Here's this week's random stock list with closing prices as of Friday 2/22/08. More about the experiment here.
1. VEOLIA ENVIRONN ADS (VE) $88.28
2. Tanzanian Royalty Exploration Corp. (TRE) $6.0499
3. Hitachi Ltd. (HIT) $72.40
4. PharmAthene, Inc. (PIP) $3.20
5. AEGON N.V. (AEF) $24.87
6. Lacrosse Footwear Inc. (BOOT) $16.90
7. Wet Seal Inc. (WTSLA) $2.87
8. Ralcorp Holdings Inc. (RAH) $56.04
9. Ford Motor Co. (F) $6.25
10. Boston Beer Co. Inc. (SAM) $36.12
Showing posts with label random stock picking experiment. Show all posts
Showing posts with label random stock picking experiment. Show all posts
2/16/08
Random Stock List 2/15/08
Here's this week's random stock list with closing prices as of Friday 2/15/08. More about the experiment here.
- Tyler Technologies, Inc. (TYL) $13.79
- Whole Foods Market, Inc. (WFMI) $39.12
- Dover Corp. (DOV) $42.04
- Nucor Corp. (NUE) $62.01
- Total System Services, Inc. (TSS) $22.11
- Merrill Lynch & Co., Inc. (MER) $51.64
- BioScrip Inc. (BIOS) $6.67
- FormFactor Inc. (FORM) $19.32
- XTO Energy, Inc. (XTO) $55.29
- Nordson Corp. (NDSN) $48.48
2/9/08
This Week's Random Stock List
Here's this week's random stock list with closing prices as of Friday 2/8/08. More about the experiment here.
1. Modine Manufacturing Co. (MOD) $13.68
2. Auxilium Pharmaceuticals, Inc. (AUXL) $33.33
3. The Pantry, Inc. (PTRY) $27.42
4. PetSmart, Inc. (PETM) $23.73
5. Coca-Cola Enterprises, Inc. (CCE) $23.28
6. Mid-America Apartment Communities, Inc. REIT (MAA) $46.44
7. Omega Protein Corp. (OME) $7.71
8. Omniture, Inc. (OMTR) $25.98
9. Cooper Tire & Rubber Co. (CTB) $17.25
10. Cumulus Media Inc. (CMLS) $6.07
1. Modine Manufacturing Co. (MOD) $13.68
2. Auxilium Pharmaceuticals, Inc. (AUXL) $33.33
3. The Pantry, Inc. (PTRY) $27.42
4. PetSmart, Inc. (PETM) $23.73
5. Coca-Cola Enterprises, Inc. (CCE) $23.28
6. Mid-America Apartment Communities, Inc. REIT (MAA) $46.44
7. Omega Protein Corp. (OME) $7.71
8. Omniture, Inc. (OMTR) $25.98
9. Cooper Tire & Rubber Co. (CTB) $17.25
10. Cumulus Media Inc. (CMLS) $6.07
2/2/08
This Week's Random Stock List and a Response to Comment
Here's this week's random stock list with closing prices as of Friday 2/1/08. More about the experiment here.
No matter what I do, Curiousjoe suggests, since my picks are random, their performance will mirror some market index, whether small cap, large cap, etc.
This makes for an uninteresting experiment, because whatever index the picks mirror, the performance will have to do with business cycles. Let's say the picks mirror a small cap index. The random stocks will do well in periods when small caps do well, and poorly when small caps do poorly, etc.
I agree with the above, but not entirely.
First, it's perfectly fine if the random stocks mirror an index. Indeed, they should. My hypothesis, originally stated, was "Over time stocks as a group tend to go up. You pick enough stocks, and your performance shouldn't be bad." I could have been more clear. This includes stock index performance. In fact, that's what it is.
Second, the experiment isn't about evaluating a random stock picking strategy. That is, I'm not saying "picking stocks randomly will beat the market" or anything of the sort. Most likely, as implied above, results should mirror the performance of market, or some large portion of it. The experiment's purpose is to be "one measure against which gurus and newsletters will be compared." That is, if picking stocks randomly does better than a newsletter people pay for, maybe that newsletter isn't worth it.
But here there may be the objection already mentioned: it will depend on business cycles.
I have two responses to this.
One, so what? Stock gurus and newsletters should account for business cycles in their picks. They pick stocks from all market segments, so why shouldn't I? (If certain newsletters expressly limit themselves to particular market segments I'll make sure not to use that fact against them). [For further research: are paid stock recommendations small cap biased?]
Two, to the extent the first response is inadequate, I've decided to measure the performance of the picks in a few different ways. These are as follows, and I might add more along the way depending on whether I think of something useful:
1. Same dollar amount in each stock when picked. For example, $100 per stock. Taking this week's list, for instance, this would amount to 3.519 shares of Dean Foods and 15.82 shares of MoneyGram. This will most likely have a small cap bias.
2. Dollar amount by market cap. I'd have to set the parameters, but large cap stocks would presumably affect the portfolio's performance more than small caps.
3. Averaging the performance of each stock relative to its starting price. For example, suppose I'll have 3 picks (instead of the 520 per year). Let's say one went up 50%, the other down 35%, and the last finished up 3%. Using this measure, I'll say the random picks' performance was up 6%. What bias here? Does it depend on the business cycle? While most picks will probably be small caps, there will be large and mid caps.
4. Just list how many went up and how many went down. Probably small cap bias.
I'm open to suggestions.
- Dean Foods (DF) $28.42
- MoneyGram International, Inc. (MGI) $6.32
- Esterline Technologies Corp. (ESL) $47.22
- Fuel Systems Solutions, Inc. (FSYS) $13.03
- Daktronics, Inc. (DAKT) $20.78
- Stantec Inc. (SXC) $33.24
- Vestin Realty Mortgage II, Inc. REIT (VRTB) $9.7
- CSK Auto Corp. (CAO) $8.98
- Commerce Group, Inc. (CGI) $36.25
- Epicept Corp. (EPCT) $1.45
No matter what I do, Curiousjoe suggests, since my picks are random, their performance will mirror some market index, whether small cap, large cap, etc.
This makes for an uninteresting experiment, because whatever index the picks mirror, the performance will have to do with business cycles. Let's say the picks mirror a small cap index. The random stocks will do well in periods when small caps do well, and poorly when small caps do poorly, etc.
I agree with the above, but not entirely.
First, it's perfectly fine if the random stocks mirror an index. Indeed, they should. My hypothesis, originally stated, was "Over time stocks as a group tend to go up. You pick enough stocks, and your performance shouldn't be bad." I could have been more clear. This includes stock index performance. In fact, that's what it is.
Second, the experiment isn't about evaluating a random stock picking strategy. That is, I'm not saying "picking stocks randomly will beat the market" or anything of the sort. Most likely, as implied above, results should mirror the performance of market, or some large portion of it. The experiment's purpose is to be "one measure against which gurus and newsletters will be compared." That is, if picking stocks randomly does better than a newsletter people pay for, maybe that newsletter isn't worth it.
But here there may be the objection already mentioned: it will depend on business cycles.
I have two responses to this.
One, so what? Stock gurus and newsletters should account for business cycles in their picks. They pick stocks from all market segments, so why shouldn't I? (If certain newsletters expressly limit themselves to particular market segments I'll make sure not to use that fact against them). [For further research: are paid stock recommendations small cap biased?]
Two, to the extent the first response is inadequate, I've decided to measure the performance of the picks in a few different ways. These are as follows, and I might add more along the way depending on whether I think of something useful:
1. Same dollar amount in each stock when picked. For example, $100 per stock. Taking this week's list, for instance, this would amount to 3.519 shares of Dean Foods and 15.82 shares of MoneyGram. This will most likely have a small cap bias.
2. Dollar amount by market cap. I'd have to set the parameters, but large cap stocks would presumably affect the portfolio's performance more than small caps.
3. Averaging the performance of each stock relative to its starting price. For example, suppose I'll have 3 picks (instead of the 520 per year). Let's say one went up 50%, the other down 35%, and the last finished up 3%. Using this measure, I'll say the random picks' performance was up 6%. What bias here? Does it depend on the business cycle? While most picks will probably be small caps, there will be large and mid caps.
4. Just list how many went up and how many went down. Probably small cap bias.
I'm open to suggestions.
1/27/08
Random Stock Experiment List 2
Last week I started my random stock picking experiment, to see how random stock picking compares in performance to that of professionals, my hypothesis being that it will do better than the majority.
Here are this week's 10 random stocks with their closing prices on 1/25/08.
Here are this week's 10 random stocks with their closing prices on 1/25/08.
- Microsoft Corp. (MSFT) $32.94
- Endurance Specialty Holdings Ltd. (ENH) $38.61
- AZZ Inc. (AZZ) $33.25
- Alaska Communications Systems Group Inc. (ALSK) $12.73
- AMIS Holdings Inc. (AMIS) $7.71
- OPNET Technologies, Inc. (OPNT) $8.6
- Royal Gold, Inc. (RGLD) $30.23
- Aircastle Ltd. (AYR) $22.5
- Valassis Communications, Inc. (VCI) $
- Hercules Technology Growth Capital, Inc. (HTGC) $10.72
1/19/08
Random Stock Picking Experiment
At some point in the (near) future, I will review various investing newsletters and investing gurus. For some time I've had a theory that most newsletters and gurus that have decent performance records owe them not to their investing acumen but to the number of their picks. Over time stocks as a group tend to go up. You pick enough stocks, and your performance shouldn't be bad. That is my hypothesis.
In the late 1990s, there used to be something called Monkeydex. It was an index of stocks picked by a monkey, and its performance beat that of many professionals. Sadly, it appears that the index is no more. I've decided to create my own version. Its results will be one measure against which gurus and newsletters will be compared.
Every weekend, I will randomly pick 10 stocks, and their performance will be monitored for a year and a day (so they would be taxed at the long term capital gains rate). I will use the picked stocks' closing price on the last trading day before they are picked (usually a Friday), and keep track of them on Yahoo! Finance's portfolio feature and on Stockalicious (look for the widget on the left hand side).
My method for randomly selecting 10 stocks a week will be as follows. As I could not find a list of the stocks tracked by the Wilshire 5000 or the MSCI Broad Market Indexes (please email me or post a comment if you happen to know where a list can be found), I decided to use the holdings of Vanguard's Total Stock Market ETF (VTI). It has over 3,600 stocks at the time of writing. You can see the list here.
I will take this list, and paste it at a list randomizer. It "generates mathematically random numbers based on noises recorded by a microphone in Ireland, and then returns your list in the randomized order." The top 10 will be the random stocks of the week.
There will probably be a bear market in the near future, but I think it's too much work to have both buy picks and sell picks (I'm a slacker, after all). Over time, I think the random portfolio will do better than many professionals anyway.
So here they are, our first 10 random stock picks with their closing prices on Friday, January 18, 2008:
In the late 1990s, there used to be something called Monkeydex. It was an index of stocks picked by a monkey, and its performance beat that of many professionals. Sadly, it appears that the index is no more. I've decided to create my own version. Its results will be one measure against which gurus and newsletters will be compared.
Every weekend, I will randomly pick 10 stocks, and their performance will be monitored for a year and a day (so they would be taxed at the long term capital gains rate). I will use the picked stocks' closing price on the last trading day before they are picked (usually a Friday), and keep track of them on Yahoo! Finance's portfolio feature and on Stockalicious (look for the widget on the left hand side).
My method for randomly selecting 10 stocks a week will be as follows. As I could not find a list of the stocks tracked by the Wilshire 5000 or the MSCI Broad Market Indexes (please email me or post a comment if you happen to know where a list can be found), I decided to use the holdings of Vanguard's Total Stock Market ETF (VTI). It has over 3,600 stocks at the time of writing. You can see the list here.
I will take this list, and paste it at a list randomizer. It "generates mathematically random numbers based on noises recorded by a microphone in Ireland, and then returns your list in the randomized order." The top 10 will be the random stocks of the week.
There will probably be a bear market in the near future, but I think it's too much work to have both buy picks and sell picks (I'm a slacker, after all). Over time, I think the random portfolio will do better than many professionals anyway.
So here they are, our first 10 random stock picks with their closing prices on Friday, January 18, 2008:
- CryoLife Inc. (CRY) $8.28
- Peoples Bancorp, Inc. (PEBO) $21.3
- Omega Healthcare Investors Inc (OHI) $15.71
- Dominion Resources, Inc. (D) $44.24
- Corporate Office Properties Trust, Inc. REIT (OFC) $28.08
- Parametric Technology Corp. (PMTC) $14.83
- Endologix, Inc. (ELGX) $2.65
- Peregrine Pharmaceuticals, Inc. (PPHM) $0.37
- Leadis Technology Inc. (LDIS) $2.62
- Dover Downs Gaming & Entertainment, Inc. (DDE) $9.23
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