As per the original article published here and last month's update that you can read here,
The Plan
- $25,000 starting equity; split into 5 "streams" of approximately $5,000 each.
- Will use mostly leveraged ETFs, midcaps, and a few well-known large caps.
- Goal is to take 10% to 15% per trade and let the money "compound" by repeating the same process with another stock.
As of the time of writing, Apple (AAPL) closed at $605.88 (up 47.33% YTD) and the SPY closed at $135.49 (up 7.28% YTD) against the backdrop of the Greek, Italian and Spanish gong show. Our portfolio is now worth $38,847 (up 55.39% YTD) with a cash balance of $2,191.
Not a bad return for 5 months given that we've had almost 2 months worth of inactivity? Well, it really depends on perspective. You see, this Moneyball "experiment" was born out of my desire to diversify my trading activities outside of one stock - Apple ...
I'm stepping out of my "comfort zone" by buying/shorting more than three stocks that I may not know anything about in detail! My simple mind may be too lazy to follow the plan!
From that perspective, I've got mixed feelings as a big chunk of the return and position sizing was still skewed towards one stock. I was caught in a quandary when the trade opportunity came up...do I pass on it for the sake of a real live experiment or do I take it and enhance returns?
"If one does not know which port one is sailing; no wind is favorable" - Seneca
I guess my internal compass is primarily geared towards maximizing trading opportunities. I've spent most of my investment life going against the grain of "diversifying your investments to reduce risk". I've always believed to "plan your trade; trade your plan" with no more than 5 stocks and if necessary to "go all in". Yup, I know, I've been told it is like playing Russian Roulette as the "Risk of Ruin" can quickly become a reality. How will this journey end? I don't know really know as I know that I'm only as good as the last trade.
An initial position in Lululemon (LULU) was opened this week. I intend to scale into it if it crosses $62; mental stop set at $56. I have no expectation of Lululemon hitting its recent April high of $81.09; this is purely a scalp trade. Admittedly, I don't know a whole lot about Lululemon as I know Apple. I do know that their Yoga pants aren't cheap and they look real good when they are adorned with the right assets! I also know that generally speaking, women tend to have more than one Lululemon item (it seems to show up very often on my credit card bills!) in their closet.
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A decision also has to be made on whether or not I will hold the Apple Leaps over earnings. Traditionally, I don't hold positions over earnings.
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If you've stumbled across this series for the first time, I'd encourage you to read the original article. Any of the stocks in the portfolio can be sold at any given point in time. I am not a registered Financial Advisor nor my views constitute a "strong buy or sell" on the securities that have been mentioned.
Some common questions I've been asked:
1. Why don't you post the trades as you make them?
- My original intention wasn't really to provide a real time alert or service; there are other subscription services out there that charges more than $1K/mo. I looked at this endeavor more as a "diary" of me trying to change my trading "habits" to see if trading other stocks that I didn't know well enough could be better than trading one stock that I knew well.
2. Do you have a subscription service where I can get live trade alerts or ask you about my own stocks?
- I'm humbled by the numerous requests; however, I'm not sure how I can balance my current freedom and that of being constantly responsible for "paying" clients.
3. What am I supposed to do with my Research in Motion (RIMM) shares now; why haven't you written a follow up piece?
- I get this question a lot since I wrote my last article here. I haven't really changed my opinion on RIMM. Between now and before BB10 is released (unless a takeover or buy out occurs), it will mostly be a scalp trade. The adoption of BB10 (or the lack of) will provide the next tipping point for the stock.
4. Do you stick with your screening criteria religiously? If not, how do you get your ideas for a possible trade?
- No. For example, in my recent article that you can read here, I believe Newton's third law of trading (or was it "motion") stated that "to every action...there is an equal or opposite reaction". So given the announcement from Apples' WDC, Microsofts' (MSFT) and Googles' (GOOG) show and tell, one can surmise that RIMM's and Nokia's (NOK) prospects may not be as bright and hence may provide a trade opportunity. As I didn't post my trade, I won't take credit for it but you will see a post I made on June 19th about Celestica (CLS.TO) winding down is BB production when RIMM was at $10.70; an OTM put trade there returned at least 40% after earnings was released.
5. Given what is happening in Europe, aren't you concerned having a long bias?
- "Bulls make money, Bears make money and Pigs get slaughtered". While it is definitely easier to make money in secular Bull markets; trading opportunities will always be available. The biggest challenge will always be in keeping greed and biases in check.
Good trading to you and thank you for dropping by. Enjoy the summer weather!
Additional disclosure: may sell any or all at any time
