What I'm buying today - A cherry picking, market timing thread

Manage
39

I’m still keeping my far dated long PUT. It keeps making money as market went down. At the same time, I’m use the put protection to start building up stocks to keep my portfolio to curve up it market goes up. Eventually, it’s pretty much market neutral. I will add short position if market rally tomorrow.

I also follow p123 long/short stock ports. I feel it’s still not time to risk on since the market outside the US is start melting down. There are so many new cases in Asia (23 new cases in TW in one day.) everywhere since many people fly from EU and US to Asia now.

Terry

40

If this goes viral (no pun intended) we may have the 2nd piece of good news setting up for a monster rally

Up 200 likes/retweets in about 10 min … 5K retweets, 10.7K likes at 9:36pm central time

https://twitter.com/JamesTodaroMD/status/1240274548165169157

BREAKING RESEARCH FROM CLINICAL TRIAL on HCQ + azithromycin in treatment of COVID-19.
100% of patients with COVID-19 were virologically cured after 6 DAYS of treatment.
p-value <0.0001

41

Marco, Thanks for sharing. Will see how the story developing.

42

I did a bit of reading on BMRA since I bought on a whim based on a headline with a quick market order yesterday. They have developed a 10 min test for CV-19 . But so have others : https://www.biomedomics.com/products/infectious-disease/covid-19-rt/

I placed a sell order before market open @16.5 . I got filled at $20. wow. quick 100% return. Thanks IB routing algo?

Tis market is crazy

43

The market is crazy.

In addition to the media, the options market is another good source for ideas.

Saw APRN there on 2020/03/16 with a large increase in call volume screen. INST appeared a couple of times this week on a call screener, but the options are thinly traded. Just watching that one for fun.

BTW, I use Fidelity’s options screener which is powered by Livevol, Inc.

Walter

44

Horrible , horrible numbers from Italy .

The Chinese doctors that flew in to Italy are recommending more strict lock downs. I don’t think western cultures can handle that.

Locking in some gains. Probably full on hedge if there’s a rally in last 30 min.

45

The absolute numbers from Italy look bad but the confirmed case growth rate is down to 15% - by my calculation. It was 20% to 25% last week. The effects of the current lock-down will probably take another week or two to see.

46

It’s probably best to become a regular reader of Seeking Alpha.

47

Already did that. Nothing need be done in sequence . . . the walk down the street and chew gum at the same time sort of thing.

Yes, of course there will be rent losses . . . didn’t I say that? So what. The market knows this and is in the process of pricing the negative in . . . which is why they’ve been getting hammered so badly. By the time things get better, it’ll be way too late to invest.

The market looks ahead. That’s why it’s always been a challenge to do p123 style or any style quant work and way there is so much angst about in-sample and out of sample. We have to se historical data to look ahead, not backward, and that’s an art. Now, though, always is out the window. When we’re living through extremes, quant work really has to get shoved way way way way to the back of the plane, preferably locked in one of the rest rooms. That’s why I’ve been saying that now is not the time to be building models. It’sa time to be watching and learning and preparing for the ongoing regime change. Spend time out of the sims and ranks and more time in the panels, in 10-Ks, in conference call transcripts, etc. And use the screener very loosely (without backtesting) just to hunt for ideas; my suggestion was/is to search for stocks outperforming in this mess (maybe in a Rank> xxx with a ranking system you like) and then run down the ideas one at a time.

Don’t be afraid to buy something based on an investment case similar to the one Marco used as an intro to this thread. No quant stuff; just business judgment based on an idea that came to his attention. Use screening to pull potentially interesting things to your attention.

BTW, I’m dong other things too. A biotech ETF, more into new tech ETFs, and given that my view of the world suggests more inflation than we’ve known in a genration, moderate dabbling in GLD and an ag-commodities eTF. Actually, new tech is part of the inflation picture. If we don’t inflate heavily, it will likely be due to productivity gains and that’s tied to new tech. Toss in a few data center REITs, and that’s the salad I’ve been whipping up thjis week.

48

I would bet money that the average investor will do much worse than indexes by becoming a discretionary trader in a time of absolute market stress.

They will buy on spikes and sell on dips… and double up winning positions while trimming losing ones.

It’s too hard for most people — don’t know when to sell…lose conviction when positions lose… and research is fairly mixed if anyone can do it well over long periods, and if so it’s likely very, very small numbers of people who invest 10,000 plus hours at it… band still have long periods of underperformance.

For anyone confident they can navigate this market better than passive asset allocators, why not create a discretionary portfolio challenge for p123 users — Starting now — with all of them kept public and shared — tracking trades in real time — and we’ll all watch and learn as we see the gains (and losses) roll in?

My bet is mechanical systems and passive asset allocators will still basically win this time around… except for a small number of outliers with few positions who may or not be able to replicate success.

If u want a factor tilt — small or quality or value… or price persistence — probably better off building a system for it, Or buying an etf, rather than being a reactionary trader.

Remember John Paulson got housing bubble right and had most profitable trade in history… but he was then wrong for a long time and lost a ton of investors money. His biggest positions were in gold and gold miners waiting for inflation after the last 2008-2009 Injection of money into the system.

I have been part of conference calls with him and his team many times, and he’s very smart.

Maybe this time it will happen… maybe not.

49

From WP article about Italy. This will be very difficult.

“The restrictions came upon us slowly but steadily. Within two weeks, our old lives were gone. First the schools closed, then came social distancing. Then the government locked down the hardest-hit areas: no more going in and out of certain provinces; limited movements within the “red zones.” Then the whole country shut down. Most stores closed their doors. People who could were asked to telework; those who could not, and did not have a job related to the continuation of essential services, were placed on part-time schedules or unpaid leave. When we went out, we had to carry a pass explaining our reasons for being outside to show to the law enforcement officers patrolling the streets. The priority became keeping everyone inside, at all times.”

Walter

50

A pretty good podcast with two older traders talking about emotional investing vs. systems in times of market stress…

https://lindzanity.libsyn.com/lindzanity-panic-with-friends-1-with-jim-oshaughnessy

Putting it into perspective somewhat. Just first 30 min or so…

51

If you have a long investment horizon ahead of you, this is a really good learning opportunity to take stock of your REAL appetite risk and stomach for drawdowns going forward. It’s easy when it’s hypothetical when things are good, but now it’s actually being stress tested with real world dollars. No shame in crying mercy and bailing out, everyone’s tolerance is different, but it has to be soberly accounted going forward when you evaluating your future asset allocations. I’m taking note, because I’m probably going to experience a few more “once in a lifetime” events in my investment lifetime. I’ve already been through 3 “once in a lifetime events”.

52

I don’t know what you’re trying to say. Anybody who subscribes to p123 is, by definition, not the average investor.

Oh pleeease! There’s more to life and investing than running a footrace against the S&P 500. At times like this, risk management is far more important than return. Speaking for myself, I kicked the living sh** out of the S&P 500 because I came into this with a very strong cash-fixed income allocation. Of course that means that prior to this, the S&P 500 was kicking the sh** out of me.

So how do we identify winners and losers? Anybody can claim victory and anybody can be a loser simply by defining start and end dates that give the answer one wants.

Mechanical? No such thing. Humans are always responsible for the systems they design, and as we’ll see going forward, for the protocols that use to develop them. And anyone who thinks it’s a good idea to passively stick with what’s been tried and tested from 1999-2020 . . . Good luck with that!

This is not about being quant, being system oriented, etc. There are good quants and bad quants. There are good statisticians and bad statisticians. There are good mathematicians and bad mathematicians. There are good system developers and bad system developers.

This thread is about “What I’m buying today - A cherry picking, market timing thread”

Instead of trying sh** all over it, can I suggest you launch another thread addressed to the topic of systems and, perhaps discuss the differences between good systems investors and bad systems investors, and leave those of us who are interested in the topic of the thread to continue on without spitballs being tossed from the outside.

53

Antm — anthem is very interesting right now. Strong value, not clear revenue growth or sales will be hit much — May even grow… and can likely pass on any cost increases to consumers with rate increases.

Medifast is also interesting buy right now.

Green dot (gdot) is also interesting… insiders still own 8% of company and buying more, strong financial position. Strong sales growth in past… good space. Lots of cash, good margins.

rMr group also interesting… strong financials… stable with good dividend. Property managment strides with good margins and lots of cash on hand.

Probably like anthem the best at first look.

But need to have a pretty long term horizon still… not technically selected, based on fundamentals.

I still think it’s best to start putting any new cash to work around 4/1 and put it to work in equal monthly installments over coming 4-6 months… will take a while for market to absorb all this as new data emerges…

Several good articles here on market impacts of pandemics in history:
https://investoramnesia.com/2020/03/01/pandemics-markets/

Can click on headlines and read articles.

The challenge with timing discretionary trades on single positions or maker as a whole is having clear entry and exit points. A trading journal over time can help there. If new, and first downturn very hard to do… even if experienced, pretty hard to do well. Have to write down thesis and when and why initiating position and when and why you’ll exit it… and then really reflect on position sizing… and stick to it.

Good news is that historically these pandemic shocks haven’t always had huge long term economic Impacts… but seem to spike % of people living in poverty… in addition to deaths…bad news is they have very significant financial market impacts generally…larger than seen so far historically.

54

Cognizant technology ctsh also looks interesting now… as do — if you want a real bet — jet blue. You’d have to be willing to hold jet blue a long time and they have to not go bankrupt… but interesting value.

But CTSH is very interesting now… for watch list. Strong company that will last… and find opps in this market to sell more. But will lily get cheaper… maybe start to buy at 20% below current price.

From what I found today, on first pass may like antm and ctsh best… issue is price targets for them… and when to buy. But I like the short list I posted today.

Still also like Humana potentially also. Question becomes entry target prices and times.

55

Tom,

Healthcare and Tech . . . hard to argue with those areas of focus.

Maybe. But things might work out more quickly than you expect. The market has shown it can melt up just as quickly as it can melt down . . . you sit for a month, two, three or so with dead money and then, voila, the stock has blown through you 3- to 5-year targets in 3- to 5-weeks, I’ve seen that plenty of time, and if anything, the tendency has increased as the trading blocks get biggert and bigger and the algorithms get faster and faster.

Yep, harder than ever. Kinda reminds me of a story my late mother told me about how she was driving someplace many years ago and her mother, who had nver driven a car in her life, was sitting in the front passenger seat. My mother had to drive through a very very narrow crooked pathway through a big construction site. After they came out of it, my grandmother, still getting over her fright, asked “How do manage to drive through something like that?” Mt mother’s answer: “Easy. I just close my eyes.”

That’s how you have to approach major crashes. Getting analytical about entry and exit points is all well and good, but sometimes, you just have to close your eyes . . . like today, when a friend who works in JBLU headquarters asked me, tongue in cheek, to buy JBLU today because she needed to sell and needed to get the price up (as if little old me could do that). Just for shits and giggles, I checked the stock: Yowza, what a pummeling (we all know what the next couple of Qtrs are going to look like, probably something that will cause gastroenterologists appreciate the aesthetic qualities of what they see when they gaze into colonoscopy scopes. But I don’t see that airline going away. Checked LUV and DAL too. Decided to close my eyes and nibble. (Actually, I closed my eyes re: entry points. I did, of course, make a quick dash to the p123 panels to check balance sheets, interest coverage, cash, capital needs and general survivability, including, potentially, government help. Not into screens, sims, ranking systems now – I’m all about the panels and especially the balance sheets and cash flow statements. Income statements and estimates? Z-z-z-z-z My estimates across the board compute to “suck like they’ve never sucked before and then some.” ) Badly crashed stocks with survivability! That’s my thing now.

56

It’s time to leave. I have hit my stop loss

57

Speaking only for myself that sh** never gets old. I laugh every time.

In addition to not liking bad math, bad fundamental analysis and bad system developers,……

I am against a lack of flexibility.

I think I agree with Marc when I say: Why would you follow a system when the market regime has changed completely? Because that is what you programmed the machine to tell you to do somewhere in the past—with old information?

You made an immutable, non-negotiable pack with your past self to follow the instructions of a computer for life? I think you didn’t.

I do get that there are some good all-weather systems and I do not want to be inflexible myself. If you have a good all-weather system you should stick with it.

Or maybe you might slightly modify an already great system based on new information—its okay. You can do it if you want.

What does that R mean in the Designer Models? You would not be alone.

People have closed Designer Models that did not perform or if they changed their mind. A lot of people. Maybe they read a new book or the port just did not work. Clearly not verboten. They usually do not explain to you why they closed the port and you do not have to explain anything to them.

I think I am strongly agreeing with Marc but I am ready to go to time out if I misunderstand or do not say it perfectly.

Best,

Jim

58

Marc,

I generally agree Airlines aren’t going anywhere as an industry – and the well capitalized ones will still be here. My 2 would be Jet Blue and Southwest as well.

And consulting / tech / finance / healthcare consulting. They will, if anything, find ways to sell more stuff.

And healthcare. Barring Bernie Sanders winning with an all democratic congress and a huge popular mandate – unlikely we will not have private insurers still.

Time horizon… no one knows – it could be 2 weeks to 2 months to market rally or 2-5 years – we’re all just guessing on that.

But I attached CTSH and Anthem healthcare. They are solid companies / stocks in very good financial position to weather all this. And they both have real business opps to find ways to grow revenues or at least stay flat.

But ultimately – need to do things ‘big enough’ to move the needle. I’m also nibbling – but that’s not really gonna change my investment fortunes / life all that much.

Need enough conviction to do something ‘big’. I’m not there beyond ‘nibbling’ yet.

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