Who Would Be the Better Investor? Wade Boggs or Steve Balboni?

Feb. 18, 2011 7:53 PM ETMCD, OUTR, VLO, C, AAPL, AMZN, NFLX
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Based in Los Angeles, Rocco Pendola is Seeking Alpha's Director of Tier 1 contributors. 

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Over the course of his 18-year career, Wade Boggs only hit 118 home runs in 9,180 at bats, according to MLB.com. Boggs struck out just 745 times, however, recording over 3,000 hits and knocking in a formidable 1,014 runs. Boggs hit an amazing .328 over his career in the Majors and got on base more than 40 percent of the time. Not to pick on the lovable Yankee, but Steve Balboni notched one-third the number of at-bats Boggs did, yet managed to strike out 856 times, generate just 714 hits, and produce a .229 lifetime batting average. While Balboni hit more homers than Boggs -- 181 -- he drove in far fewer runs -- 495. The comparison between the two sluggers proves instructive to those of us who wish to make trading and investing our career. 

I am in the process of moving away from a career as a freelance writer to trade stocks and options full-time. It's something I have always wanted, but finally find myself in the position to do. At this early stage, I am focused on building capital so I can properly execute the strategies and signals I have worked hard to design. I struggle against the temptation to get there faster by seeking Balboni-style home runs instead of workman-like Boggs' singles up the middle. 

This week I swore off penny stocks. On message boards and through investor friends, I come across them all of the time. Some of them hold promise. Many will actually pop and result in a profitable trade. Others turn into legiitimate long-term holds. Most do nothing. A whole bunch end up losers. I presently hold two penny stocks. I believe in the long-term prospects of both, but they really have no place in my trading account as I build a bankroll and hone my gameplan. These pennies may provide the pop I am looking for, but they are behind schedule. They might just put out some PR in the coming days that gets me out with a decent profit. In either case, they sit in my account for a longer duration than I wish to dedicate to a single trade. I tie up capital in these long shots that could be put to better use elsewhere.

For instance, this past week, I opened several other positions and closed three profitable trades. I opened options positions in MCD, CSTR, VLO, and C. I closed out 1 AAPL March $360 call for a $191 profit. I closed out 2 AMZN March $190 calls for a $330 profit and I sold to close 5 NFLX March $215 puts for a gain of $175. I ended the week up $696. I could make a living doing that every week going forward. I have my sights set higher, but, at the end of the day, +$696 ranks better than many other alternatives, particularly at this stage of my development.

I have over $2,600 locked up in the two aforementioned and nameless penny stocks, as I wait for them to do what I want them to do. As if I can will them to rocket to my overly-enthusiastic price target. Not bloody likely. That money could be better spent elsewhere. 

I could have opened stronger or different positions in MCD, CSTR, VLO, or C. Better yet, I could have purchased 2 AAPL calls as opposed to 1, 4 AMZN calls instead of 2, and 7 NFLX puts rather 5. Simply by putting an addition $2600 or so into these three plays, I would have produced additional gains on the trades of around $650, give or take a few bucks after commission. Roughly, I would have nearly doubled my profit on the week to about $1,346. The difference between earning $1,346 and $696 in a week as a trader is the difference between making $64,608 and $33,408 a year, before taxes. 

Don't try to hit home runs. They'll come. Be as disciplined and patient of a trader as Wade Boggs was a hitter. One day, you'll expect the fastball, you'll get the fastball, and you'll knock it out of the park. Often, a play runs past your target and you let it run. You win big. More often, though, sticking to a strategy, which might require discouraging stops and leaving money on the table, offers a better chance that you can maintain trader as your sole occupation for the long-term. 

Disclosure: I am long AAPL, CSTR, C, MCD, VLO.

Additional disclosure: **Please do not publish the following: I have had a couple articles rejected. I have some idea why. And I do not take issues with the rejections. That said -- I hope to become a somewhat consistent author on SA. I see no reason why this cannot happen. I notice people with similar or less experience/fewer credentials than me publishing consistently. I see similar topics, written at a similar level published as well. Even if you accept this one, I would love some specific feedback on the past articles and on what I can do to become consistently published at SA, given my background and current situation as a trader. Thanks so much for the time.

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