So assuming you started out with a mere $10K in 2004, your account is now $14M?
- removed - (see below)
Hi Chris, thanks for sharing. I follow the same process as you but I trade 40 stocks not 5. It is remarkable that your drawdown is so small given such a small amount of stocks. I look forward to your tutorial.
Also, thanks for Finviz for news, Yahoo and Google just don’t cut it anymore.
Brian
Hi Chris,
It is amazing! And really appreciate your openness to share your experience and know-how!
Really look forward to your next post.
AC
Just to put these jaw-dropping returns in perspective, check out the returns posted on Chris’s website here: http://intelligentvalue.com/results.htm. You can compare those results to those of the world’s greatest investors here: Book presentation: Excess Returns: a comparative study of the methods of the world's greatest investors | PPT.
What I showed earlier in this thread (now removed) was one of the portfolios that has been running on the IntelligentValue website since September 2004. The Blue-Chip Value Portfolio was running in the ‘Pro’ section of the site (for institutional investors and other money managers) beginning in 2004 and then was added to the Individual-Investor section as a replacement for our Deep Value Portfolio in 2011. The DV Portfolio, being created specifically for the incredible opportunities that arose out of the Financial Crisis, after recording a return of 100% per year for 5 years, began to flatten, then slump, and has not held a position since the market became fully valued a few years ago. This was not an unexpected result for a strategy with such a narrow focus. The Blue Chip Value Portfolio offered subscribers with a new set of five stocks that, while not gaining even half of the DV portfolio’s 100% (avg) per year, could provide consistently robust returns year-in, year-out, regardless of the market’s condition.
There are hundreds of long-time subscribers who have been receiving the weekly IntelligentValue portfolio updates, stock recommendations, individual stock analysis, and market-risk analysis since 2004 - and getting the return I showed for the Blue Chip value Portfolio and other portfolios on the site. These subscribers are living proof of the authenticity of the returns, and the fact that the website and company show a history of not a single complaint to the Better Business Bureau in all those years is a testament to the fact that false claims weren’t being made. However, a few months ago, I sold IntelligentValue to a financial publishing company that also offers value-investing content/websites. IntelligentValue has not accepted new subscribers for several months and I am in the process of wrapping up this long chapter of my career devoted to individual stock analysis /selection and heading in a different direction in my career.
I had no reason to start this post other than an effort to generously share some of my best strategies and methods as I prepare to move on. However, I am always disappointed by the flack I get whenever I have posted anything on this forum that shows a good return. Others seem to be threatened, attack it and claim it can’t be authentic. I think a significant amount of that flack comes from relatively new P123 members who don’t understand what is possible with some advanced approaches in quantitative investment systems. This is likely a result of the “Smart Alpha”/“R2G”/“Designer Models” component of the site that nearly eliminated public sharing of proprietary models and ideas because designers could now profit from their work. Being a member since early 2004 (before the member pay-strategy feature), I had the good fortune to see some of this excellent work shared in this community – work that designers now largely keep behind the scenes. That’s understandable, as I hadn’t shared the details of my work prior to now, either.
An annual return of 44% (as I showed for the real-time Blue Chip Value portfolio that has been running on IntelligentValue since 2004), is not especially spectacular. Nevertheless, some see it as me trying to manipulate others fraudulently by showing a “jaw-dropping” result. I ask: To what end? IntelligentValue does not accept subscribers. I cannot earn money from the sharing I was doing.
I planned to contribute to the community the details of some of my best, most robust and consistent strategies and techniques (both the P123 components and technical, chart-review supplements) that I had developed over a 42-year career as an investor in individual equities. My idea was to create a small ‘manual’ that showed each aspect with an explanation of the logic, process, formulas, and details. I figured that each member could take what they wanted and perhaps put their own spin on it and I hoped it would assist the investing success of those individuals in coming years. I can’t think of anything more fulfilling I could do as a way to give back to P123 community that has contributed to my success. You know the saying, “teach a man to fish…”
But because of a few, who apparently are struggling with their own personal demons, I have decided not to proceed with that widely accessible approach. I will consider a way to share with a portion of members who I think have good intentions toward others in this community and aren’t disruptive negative influences. I’ll make a new post when I determine an appropriate way to do this, or perhaps I’ll contact the members directly. Adios - no more posts from me.
Chris
Hi Chris,
So sorry to hear you say that. I too have had some success over the years but I am always looking to better myself and help others at the same time. I started a thread awhile back to try and get the ball rolling https://www.portfolio123.com/mvnforum/viewthread_thread,10703#59646 but as I mentioned in the thread (and you said) with the advent of Smart Alpha"/“R2G”/"Designer Models the sharing component of P123 has definitely slowed down. I would suggest to anyone serious about this game to go back as I did and read all those great posts from the people you mentioned. It will take some time but there is a wealth of information out there.
What I have learned is that there will always be Haters out there. Not everyone has the passion/discipline and psychological make up to be successful in the markets. I know it took me a lot of years and painful lessons to get there. I hope you reconsider as what you were proposing to do is exactly what P123 is missing.
If not, I wish you well and thank you for sharing as mich as you have.
With Gratitude,
Brian
Dear Chris, Dear P123ers,
I would like to point out the “Law of Attraction” here (Netflix has a great video on that stuff):
My experience since 1996 was the following: Bear with me a bit, since I tell a story to make my point:
I was discretionary from 1996 - 2000 and I make 800k in 4 Years, it got to my head and was devastated by the bear market.
I decided to be a systematic trader and built a decent momentum strategy and on the way I got a PHD with it.
BUT: I could not use the strategy (something like 20% per year performance and a 20% Max DD) and the only reason for
it was: I COULD NOT believe it.
It took me until 2011 - 2013 and even a bit in 2015 to stick to a system.
Now I am 100% sure, that my system works which has produced 53% per year since 1999 (realtime test from 2013 on)
and I am able to use it.
One more story: Warren Buffet made this performance early in his carrier (50-100% a year) and in an interview he said
he could produce such performance with a portfolio below 1 Mill in AUM. Warren Buffet built his empire on small cap
value stocks (in the beginning)!!!
It is absolutely possible to make 30%-50% a year with a small portfolio!!!
Now the law of attraction comes into the game:
Road I:
- Be Thankful on what you have (it changes your whole attitude to everything)
- Make to yourself 100% clear on what you want to reach, find your bliss (in my case: making a billion until I am 80 years old (Another 32 Years!), nothing else is what I want to reach, not
because of the money, but I am only thrilled by monster high aims, and if you are not thrilled, you have not found your bliss) - Visualize it, meditate it for every day for 30 Minutes (this is hard work!), if you do not like what you see, go back to Step 2. (and the power will be with you)
- Do as if you have already reached it, as if it is already here (1. and 4. makes you feel as if you where on prozac, just a 1000 times more powerful)
The chances, that you reach your goals are 1000000 Times higher, if you take that road I instead of road II.
You might objectively not reach your goal, but it puts you in your A-Game, into a state where you perform the best an that
is the goal, everything else takes care of itself. You reach your full potential and then it does not matter, if you
reach your goal 100% or only 10%!
Now, I lay out what the naysayers you describe (that attack you):
Road II (unfortunately most people are on that road!)
- They are unfulfilled also because they are not thankful _(if you got a roof above your head and have enough to eat and
are somewhat healthy, you got a reason to be very, very, very thankful) - This toxicates them, they concentrate on the dark side and spin into a negative spiral
- The blame others and tell others that it is not possible to be successful because of a trillion reasons, They attack others who give them opportunities, they
are put of by very high aims
Just do not listen to the naysayers, concentrate on Road I not Road II, they can not be helped until they are thankful on what they have.
(For example be thankful, that you have P123, if you can not make it here, you can make it nowhere! And this
is not because of P123 but your are on road II not on road I).
To sum it up:
10% is the system (took me from 1996 - 2013 to build one I like, I would have loved to have found you in 2005 Chris!!!)
90% is being in the right state of mind to be able to use the system (will take me until I die!) To be in the right
state of mind, you need a second “system” or “mind-Shaping-framework” (the law of attraction is the one I use and I got a coach (basically a shrink) who
helps me with it).
Best Regards
Andreas
To me a good system is like fine art. Having a few lucky wins doesn‘t give me any thrills anymore. Anyone can be lucky for some time. But if you are able to build and stick to a winning system it says a few things about your character, your emotional control and your intelligence.
Someone who won the lottery or who for example made a few hundred % return with Crypto‘s in a few months might believe that he’s now an investment genius. And it might very well be the case. But for me I don‘t understand crypto‘s and I can‘t evaluate their value. Which is why I have never really considered any investment into crypto currencies.
For me an approach like the systems Chris, Andreas and many others have been presented here is by far more beautiful and interesting than any short term gain out of pure luck.
P123 to me is an art, it‘s like playing chess vs gambling on the slot machines in Vegas.
That sounds like a lot!
For perspective, with compounding, that is 46% annualized which is a lot.
Yuval says he makes more than 40% per year with his personal portfolio. I believe Yuval on this. The challenge for anyone would be to keep this up for over a decade. My guess is that Yuval will be one who meets this challenge: he is smart and puts a lot of work (even passion) into what he does.
Chris shows a port over a long period of time. Being able to see the out-of-sample returns for this long of a time-period for a personal port is rare. But as good as P123 is (and the way statistics works) the only surprise would be if there weren’t someone who could show a port that has a truly remarkable result. Given the skill level of the people at P123 (all types of skills) it would be a statistical anomaly if some ports like this did not exist.
Given human nature, it would be unusual if someone did not want to publish the results of one of these remarkable ports every once in a while.
I don’t want to appear naive on this. I’m not saying I am going to sign up for the next online stock newsletter. I’m not even going to sign up for a Designer Model today without expecting significant regression toward the mean.
But I’m not sure what the fuss is about.
-Jim
Since I began using P123’s ranking systems on 11/1/15 my total return is 130%, or 46% annualized. There is no way in hell I’ll be able to keep this up. There has been a huge tailwind in my favor: the Russell Microcap index is up 35% (16% annualized), which helps immensely. And as my AUM gets bigger, it’ll be much harder to invest in only a handful of low-liquidity stocks, as I’ve been doing for the past two years.
This confuses me, Andreas. Your real-time returns since 2013 have been 53% per year? Your simulated returns since 1999 have been 53% per year? My simulated returns since 1999 with an 18-stock portfolio is about 90% per year, but that proves absolutely nothing about my real-time returns, which will never come close to my simulated returns.
I agree 100%. A number of highly successful investors have done this. I love your optimism, and I love your philosophy. If there’s anyone in this forum who has the power to do this, it’s probably you. But from the little I know about investing, making 30% to 50% per year for over ten years puts you in a kind of pantheon. If you do manage to do this, prepare to be famous.
Andreas,
thanks for your post. Gratitude/Goal Setting/Visualization and Meditation have also helped me. (Lots of science behind this also)
Anyone willing to spend the time can also benefit from this.
Good returns are possible. I have done it for 33 years. I don’t post my returns because that only brings out the skeptics and I have no need or desire to defend myself against the negative. You can believe that those of us who have managed some success are just anomalies or you can get to work on bettering yourself. The choice is yours.
What I have wrestled with incorporating is the qualitative type analysis that Chris does. Clearly, it makes sense - checking the news, making sure the chart isn’t collapsing - however, I don’t know how I would judge the effect of my own input over the system itself. I’ve read that computers beat humans (in chess, for instance), but computers plus humans beat computers alone. But the reason I turned to factor investing years ago is that I’m a terrible qualitative analyst, possessing the supreme ability to talk myself out of any investment. I figure that when evaluating a system backtest, the system didn’t know what the news was or (barring technical rules) what the chart looked like, so these shouldn’t matter in the future. Not sure though, and if I thought I could add value with more discretion, I probably would.
Take it from Jim Simons. Founder of Renaissance Technologies – the most successful hedge fund ever.
“At the end of a 10-year run, it was clear to me that this gut wrenching business of fundamental trading . . . you know, if you are doing fundamental trading one morning you come in and you feel like a genius. Your positions are all your way. “God I’m really smart. Look at all the money I made overnight.” Then the next day you come in and they’ve gone against you, and you feel like an idiot. We were pretty good at it, but it just didn’t seem to be a way to live your life.
So by 1988, I decided it was going to be 100% models. And it has been ever since. Some investing firms say “Oh we have models” but what they typically mean is that we have a model which advises the trader what to do. If he likes the advice, he’ll take it, and if he doesn’t like the advice he won’t take it. [b]Well that’s not science. You can’t simulate how you were feeling when you got out of bed 13 years ago when looking at historical simulations. Did you like what the model said or didn’t you like what the model said? It’s a hard thing to backtest.
So if you are going to trade using models, you just slavishly use the models. You do whatever the hell it says no matter how smart or dumb you think it is at that moment. And that turned out to be a wonderful decision.[/b] So we built a business 100% based on using computer models, starting with currencies and financial instruments, gradually moving into stocks and finally into anything liquid that moved.”
See this video starting about 29:50:
Jim Simons is brilliant!
Parker,
You make a very strong point. Jim Simons has done remarkably well. For most people this is the way to go- why, because for most people, left to their own devices, they will do the wrong thing in emotional situations. This is not , however, the only way to be successful. There are those with enough experience that can add alpha. I am talking about discretion within a framework. Warren Buffett comes to mind…
I’m going to post one more time to try to clarify something that I think is getting twisted about my approach. Perhaps I wasn’t clear: I DON’T DO manual, fundamental analysis of stocks in the process of populating my investment portfolios. As I started off this thread saying, fundamental analysis, forecasts, and estimates are “Empty Noise.”
The discretionary, fundamental forecasts generated by highly paid stock analysts are worthless to me and should be to most investors. They are created as SALES TOOLS for a company’s brokers and other sales agents to stimulate new transactions and associated commissions. As evidence, I suggested that a person could view the analyst recommendations on a site like FinViz and then compare those to the actual results a stock attains in the following months to see the consistent lack of anything resembling accuracy. I believe this about forecasts based on fundamentals – and I earned a living as an analyst for many years, so I should know.
I also believe in “slavishly using the models,” as Jim Simons says — EXCEPT that I have chosen, for my particular approach, to purchase only the very best, highest ranked selections in my models. If I was willing to run 20, 50, or 100-stock portfolios, I would just allow the models to select every trade and wouldn’t pay attention to how any particular company performed in my portfolio. But if I did that, it would result in mediocre returns, at best. (And from what I’ve seen, that’s what the people who have been critical of me are doing - big portfolios - for ‘diversification’ to avoid getting killed when some stocks crash and burn).
However, in my investment approach, I have chosen to use just the top 5 stocks, which for my S&P 500-based portfolio is only the top 1% of the universe. When you are working with that small of a group, you CAN achieve MUCH higher returns than portfolios with many more stocks. But ‘can’ doesn’t mean you will. Here’s the key: you have to make sure that you don’t have any stocks in your 5-stock portfolios that turn out to be big losers. I don’t even want to see minor losers! Therefore, I do two quick reviews (discussed previously), that I have found will DRAMATICALLY improve my chances of adding a winner – and if a stock does go down, it won’t be by much.
The only POST-P123 reviews that I recommend are to 1) scan the news for items that could potentially cause a stock to crash at some point in the future. When in doubt, err on the side of caution and move on to the next P123 pick. At this time, P123 cannot scan the news for negative items and these are usually the things that cause individual stocks (particularly small companies) to come crashing down by -20% or -40% in a half-day before you realize what happened.
I also 2) do a quick review of the chart of each stock. I plug each ticker into a template I use that identifies whether a stock is overbought or oversold and whether it is likely to gain or decline the following day, week and month. If the determination is that a decline is even possible, I move on to the next p123 selection, so there’s not much discretion involved. This review process is done in about 3 seconds per stock. This step results in a maximization of % winners, dramatically reducing portfolio drawdowns to about 1/4 that of the market, and thereby significantly increasing returns.
These two review steps, which take a total of about 10-seconds (max) per stock, as well as using three sets of P123 factors and formulas (for various market environments) that have stood the test of time, are the source of my very low drawdowns and relatively high, consistently stable return for the Blue Chip Value portfolio I discussed previously. If stocks don’t meet the three criteria of 1) qualifying in the highest 1% or 2% of the universe based on P123’s fundamental criteria, 2) has no even mildly concerning news items, and 3) has a price chart that offers promise without worry – then my portfolios stay in cash.
I find this is one HUGE difference between me and most other investors. I am willing to sit out the market when it doesn’t present me with opportunities that I have found fit into my system. Other people can’t stand to be out of the market - without any consideration of what’s really going on in the market that might be causing a dearth of viable stock opportunities. Discipline is critical.
Oh, and one other thing that maximizes returns in my system: I stick with large-cap or upper-mid-cap stock, generally more than $500 million or $1 billion in market cap. Many think they can only get great returns with small-cap stocks, but I find they are too unpredictable and volatile from the standpoint of all three of my criteria: fundamentals, news flow, and price charts. I can get near-50% returns each and every year (even in 2008-2009) from an S&P 500 universe by picking the top 1% of stocks that also meet my post-P123 criteria mentioned above.
Ok, that’s REALLY the last post for me. I just didn’t want my words getting twisted around to where I was being portrayed at a discretionary fundamental investor (uuughh!). Let me assure you, if P123 had a parameter that screened for negative news and I could enter my particular technical scan, then I wouldn’t have needed to even do those two quick post-P123 scans. QUANT all the way.
Chris
To return to the main topic of this thread, I just read Jeremy Grantham’s market forecast, which came out on Wednesday, here: https://www.gmo.com/docs/default-source/research-and-commentary/strategies/asset-allocation/viewpoints---bracing-yourself-for-a-possible-near-term-melt-up.pdf . . . While I agree that market forecasts are usually empty noise, this one strikes me as different. I’m quite convinced. And even if I weren’t, it was a great read from a great thinker about world markets.