Netflix (NFLX), Chipotle Mexican Grill (CMG), and Bidu.com (BIDU) have been most volatile through the entire last year. I made frequent trading (33 profit/loss takings), pretty big gains (6.6%) for 14 days, paying a $2.65 two-way commission on average, and still holding them.
A 6.6% gain for 14 days was enormous. It was a 168% gain annualized. The win average was 97% (32 out of 33). There was no homerun, but many solid singles. The question is how to fairly evaluate this performance. This question leads the following principle.
The SAM Principle
Investment results depend upon three things: science (“S” 40%), art (“A” 30%), and market trends (“M” 20%). The principle of S (science), A (art), and M (market) makes the “SAM” principle. The 10% residual is luck.
The science part includes (a) rigorous stock selections with market data, (b) careful reading of chart formations, or (c) any own system, which is a simple reliable discipline, rules, guide, or strategies. All decisions made by different institutions and individuals with different methods are interacting in the marketplace every moment.
The art part is working in the area where human beings are curing the weakness of a machine (algorism, logic, pattern, number clinching, etc), by adding a sound judgment. The art contributes both ways – positively or negatively. The 30% success is based on our decision making.
The market part is important. During market upswings, our performances overstate, and during downswings, they understate. For fair evaluation, investment results should be discounted by the market performance. Last year the S&P 500 went up 12.8%, with a couple of big corrections. After discounting the market trend (13%), the performance of three stocks (BIDU CMG NFLX) last year was an incredible return (155%).
BIDU seems to recently settle at around the $100 range, which is $1,000 as the prior-split (10 to 1 on 5/12/2010) basis It hit a bottom at $40.67 on 1/29/10 and topped at $115.04 on 11/11/10.
CMG is showing a strong recovery from a three week (Dec 27, 2010 to Jan 12, 2011) minor correction. It seems to anchor around $230, showing a strong signal for further advance. Its bottom was $93.81 on 2/5/2010 and its top was $262.77 on 11/30/2010
NFLX has moved upward strongly (almost vertically) all year until heating a top ($209.24) on 12/1/2010. It had enjoyed a great momentum after Blockbuster’s fall. News of Comcast, Time Warner, and Coinstar, and all related firms have continuously generated lots of recommendations, tips, charts, reports, rumors, noises, emotion, hunches, cries, excitement, and even curses. NFLX was the king of tigers last year. It is now flying with a harsh head wind. We simply do not know its journey this year. This week (Jan. 10 - 14) NFLX seems to be ready for its next determined movement, shrugging off stubborn bear attacks for several weeks.
What are the main features of these three big winners last year? One is their triple-digits prices, Dominant market players (hedge funds, mutual funds, and sovereign wealth funds) tend to prefer high priced stocks which stir the market much less. The second is dividends do not be considered: Investors concern mainly a huge growth potential.
The third is that all three stocks were well growing in a recession environment or in the early stage of upswings. Watching movies, internet connections, and eating out at less expensive restaurants are favorable activities in a stressful time. This year we are still in the “weak” recovery process, forecasting 3% or 4% economic growth. The expected earnings of these three are still bright.
The Forth is that these stocks are the leaders in their segments in the long run: BIDU (internet services in China), CMG (food services), and NFLX (innovative movie distribution).
As of today (1/14/2011), the prices of BIDU, CMG, and NFLX appreciated 130.3%, 139.5%, and 275.8% for one year, respectively. Therefore, the rates may slow down this year. I classify these three as Group A
Six stocks have been selected as the candidates of this year winners, and I classified as Group B and Group C as follow.
Group B : Amazon.com (AMZN), Life Technologies (LIFE), and NVR, Inc (NVR). The three companies cover consumer spending, healthcare, and the housing industry. The angle is to focus on the domestic market (AMZN) and the special situations (LIFE and NVR). The prices of AMZN, LIFE, and NVR increased 48.5%, 9.6%, and 11.6% , respectively. All companies do not pay dividends.
Group C : CME Group (CME), Freeport-McMoran Copper and Gold (FCX), and International Business Machines (IBM). The three companies are more globalized and paying dividends. The price of CME decreased 6.6%. The prices FCX and IBM rose 40.4% and 13.8%, respectively.
Groups A, B & C altogether have four technology stocks (BIDU NFLX AMZN IBM), one financial stock (CME), one commodity stock (FCX), one healthcare stock (LIFE), one home builder stock (NVR), and one restaurant stock (CMG). All nine companies are the distinguished leaders in their market segments.
Since I have a strict rule to commit up to 5% of capital for these three Groups, I have to focus only 3 stocks, by selecting one from each Group during this year. The following table shows the summary of three Groups.
1/15/2010 | 1/14/2011 | One Year | 52W H | 52W L | ||||
SYMBOL | GROUP | PRICE | PRICE | change % | PRICE | DATE | PRICE | DATE |
BIDU | A | $46.77 | $107.73 | 130.3% | $115.04 | 11/11/2010 | $40.67 | 1/29/2010 |
CMG | A | $98.06 | $234.89 | 139.5% | $262.77 | 11/30/2010 | $93.81 | 2/5/2010 |
NFLX | A | $50.95 | $191.48 | 275.8% | $209.24 | 12/1/2010 | $48.52 | 1/25/2010 |
AMZN | B | $127.14 | $188.75 | 48.5% | $185.65 | 12/21/2010 | $105.80 | 7/23/2010 |
LIFE | B | $50.40 | $55.25 | 9.6% | $57.25 | 1/4/2011 | $54.23 | 7/29/2010 |
NVR | B | $715.00 | $797.98 | 11.6% | $769.50 | 4/22/2010 | $595.00 | 9/1/2010 |
CME | C | $337.24 | $316.96 | -6.0% | $353.03 | 1/11/2010 | $234.50 | 8/24/2010 |
FCX | C | $84.30 | $118.35 | 40.4% | $120.78 | 12/30/2010 | $56.71 | 7/1/2010 |
IBM | C | $131.78 | $150.00 | 13.8% | $147.53 | 11/9/2010 | $116.00 | 5/6/2010 |
Who are leading and lagging in term of the watch lists on Stock Talks? The TANER watch list started on 12/13/2010. I counted how many times these nine stocks showed on the lists daily and weekly. When we observe the TANER watch list (votes or cards) sequentially, we can get an idea which stocks are gaining and losing a momentum. Everyday new TANER watch lists are added, and the momentum rank of nine stocks is changing continuously. We can monitor the potential champions, by paying attention on TANER watch lists.
As of 1/18/2011, the leaders are NVR (28), IBM (26), and CMG (23). IBM has been building a steady momentum and currently accelerating. CMG are following very closely IBM, also speeding up. NVR, however, is loosing its steam a little bit after a strong upward movement. The laggards are LIFE (4) and NFLX (9). The following table shows the scores of nine stocks.
Scores from Daily TANER Watch Lists (Stock Talks)
DATE | BIDU | CMG | NFLX | AMZN | LIFE | NVR | CME | FCX | IBM |
12/13/2010 | 1 | 2 | |||||||
12/14/2010 | 1 | 1 | 2 | 1 | |||||
12/15/2010 | 1 | 2 | 2 | ||||||
12/16/2010 | 1 | 1 | 1 | 1 | 1 | ||||
12/17/2010 | 1 | 1 | |||||||
12/20/2010 | 1 | 1 | 1 | ||||||
12/21/2010 | 1 | 2 | 2 | 1 | |||||
12/22/2010 | 1 | 1 | 1 | 1 | |||||
12/23/2010 | 1 | 1 | 1 | 2 | |||||
12/27/2010 | 1 | 1 | 1 | 1 | 2 | 1 | |||
12/28/2010 | 1 | 1 | 2 | 2 | 2 | 1 | |||
12/29/2010 | 1 | 1 | 2 | 2 | 1 | ||||
12/30/2010 | 1 | 1 | 1 | 1 | 2 | 1 | |||
12/31/2010 | 1 | 1 | 1 | 1 | |||||
1/3/2011 | 1 | 1 | 2 | 2 | 1 | 2 | |||
1/4/2011 | 1 | 1 | |||||||
1/5/2011 | 1 | 1 | 2 | 1 | |||||
1/6/2011 | 1 | 2 | 1 | 2 | |||||
1/7/2011 | 1 | 1 | 2 | 1 | 2 | ||||
1/10/2011 | 1 | 2 | 1 | ||||||
1/11/2011 | 1 | 1 | 1 | 2 | 1 | ||||
1/12/2011 | 1 | 1 | 1 | 1 | |||||
1/13/2011 | 1 | 1 | 1 | 2 | |||||
1/14/2011 | 1 | 1 | 1 | 1 | |||||
1/18/2011 | 1 | 1 | 1 | 2 | |||||
TOTAL(D) | 12 | 14 | 4 | 16 | 2 | 27 | 18 | 13 | 23 |
| |
Scores from Weekly TANER Watch Lists (Stock Talks)
DATE | BIDU | CMG | NFLX | AMZN | LIFE | NVR | CME | FCX | IBM |
12/13/2010 | 1 | 1 | 1 | ||||||
12/20/2010 | 1 | 2 | 1 | 1 | |||||
12/27/2010 | 1 | 2 | 1 | 1 | 1 | ||||
1/3/2011 | 1 | 2 | 1 | 1 | |||||
1/10/201 | 2 | 1 | 1 | ||||||
1/18/2011 | 1 | 2 | 2 | 1 | 2 | ||||
TOTAL(w) | 4 | 9 | 5 | 4 | 2 | 1 | 0 | 3 | 3 |
TOTAL | |||||||||
(A+B) | 16 | 23 | 9 | 20 | 4 | 28 | 18 | 16 | 26 |