Investing General Discussion

Rangoth · May 30, 2024

Sanrith Descartes I've always appreciate the advice and information you and others put out there, it has helped me grow as a trader! You helped remind me to always look back on a trade(especially bad ones) and try to figure what I did wrong, stupid play from the start, took too much risk, didn't exit at the right time(and how could I have caught it, etc).

My goal as mentioned with PATH was a moderately short term trade of a stock that seemed trapped in a band, but with solid resistance lines. PATH, or so I thought, had that. It is not a super solid name so I didn't really expect much out of it and I think my biggest mistake here was holding into earnings when the previous 3 earnings both saw very large spikes. Ohh well, live and learn I guess.

Previous 3 earnings, both with large spikes:

5 Year Chart, resistance was 17.41, it did drop to the 10/12 range once before but slowly made it's way out:

Here is an example of another play I made, YPF, similar goals, 5%(or more if lucky) in less than a month or so. I may get called on this tomorrow, but I am perfectly ok with that, it served it's purpose.

Araysar · May 30, 2024

Gravel said:
This is just market timing though. You're saying to rotate in and out of sectors as if you have some magic ball that tells you what future returns will be, or if the sector is about to start lagging.

This is literally the opposite of timing the market. You watch for large macro events that produce industry-wide returns for years and move into those sectors after already confirming performance.

If working in 1-5 year time frames is "timing the market" then the concept is meaningless. It's not like this stuff flashes in a pan for a week then disappears for 3 years.

Here's a scenario for you. Its 3-6 months into the COVID epidemic, hospitality/travel stocks are hosed, e-com stocks are rapidly soaring. You unload your UAL stock and buy some AMZN. Are you using a magic ball here to time the market?

Gravel · May 30, 2024

You're using covid as an example which is an incredibly rare one off event (at least, hopefully).

When do you rotate into or out of tech? Pretty much anyone could make a very convincing argument that tech is incredibly overpriced right now. When does your magic 8 ball tell you it has run its course? What's the next sector(s)?

The bulk of returns come from something like 5 trading days a year. If you miss those, you miss the entire run. That's why investing in the total market and betting on the entire US economy is a winning play, versus trying to guess what runs next.

Araysar · May 30, 2024

Rangoth said:
I think my biggest mistake here was holding into earnings

As someone who got burned on this enough times, I've learned to never hold a position into an earnings call no matter how confident you feel about it. Its about as reliable as going all-in on black at the roulette table. Even on this recent NVDA call where I was 100% certain that it would crush earnings, and predicted it here, I would still sell off before the call and buy back in later. You just never know what the market decides to get retarded about. No amount of charting, or looking back, can predict the outcome of an ER. It just can't. Its an extremely uncertain event with tremendous volatility that constantly breaks SMAs instead of reinforcing them.

If you really want to play earnings, go long or short right after the call depending on which way the market takes the price. You wont get ALL the gains but you'll get some of the gains and that's still better than ending up on wrong side of the trade that's getting wronger with every minute.

Alternately you can play options on earnings calls.

Khane · May 30, 2024

Hindsight sure is convenient as an example of "duh, this is how you win" isn't it?

Sanrith Descartes · May 30, 2024

Rangoth said:
Sanrith Descartes I've always appreciate the advice and information you and others put out there, it has helped me grow as a trader! You helped remind me to always look back on a trade(especially bad ones) and try to figure what I did wrong, stupid play from the start, took too much risk, didn't exit at the right time(and how could I have caught it, etc).

My goal as mentioned with PATH was a moderately short term trade of a stock that seemed trapped in a band, but with solid resistance lines. PATH, or so I thought, had that. It is not a super solid name so I didn't really expect much out of it and I think my biggest mistake here was holding into earnings when the previous 3 earnings both saw very large spikes. Ohh well, live and learn I guess.

Previous 3 earnings, both with large spikes:
View attachment 530799

5 Year Chart, resistance was 17.41, it did drop to the 10/12 range once before but slowly made it's way out:
View attachment 530798

Here is an example of another play I made, YPF, similar goals, 5%(or more if lucky) in less than a month or so. I may get called on this tomorrow, but I am perfectly ok with that, it served it's purpose.
View attachment 530797

My only take (since i know nothing about the company) is that you did the research and had a plan. That's really about what we can do so props on that. Since the dump happened after the close with what I am sure was low liquidity there was little to be done once it waterfalled. Maybe once you started thinking about taking profits setting a trailing stop, but even with that the after hours waterfall probably wrecks you anyways.

Jysin · May 30, 2024

Araysar said:
...COVID shit lasted for like 3 years, so would you stay in airline and cruise ship stocks for that whole time...

We had someone here trying that yolo on cruise lines and warned the guy repeatedly, with technicals and fundamentals. He ate shit with >50% losses. Hell, NCLH still hasn't come close to his ~$28 CB to this day. (Currently $16.35). The CEO can talk about bookings all day long, but they took on mountains of debt during Covid years. Hell, AAL's news yesterday has them currently trading near 2020 Covid low levels!

Meanwhile, you could have put that money virtually anywhere else and made a killing. Airlines & Cruiselines were not the smart play.

Araysar · May 30, 2024

Gravel said:
You're using covid as an example which is an incredibly rare one off event (at least, hopefully).

When do you rotate into or out of tech? Pretty much anyone could make a very convincing argument that tech is incredibly overpriced right now.

I break Tech into smaller segments and rotate out of them as needed. You got application software companies (SalesForce, Intuit, Oracle), you got consumer electronics (AAPL, DELL, HP, Western Digital), you got communications, e-com, etc.

Its a mistake to group it all as "tech" and then treat Oracle the same way you would Nvidia. I see the AI boom as being transformative to the next 10-20 years of US economy, and semiconductors are the big drivers of that grwoth right now to build GPU farms to train LLMs. That's the hardware side which is the bottleneck. The software (MSFT, GOOGL) side is doing well too but its less bottlenecked. Their bottleneck is largely one of talent. This has been very obvious for well over a year, plenty of time to rotate into what works and rotate out of what doesn't.

Gravel said:
When does your magic 8 ball tell you it has run its course? What's the next sector(s)?

That's the point, I dont need to predict the next sector. On 1-5 year time frames there is plenty of time for it to show itself and for you to rotate into it accordingly.

Gravel said:
The bulk of returns come from something like 5 trading days a year. If you miss those, you miss the entire run. That's why investing in the total market and betting on the entire US economy is a winning play, versus trying to guess what runs next.

LOL. Why wouldnt you just invest into that sector instead of "investing into the total market"? The total market is EVERYONE and its mostly LOSERS. Real estate companies that are eating shit right now, healthcare and retail that are barely staying above break even returns. Why would you want them? Their prospects aren't going to change next week, next month and not even this year until there is a rate reduction at least for retail and real estate.

You can just take your capital and spread it out amongst the top 3-4 companies in a well performing sector so you dont miss your 5 trading days of bulk returns. Think of it as an ETF that holds mostly winners, instead of SPY where a handful of winners are pulling along hundreds of losers.

Tmac · May 30, 2024

Araysar said:
Even as a long term investor (not day trader) I dont believe in "capturing the whole market". I think that while individual stocks can be volatile and maaaybe you should diversify there if you're NOT an active capital manager... industry performance and the shift from bad/good or vice versa is measured in years, more than enough time to course correct from industrials, to travel/hospitality, to AI/big tech, to robotics, or whatever the new flavor is every 1-5 years.

There will be market sectors that will perform poorly for years compared to others and you should rotate out of those for those years into sectors that perform well. Right now its semiconductors and related AI companies, 5 years ago it was cannabis stocks, 3 years ago it was Blockchain craze, etc.

These are extreme examples but I just want to illustrate my point. COVID shit lasted for like 3 years, so would you stay in airline and cruise ship stocks for that whole time, or would you rotate out to ecommerce companies like Amazon and Overstock whose share price grew 1000% because everyone was locked up at home?

For the record, I am not advocating chasing extreme fads like Blockchain, Cannabis and by extension "meme stocks". You can examine traditional sectors by performance and see what works well there and take a position in those sectors. Here's YTD so far. Is taking positions in Real Estate companies in 2024 a good idea given what we know about the macro factors with home sales being down, interest rates at 25 year high, people not wanting to move or refinance? Probably a bad sector to be in. Do you really want to "capture the market" with all these losers in it?

View attachment 530786

If a person wouldn't hold positions in domestic sectors that are in the dumps, why would that person hold positions in "emerging markets", "international markets" and my favorite would be..... treasury bonds from roughly 2001 to 2020?

Im interested in doing more of this, I just have zero idea of how to see which industries are cycling. I’ve asked here a few times but have never gotten an answer I can apply.

Moglyzoke Moogleman · May 30, 2024

Tmac said:
Im interested in doing more of this, I just have zero idea of how to see which industries are cycling. I’ve asked here a few times but have never gotten an answer I can apply.

One way is to make a bunch watchlists and cycle through them often. That's how I discovered the AI hype last year. When everything on the list is green you know that sector is hot that day.

Khane · May 30, 2024

If someone asked me why invest in SPY I'd just say because it's up 90% in the last 5 years and it makes me immune to emotional stupidity. I can be lazy, complacent, or even just ignore it altogether and still make great returns with proven success over a long time horizon.

Blazin · May 30, 2024

Tmac said:
Im interested in doing more of this, I just have zero idea of how to see which industries are cycling. I’ve asked here a few times but have never gotten an answer I can apply.

Not endorsing one way or the other but not predicting anything would likely be the better way to handle that strategy. If price is above the 200d and the 200d is sloping up buy, opposite sell. What these strategies usually do is give good returns while limiting drawdown. While they might underperform total return it's going to reduce beta. You can invest in strong sectors as long as they remain strong, dont invest in weak sectors as long as they remain weak. You aren't making any judgement about the future.

Araysar · May 30, 2024

Link below is YTD performance of all companies in S&P 500

YTD Return of Companies in the S&P 500

www.slickcharts.com

Keep in mind, we are in a very bullish market right now.

Yet, 40% of S&P500 has NEGATIVE YTD Returns (202 out of 500 companies)
Another 180 companies have a return below the historical average of 13%

So right there, almost 80% of S&P 500 is underperforming or just straight up losing money

Out of top 50 companies (10% of the companies in the list), the poorest performer has 24% and the biggest performer is SMCI with 195%

These top 100 companies out of 500 companies are carrying the other 400 companies to that 13% average historical return.

Why would you want to 'capture the market"? 80% of it is garbage.

Tmac to your earlier question about how you identify winning industries. You can take this list of top 500 and see if there are more than a couple that belong to same industry. Its probably better to do it with a larger index (Like Wilshire 5000) to better see trends. There is probably lists like that already out there that also have the industry mapped to each ticker

I looked at top 50 (thats how far I could go by taking one screenshot) and found 6 out of 50 (12% of the list) belonging to same industry, including #1 and #3 company. Its semiconductors. That is a very specific sector that is doing very well across the entire sector.

You can also see energy companies in #2, 4,5 and 6 spots. I dont know much about them but they could all be energy producers, in that case it could be an signal to look into the energy industry as an investment opportunity. I would segment that industry out more to see if this is primarily producers, or servicers or both. I would also look to see what type of energy they focus on: is it fossil or alternative? Maybe theyre all wind energy producers and there is some green energy fad at play, etc. and you dont want to get caught on the wrong side of that

Tuco · May 30, 2024

Khane said:
If someone asked me why invest in SPY I'd just say because it's up 90% in the last 5 years and it makes me immune to emotional stupidity. I can be lazy, complacent, or even just ignore it altogether and still make great returns with proven success over a long time horizon.

I'm on team SPY (or similar index funds) for basically the same reason. Being mostly insulated from the year to year movement in the stock market is just a clean lifestyle choice. I never argue that it's the correct choice from an investment perspective and it's arguable that even if someone didn't outperform the market they might enjoy employing some investment strategy as much as I enjoy ignorantly dumping money into the market and shrugging at any investment news.

Araysar · May 30, 2024

Tuco said:
I'm on team SPY (or similar index funds) for basically the same reason. Being mostly insulated from the year to year movement in the stock market is just a clean lifestyle choice. I never argue that it's the correct choice from an investment perspective and it's arguable that even if someone didn't outperform the market they might enjoy employing some investment strategy as much as I enjoy ignorantly dumping money into the market and shrugging at any investment news.

Its amazing how some of you will min/max everything in a MMORPG but you won't do the same for the money in your RL retirement account

Heres the difference between just getting whatever you get from SPY vs. taking some minimal interest in what your money is actually doing and applying it to well performing sectors

SPY YTD Return

vs.

My 401K YTD return. Over 5x higher.

Btw, I rarely day trade in this account, but I do swing trade it in a few times a month. Mostly I look for laggards in well performing sectors, scoop them up at a discount and then ride them back up for a couple percent over several days to 2 weeks.

fris · May 30, 2024

Why isn't there an ETF that just has the winners?!?!?!!!! Just cut that buttom 80%, step 3 profit

Sanrith Descartes · May 30, 2024

fris said:
Why isn't there an ETF that just has the winners?!?!?!!!! Just cut that buttom 80%, step 3 profit

There is. It tracks all of Nancy Pelosi's trades. :trollface:

Araysar · May 30, 2024

fris said:
Why isn't there an ETF that just has the winners?!?!?!!!! Just cut that buttom 80%, step 3 profit

You gotta make your own Winner ETF but if you want a widely available Loser ETF, I think Cathie Wood-Cramer is running a very popular one.

Tuco · May 30, 2024

Araysar said:
Link below is YTD performance of all companies in S&P 500

I don't disagree with any of your analysis, but claiming that approach would trivially produce reliable results for a novice investor would be disingenuous. The prices set by the market are done so largely by professional investors using the same and better information you have. Sure, it feels like whatever the current price for Walgreens and Carnival is currently, it just can't be low enough and they're going to continue to go down no matter what. But it's an inherently competitive field and you're betting against people that know more than you. Coming up with a system whether it's some basic technical analysis like "Just buy big stocks that performed well last year" or basic fundamentals like "Just buy the industries that will do well this year" is a primitive version of what professionals use.

I'm glad that you experienced great results last year and I'm not claiming you won't succeed again. But if it was so easy to beat SPY by 5x with this one strategy, why isn't everyone else using that strategy?

Again, I'm not saying my ignorant strategy is superior or will provide better returns, I'm just arguing it's non-trivial to beat the market.

Araysar said:
Its amazing how some of you will min/max everything in a MMORPG but you won't do the same for the money in your RL retirement account

There's a lot of different areas I don't min-max. And yeah, investing is one I could maybe benefit from. Maybe in the future I'll get into it!

Araysar · May 30, 2024

Tuco said:
I'm just arguing it's non-trivial to beat the market.

I just fundamentally disagree with that from experience. Anyone who is willing to put in some time to learn can beat the average market return easily. Its 13% a year. You're being asked to produce just a tad more than a 1% return per month to beat the average. Its not a lot.

Anyone with 100-200 hours of basic investment/market/macros education can beat that and you already probably spent that much if not more in your life on this topic, you just didnt have direction or didnt know what to focus on. You're not being asked to become a day trader, to learn charts, technicals, candle patterns, etc.

All you're being asked to do is to take an ETF that you put money into blindly on a regular basis and then ask yourself: how much of this ETF is under performing and overperforming, and why am I paying an expense ratio for someone to load me up with losers on top of my winners aka "investing into the total market". Just take the winners from ETF, invest into them separately. What, you think you'll do worse than Cathie Wood or the professional hedge fund manager that loaded up that ETF with losers to begin with? This exercise alone can be done in just a couple of hours and produce meaningful improvements in your gains

Take the top 5% of performing companies and distribute your money amongst them and make your own quasi-ETF.

I get it, it sounds terrifying. I used to just do the SPY thing myself. But once you start taking it apart you realize how easy it is and what a ripoff ETFs are.

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