I Want To Beat The Market

Other way of diversification

2009-03-12T22:21:00.000-07:00

Besides having stocks in different market cap, I also try to have stocks in different country. This way I don't depend all my stocks in a single country's economy. I divide stocks into different continents to help tracking the stock easier.

Here are how my stocks are distributed among the continents:

North America: 58.62%
Asia: 7.74%
Europe: 33.64%

Typically in North America and Europe there are more developed nations so I try to leave most of my eggs there while still have a little bit of my stock in Asia so I also have some of my investment in emerging market.

More on diversified portfolio

2009-03-11T23:28:00.000-07:00

Now that I have at least one stock in every sector, the next thing to check is the market cap. Typically large cap stock doesn't move as drastically as small cap stock so it is a good idea to keep a good mix of stocks in all caps. I also have stocks in micro-cap which is more risky yet would probably yield more return.

Here are the percentage distribution of my holding for different caps.

Large Cap: 26.64%
Mid Cap: 21.8%
Small Cap: 25.96%
Micro Cap: 31.41%

All area covered

2009-03-10T22:27:00.000-07:00

To make my portfolio diversified, I added more stocks so that now I have all the sector covered. Today all my stocks did well because of the huge rally. Below are my choices of the stocks and the sectors.

Basic Material: AK Steel Holding(AKS)
Capital Goods: Trinity Industry(TRN)
Conglomerates: General Electric(GE)
Consumer Cyclical: Ford(F)
Consumer Non-Cyclical: Dr. Pepper Snapple(DPS)
Energy: Petrobras Energia Parcipaciones(PZE)
Financial: US Bancorp(USB)
Healthcare: China Medical Technologies(CMED)
Service: Office Depot(ODP)
Technology: Taser International(TASR)
Transportation: Dryships(DRYS)
Utilities: A-Power Energy Generation System(APWR)

My Portfolio 3-9-2009

2009-03-09T22:48:00.000-07:00

My current investment strategy in this challenging market is diversification. To make sure I get myself covered at all grounds, I try to pick one stock in every sector. And today even though most major indices are down at least 1%, I actually managed to get my portfolio up about 4.87%. Below are my choices of the stocks at the moment.

Basic Material: AKS
Healthcare: CMED
Transportation: DRYS
Consumer Cyclical: F
Capital Goods: TRN
Conglomerates: GE
Service: SIRI
Technology: TASR
Financial: USB

About My Stocks

2008-06-19T22:57:00.000-07:00

Successful investment is all about minizing risk. One way to do it is to focus on a few company and study thoroughly. Other way to do it is to diversify and buy stock in different industry and caps. Or one safer way to do it is to let the professionals pick the stock for you - mutual fund. It is probably hard to picture how diversify I am by just looking at the symbols so let's look at more detail of each stock I have.

ACM: AECOM Technology is an US based architectural and engineering design company involving in projects in highways, airports, bridges, mass transit systems, government and commercial buildings.
ALY: Allis-Chalmers Energy based in US provides rental equipments for oil company.
CHNR: China Natural Resources is a Chinese mining company of zinc, iron, and other minerals.
CPST: US based Capstone Turbine builds microturbines which are used as generators for hybrid electric vehicle.
DAR: US based Darling International collects animal by-products such as hides and converts them into useable oils and proteins for agricultural, leather, and oleo-chemical industries.
DIS: If you don't know what kind of company Walt Disney is, ask your 5 year old kid who seats in front of tv watching Disney channel everyday.
FEED: China based AgFeed Industries makes and sells feeds for poultry, cattle and pigs.
GRO: The Chinese agricultural company Agria offers corn seeds, sheep breeding products, and seedling products.
HNP: Huaneng Power International provides electric utilities in China
JPM: JPMorgan is the top financial conglomerate in United States.
LUV: Southwest Airlines is probably the only US based airline company that's still making money.
NSM: National Semiconductor is one of the top US semiconductor maker.
SDA: Brazil based Sadia sells processed frozen meat products in Brazil.
SHI: China based Sinopec Shanghai Petrochemical processes crude oil into synthetic fibers, resins and plastics, intermediate petrochemical products, and petroleum products
SOLF: Solarfun Power Holdings makes and sells Solar cells.
VIP: Russia based Vimpel-Communications provides wireless telecommunication service.

Investment Mistake #3 - Buy High Sell Low

2008-06-12T22:18:00.000-07:00

I know. It is really a stupid idea. Because in order to make money from stock we need to buy low and sell high instead. Unfortunately to some investors including myself, buying stock at high and selling at low is what we end up doing most of the time. So why are people doing such a stupid thing?

This is how it happened. Let's say you saw a stock going up 20% in one day. So will you buy it or not? Maybe not because you know it's up way too much in one day and will come down the next day.

So day 2 comes and the stock went up another 20%. Tempted? But the logical side of your mind says it is too risky because the stock has gone up too much too quickly.

Day 3 the stock accelerated and went up 50% in one day and then you hear your friend taking about how smart he is making money with the stock. And there is a battle starting in your brain now.

Day 4 you make the decision that if the stock goes up then you are jumping in. The market opens and the stock went up another 10%. You hit the "Buy" trigger and feel a little worried but frustrated too that you missed the golden opportunity. And by the end of the day the stock finished up another 10% and you are so excited about how smart you are picking the stock.

Day 5 and thing begin to turn south on profit taking. Stock down 10%. Not too worry you think because it is just back to where you were and it will sure come back.

Day 6 the drop accelerated and the stock is down 20%. You say to yourself it is down the second day and shouldn't go down any further.

Day 7 another 20% drop. You feel so ashamed and don't want to admit "mistake" you made. So you say "forget it, I'm going for Long position... it should eventually come back".

After one year the day you bought the stock happens to be the all time high of the stock and you have lose so much money on the stock that you finally pull the sell trigger and never look back at the stock again.

So sounds familiar?

Results of Black Friday - June 6

2008-06-08T15:03:00.000-07:00

Things couldn't get any worse than Friday. With bad job report and spiking oil price, major indices dropped 3% on average making the worse drop for the month. Here is how my portfolio did compare to the market:

Dow 3.13%
Nasdaq 2.96%
S&P 500 3.09%
Wilshire 5000 2.9%
My Portfolio 2.26%

Yes I did beat the major indices by almost 1% on Friday. However I was still not happy with the result as it is still a 2% drop.

Symbol(Gain/Loss)
ABB(2.97%)
ACM(1.89%)
AIXG(1.12%)
AIXG(3.85%)
BRCM(4.8%)
CPST(3.46%)
DAR(2.17%)
DIS(4.29%)
END(11.63%)
GTE(0.17%)
HNP(6.55%)
LMNX(5.22%)
NRF(2.69%)
NVDA(3.18%)
SDA(5.21%)
SOLF(2.35%)
XIDE(1.1%)

Fortunately END the oil driller benefit from the spiking oil price and gained 11.63% on the day and offset part of my heavy losses from stocks such as DIS, HNP, LMNX and SDA. A surprise come from battery maker XIDE which actually gained 1.1%.

Stock Switch - June 4

2008-06-04T22:38:00.000-07:00

Sold:

All shares of CHNR were sold at loss due to 9% drop in negative earning.
All shares of CSUN were sold becuase I already have solar shares in SOLF.
All shares of DD were sold to limit my exposure in material.
All shares of FNM were sold at loss on continous weakness in morgage market

Bought:

Add position in COH to include retail industry in my portfolio.
Add position in DIS to include entertainment industry in my portfolio.
Add position in NRF to keep my position in financial industry after I sold FNM. NRF is focusing on Retail REIT market.

Result of June 3

2008-06-03T18:45:00.000-07:00

The market is in deep distress as major indices kept falling. Here is how my portfolio did compare to the market:

Dow 0.81%
Nasdaq 0.44%
S&P 500 0.58%
Wilshire 5000 0.45%
My Portfolio 0.51%

Although I beat both Dow and S&P 500 yet got beaten slightly by Nasdaq and Wilshire 5000. The top performers is newly added oil driller Endeavour International which rose 3.59%.

Symbol(Gain/Loss)
ABB(0.68%)
ACM(0.19%)
AIXG(1.89%)
BRCM(2.07%)
CHNR(1.51%)
CPST(1.79%)
CSUN(2.68%)
DAR(3.1%)
DD(0.85%)
END(3.59%)
FNM(0.93%)
GTE(0.34%)
HNP(2.89%)
LMNX(1.51%)
NVDA(3.39%)
SDA(0.04%)
SOLF(1.49%)
XIDE(1.11%)

Stock Switch - CROX to END

2008-06-02T20:37:00.000-07:00

Because CROX has dropped 10% since I purchased it, I decided to cut the loss and switch to a small oil stock Endeavour International Corporation (END). Detail analysis of the stock can be found here.

Investment Mistake #2 - Using Margin

2008-05-20T19:39:00.001-07:00

I don't know who invented such tempting forbidden fruit called margin but ... it is irresistable. I mean what can be better than earning double return when the stock goes up especially if you don't have much of cash in hand.

So what's margin anyway. Basically how it goes is if you have $1000 in cash and you want to buy a $100 stock. Typically you can buy 10 shares so when the stock goes up $1 you get $10 in profit. With margin you may borrow another $1000 to buy another 10 shares so instead of getting $10 you will receive $20 in profit.

Sounds too good to be true right? The upside for this double edged sword is attrative yet what if the stock goes down? You guess right, you lost twice the money as well. And the problem with margin too was that you couldn't really hold the stock for long term unless you have tons of cash to back it up. This is exactly what happen to all my initial $8,000 investment which went evaporated.

So what happened to me was I leverage all my margin and bought about $16,000 worth of stock during the year 2000 - when the market began its slide. The volatile market cut my equities in half so I am left with $4,000? No. Because I bought stocks on margin, so the swift and huge loss caused what's called a margin call. And to cover the call I'll have to put in more money otherwise my investment is worth $0. Right. Nothing. And at that time I had no more cash to put in so I eneded up losting all my investment - the extra cash I have saved for 2 years.

And did I learn from the mistakes? Not for the next few years when until recently I realized that I'm just losing way too much money on investment.

Result of May 16 - Crazy Day

2008-05-16T23:55:00.000-07:00

It was a crazy day today with Dow falling as much as 100 points and than stormed back to finish the day with just 5 points loss. S&P 500 also came back to the positive territory with a late run. Overall the day wasn't too bad considering another record setting oil price of $128 per barrow. So why do I call it a crazy day? It's my crazy portfolio. Take a look:

Dow 0.05%
Nasdaq 0.19%
S&P 500 0.13%
Wilshire 5000 0.14%
My Portfolio 3.71%

Up 3.71% on a day where two major indices were down? This is why I call it crazy. Looking at the stocks from my portfolio that did well today than you'll see that is was not a surprise why my overall performance was pretty good today. Despite two stocks losing more than 3% today, I have two other stocks, CSUN and SOLF, both solar energy companies, gaining 13.59% and 23.66% respectively. The strategy of putting shares in alternative energy on high oil price plays well. Here are how the rest of the stock did for the day.

Symbol(Gain/Loss)
ABB(0.77%)
ACM(1.04%)
BRCM(4.28%)
C(2.57%)
CHNR(3.39%)
CPST(2.96%)
CSUN(13.59%)
DAR(1.04%)
FNM(1.12%)
GTE(0.56%)
LFT(0.1%)
LMNX(3.18%)
MPEL(3.74%)
NVDA(2.65%)
SDA(4.5%)
SOLF(23.66%)
Overall(3.71%)

Compare to last week I took profit on Vision Science(VSCI) after 40% gain in just week and switched to Solarfun(SOLF). The strategy so far works as VSCI lost almost 17% since I sold it yet SOLF gained 39.44% so far.

Result Of Friday March 9 - Beat The Market

2008-05-10T18:32:00.000-07:00

The market was a disaster on Friday with disappointing earning from AIG. By the end of the day Dow dropped 120 points or 0.94% while S&P 500 lost 0.67% and Nasdaq was 0.23% in the red. The other major index, Wilshire 5000 which represents the actual market, was not far from S&P with 0.57% loss. So to beat the major indices all I need to do was to lose less than 0.23%. Here's how my portfolio did compare to the major indices:

Dow 0.94%
Nasdaq 0.23%
S&P 500 0.67%
Wilshire 5000 0.57%
My Portfolio 0.69%

So I lost 0.69% right? A little worse than S&P 500? No! Actually I was able to pull off a surprising 0.69% gain on the day thanks to 8.37% gain from Darling International(DAR) due to strong first quarter earning. Here are how the rest of the stock did for the day.

Symbol(Gain/Loss)
ABB(0.54%)
ACM(0.54%)
BRCM(0%)
C(2.76%)
CHNR(1.82%)
CPST(0.68%)
CSUN(0.3%)
DAR(8.37%)
FNM(0.65%)
GTE(1.1%)
LFT(1.52%)
MPEL(1.62%)
NVDA(2.64%)
SDA(1.85%)
STO(1.98%)
VSCI(5.74%)
Overall(0.69%)

The biggest surprise comes from graphic chips maker Nvidia which despite posted earnings below the Street's estimate yet still pull a 2.64% gain due to 34% jump in first quarter profit which investors see as a positive sign. The medical diagnosis maker Vision Science continue it's crazy bullish journy with anthor 5.74% gain and push my overall gain now to 43%.

My Current Holdings

2008-05-07T01:26:00.000-07:00

Before I talk about the rest of the investment mistakes I made let me quickly give you my current holdings and how they did so far. I will explain the detail of these picks later.

So here they are, my market beating portfolio:

Symbol(Gain/Loss)
ABB(0.16%)
BRCM(22.57%)
C(10.6%)
CHNR(9.7%)
CPST(-1.34%)
CSUN(2.15%)
DAR(16.55%)
EJ(27.89%)
FNM(5.59%)
HOV(1.63%)
LFT(-1.32%)
MPEL(0.49%)
NVDA(9.1%)
SDA(14.74%)
STO(1.84%)
VSCI(40.44%)
Overall(8.87%)

Investment Mistake #1 - Jump In At The Hype

2008-05-01T07:27:00.000-07:00

Back in 1999 when I started working my impression on stock wasn't positive. I though of it as gambling rather than investment. During that year I saw Nasdaq went from 2,207 all the way to 4,000 by the end of December.

At the same time I saw how my co-workers and friends were making easy money on high flying stocks such as wireless company Qualcomm(QCOM) and business software maker I2 Technology(ITWO). I2 Technology went from $30 in January 1999 and finished the year at $195, an amazing 500% profit in just one year. And Qualcomm at the same time went from $50 to $177 - an OK 254% gain compared to I2. But don't forget during the same time Qualcomm had a 2:1 stock split in May and then another 4:1 stock split in December so actually instead of $177 it should actually be $1416 - a gain of 2,700% in one year!! This is why Qualcomm is one of the most popular stock during the time.

So seeing how people double their money 5 times to 30 times in a year and then seeing my tiny miserable savings sitting in the back and earning like 2% interest, I did what I thought the smartest move at the time - jump in the stock market and catch the ride of easy money.

So my first ever investment goes to a techology leader at the time - a high flying telecom company called Worldcom.

Confession of a Loser

2008-04-26T10:57:00.000-07:00

I made most of the possible mistakes that an investor could make. Unlike most investors whoes investments are bringing in money. My investments become donations with mounting losses and the only benefit I am getting is the capital loss I can deduct from IRS for couple of years. Considering you can only deduct maximum of $3,000 per year, you should see now that I have lost money. Lots of money.

So what did I do wrong? Here are the incredible things I did:

Got into the market in beginning of 2000.
Bought stocks on margin.
Buy high sell low.
Bought Enron.
Day trade.
Bought penny stocks.
Worried too much about daily fluctuation.
Bought same stocks again and again.

So any of these mistakes sound familiar to you? Let's take a look at the detail of these mistakes.