crossover, I don't think that will amount to much.

Although in their earnings statement they beat their projections for the past recent quarter, they also project slightly lower sales for the next. Mixed sentiment has come as a result but overall their overseas business is expanding and doing well.

Still pretty optimistic about this holding. Current valuation makes the company seem like an old horse with no more strength to run, but I think they still have quite a bit of room and conviction to grow within the US athleticasual market as well as the international shoe and athleticasual apparel market, and get rid of their general stigma of being untrendy.

Managerial effectiveness ratios are sufficient, the financial statements of the company shows a positive trend with on average just under 40% YOY EPS growth rate, and projections are still showing to be growing quickly. For me, that just doesn't show signs of deserving a mere 17.99x P/E, a 12.55x Forward P/E, and a 0.9x PEG ratio (taken from finviz on 6/6/16). My outlook is still mid-to-long-term here, and I really think over time people will see this company as a strong growth prospect. Currently sitting on an 8.1% gain on it. I don't plan on shaving off the position anytime soon.

Overall, I've been really enjoying the past week and a half of summer. It feels good to eat actual food, be lazy, and spend time with friends I normally don't have the time to see. But that's pretty unsustainable. I can't just spend my entire summer doing nothing and being blissfully bored.

I've got quite a bit of plans regarding finance for the coming times and this post for me is the gunshot to begin the race. Luckily, since I have two and a half months to work with, it's a marathon, not a sprint.

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