Seeking Alpha

Abdalla Al-ayrot's  Instablog

Abdalla Al-ayrot
Send Message
Abdalla Al-ayrot is a value investor with a long time horizon. I tend to focus on misunderstood and/or under-followed companies where i believe there are a great amount of value that the market is yet to price in. Some people prefer to buy $1 for 50-60 cents, i usually buy $1 for 20-35 cents. I... More
My company:
Ayrot
View Abdalla Al-ayrot's Instablogs on:
  • Performance Review

    In the past 6.5 months I have frequently written articles for Seeking Alpha with some of my investment ideas.

    The key benefits of contributing to Seeking Alpha are (in my opinion) the transparency and the quality of discussion. In order to continue the transparency I'm going to review the performance of the investment ideas I have published on Seeking Alpha in H1 2013 to H2 2014. I have excluded investment ideas that I have contributed in the last month, due to the fact that they might not have played out yet. Remember I have a minimum 3-year time horizon when I invest.

    In order to measure the performance of the investment ideas in as an objective way as possible I have decided to measure the performance of each investment idea in the following way:

    1. I have assumed that one were to buy or sell a stock at the closing price of the day that the article was published. In cases where an article has been published during a day where the market has been closed, I have used the closing price of the next trading day.
    2. I have used the so-called "best price" for determining the performance. The "best price" is the highest price of the stock in question in the following period of time in case of a buy recommendation. In case of a "sell" recommendation I have used the lowest price that the stock has traded after the investment idea has been published.
    3. In the one case where I have recommended buying a stock and the stock didn't rise higher than the price I recommended buying the stock at. I have used the "best price" after the stock has bottomed.

    The following is the table that sums the performance of the investment ideas that I have published on Seeking Alpha.

    As the table above shows 13 of my 14 investment ideas have been profitable to date. It furthermore shows that the average return of my investment ideas published on Seeking Alpha has been 21.74% and the median return has been 21.5%. Keep in mind that has been in a 5-month period.

    Jun 09 5:41 AM | Link | Comment!
  • How To Earn +500% In 7 Months

    I have previously introduced the Ayrot Cannabis Retail Interest Index (for short the "ACRI Index"). The indicator was introduced in another article on Seeking Alpha.

    In the article I had focus on how you can use the indicator to avoid market crashes in cannabis stocks. Ergo I had a risk management angle in the entire article. Therefore I tested how efficient the ACRI Index was at predicting cannabis share prices on a week-by-week basis. Fortunately it turned out to be extremely efficient at predicting the development in cannabis share prices on a weekly basis.

    How You Could Have Earned +500% in 7 Months

    Investors can take advantage of this by trading based on the signals from the ACRI Index.

    I have back tested the performance of the ACRI Index's signals from November 30, 2013 to May 31, 2014. The back test has the following rules:

    1. As the indicator is published before the market opens on every Monday, the back test assumes that the investor buys or sells at the closing price every Monday. This is considered highly realistic.
    2. If the indicator shows a buy signal, the investor gets long exposure to cannabis stocks.
    3. If the indicator shows a sell signal, the investor gets short exposure to cannabis stocks.
    4. Every position is only maintained from Monday's close to Friday's close.

    The following chart shows the development in a $10,000 investment in the last 7 months, if one had followed the signals from ACRI:

    (click to enlarge)

    A $10,000 investment would have turned into $67,134 by following the signals of the indicator. A 571% return in 7 months. I know what you think. Two things:

    First, the calculation is not taking brokerage commissions into account. As there are 19 components in the Ayrot Cannabis Index (an index which measures cannabis stock prices), one would have to trade 19 stocks two times nearly every week. The commission adds up.

    So, the following chart assumes a $1 commission on every trade. That adds up to $19 x 2 = $38 in commissions every week. The following chart shows the result.

    (click to enlarge)

    A $10,000 investment would have turned into $64,642(with commission). That's a 546% return in 7 months.

    That answered the first objection. The second objection is the fact that the ACRI Index was first revealed to the public in April 2014. So, it would make sense to see the performance of the indicator based upon the data from April to May.

    Fair enough. So, I have back tested the performance of the indicator since it was first revealed to the public on April 16, 2014. I have taken brokerage commissions into account. The following is the result:

    (click to enlarge)

    A $10,000 investment would have been turned into $15,496in about 1,5 months. That's a return of 54.96% in 1.5 months.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 09 5:37 AM | Link | Comment!
  • How To Avoid Losing Money

    Warren Buffet has two rules when he invests.

    1. Never lose money
    2. Never forget rule number 1

    There's a reason for that. The long-term consequence of a significant loss is huge for a portfolio. As a significant loss reduces the value of the money that can be compounded.

    Let me give you an example. Lets assume that Tony and John both are invested in the stock market and that both of them can compound their money at an annual rate of 7% for 30 years. Lets furthermore assume that both of them start with a portfolio value of $1,000,000.

    The following chart shows the development in their portfolios value (Notice you can only see one of the lines, as their portfolios' values changes at the exact same rate).

    As the chart shows both of their portfolios have increased more than 7-fold in the 30 years to $7,114,257 under the previously given assumptions.

    But, lets tweak the assumptions a bit. Lets assume that Tony heard about this new great penny stock that had developed a revolutionary product that would change the whole biotech industry. After having heard about it on the Internet he invested 20% of his portfolio in the stock of the company in Year 5.

    Unfortunately for Tony it turns out that this penny stock never really made it. So Tony lost the 20% of his portfolio he had invested in the company. Tony also made some other speculative investments, which made his portfolio go down by 50% in Year 5.

    The following chart shows compares the difference between Tony's portfolio 50% loss in Year 5 with John's portfolio, which experienced no losses.

    As the chart above shows the difference between the two portfolios is 3,557,129. Remember that both portfolios started with $1,000,000

    The fate of Tony's portfolio (the 50% loser) has been the fate of many investors who was caught up in the 2008 S&P 500 (NYSEARCA:SPY) crash.

    (click to enlarge)

    Ok, So how Can I Avoid Loosing Money?

    Risk Management is the answer. In the digital that we live in now, investors can apply a range of effective risk management tools and indicators that can help investors to predict the worst market crashes. There are currently a wide range of such tools available based on the sector that one invests in. It would be too extensive to list all of them in this article.

    But, feel free to message me on Seeking Alpha or e-mail me at contact@ayrot.com if you want to know about a risk management tool hat works for a specific sector.

    It's actually surprising how few investors that are utilizing such tools in their investment analyses and risks management efforts. This is likely to be the difference between the top performing portfolios and the rest.

    In addition to such tools it's always important to thoroughly examine the companies that one invests by making thorough due diligence of the fundamentals.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    May 25 1:46 AM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.