We often get asked how we have done so well in spite of the market's slide and tremendous volatility in the past few months. We believe that much of our success has been due to our methodology, which combines a rigorous assessent of a firm's discounted cash flow and a relative valuation process with an in-depth technical and momentum evaluation. In our opinion, this allows us to identify the most attractive stocks at the most opportune time to buy, avoiding value traps while maximizing gains to the upside by letting our winners run. The results of our Best Ideas portfolio have been nothing short of fantastic, and we're now outpacing the S&P 500 by nearly 2,000 basis points.
Here are a few public winners that we show below to demonstrate our track record.
Apple (AAPL): We continue to be big fans of Apple, and our process identified what we'd consider to be a near-term bottom several weeks ago. We published this article on Seeking Alpha on June 17, a trading session or two before it took off to new highs. We continue to hold Apple in our portfolio and believe it to be significantly undervalued.
EDAC Tech (EDAC): Thanks to our methodology, this has probably been out best call in the past few months. Since June 6, EDAC Tech has more than doubled to nearly $9 per share today. We continue to hold EDAC in our portfolio of best ideas, and think a fair value for the shares is $10.
Our process also identifies short candidates, which we may pursue in our Best Ideas portfolio via put options. We showcase two examples of how our process may work for you.
Netflix (NFLX): As mentioned above, the core of our process begins with a rigorous DCF assessment. As of July 26, we thought the firm was absurdly overvalued at over $260 per share. The stock has since fallen over $50 from that time, or about 25%. We continue to think Netflix's shares remain overvalued, and are looking to establish a put position in our portfolio.
AMR Corp (AMR): We've never been fans of airlines, but our DCF process for the parent of American Airlines revealed to us that the shares were practically worthless. As of May 19 AMR was trading at almost $7 per share, and it is about half of that today. We subsequently notified our subscribers that we closed our put position in the name, but we may look to re-establish one if the shares move inexplicably higher.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Apple and EDAC Tech are included in our Best Ideas portfolio.