# Stock-picking, let's test it



## MrBlackhill (Jun 10, 2020)

Hi all,

Let's test this and make bets. It may look similar to this thread or this thread but here the goal is to follow a specific portfolio fully documented and make bets on what will be its faith.

*If you want, as @Karlhungus suggested below, if you believe you are good at stock-picking, you could also post your own stock picks to see how many stock-picking suggestions will outperform.*

I've came up with a list of 25 US stocks which I found from screening mostly based on their high growth the last 5 years, high Sharpe ratio, high Sortino ratio. Then I ordered them to find out which ones had the highest growth in the past 15 years. Then I kept only those who had historical data prior to the 2000 dot-com bubble. I went back to December 1998. I didn't look further, I didn't do big analyses. I have a watchlist of over 100 US stocks and there were certainly better options, but I just made this list as a no-brainer.

I didn't look at what are those stocks, what are their current fundamentals, it's purely based on their long-term trend. Obviously, it would make more sense to base the decisions on forecasts for those stocks, their current fundamentals, their future growth potential and so on. But, no, here I've only picked stocks based on long-term historical data, that's it. As we know, even stocks growing super fast for decades can go bankrupt. Past results do not guarantee future results, but forecasts don't guarantee future results either. So, who knows best? Better look at both sides. But here, as I said, I'll just look at the past and go blind for the future.

We'll see what happens with hindsight bias, with selections based only on historical statistics.

So here's the portfolio of 25 US stocks, equally weighted. You can add SPY, QQQ, DIA as portfolios 2, 3 to see how it compares.





__





Backtest Portfolio Asset Allocation


Analyze and view backtested portfolio returns, risk characteristics, standard deviation, annual returns and rolling returns



www.portfoliovisualizer.com





The portfolio, from December 1997 to end of December 2020

Best year +65.97%
Worst year -23.27%
Sharpe ratio 1.39
Sortino ratio 2.63
Maximum drawdown -33.94% with 2 years and 2 months underwater after 1 year and 4 months of bear market
Rolling 15-year CAGR : average 27.42%, highest 30.14%, lowest 23.85%
Rolling 10-year CAGR : average 26.92%, highest 34.15%, lowest 19.37%
Rolling 7-year CAGR : average 27.66%, highest 35.17%, lowest 20.13%
Rolling 5-year CAGR : average 27.78%, highest 43.07%, lowest 15.64%
Last 3 months +14.80%
Last 1 year +55.06%
Last 3 years 37.57% CAGR
Last 5 years 35.72% CAGR
Last 10 years 32.25% CAGR
QQQ, from April 1999 to end of December 2020

Best year +74.15%
Worst year -41.73%
Sharpe ratio 0.42
Sortino ratio 0.61
Maximum drawdown -81.08% with 14 years and 7 months underwater after 2 years and 6 months of bear market
Rolling 15-year CAGR : average 9.48%, highest 15.61%, lowest 0.35%
Rolling 10-year CAGR : average 9.78%, highest 22.37%, lowest -8.06%
Rolling 7-year CAGR : average 9.76%, highest 22.78%, lowest -12.13%
Rolling 5-year CAGR : average 9.48%, highest 28.16%, lowest -19.54%
Last 3 months +13.13%
Last 1 year +48.40%
Last 3 years 27.24% CAGR
Last 5 years 23.96% CAGR
Last 10 years 20.35% CAGR
SPY, from December 1997 to end of December 2020

Best year +32.31%
Worst year -36.81%
Sharpe ratio 0.46
Sortino ratio 0.66
Maximum drawdown -50.80% with 4 years and 5 months underwater after 1 year and 4 months of bear market
Longest drawdown -44.71% with 6 years and 3 months underwater after 2 years and 1 month of bear market
Rolling 15-year CAGR : average 6.79%, highest 10.41%, lowest 3.67%
Rolling 10-year CAGR : average 6.47%, highest 16.55%, lowest -3.45%
Rolling 7-year CAGR : average 6.97%, highest 17.14%, lowest -3.91%
Rolling 5-year CAGR : average 6.72%, highest 22.86%, lowest -6.67%
Last 3 months +12.12%
Last 1 year +18.37%
Last 3 years 14.03% CAGR
Last 5 years 15.11% CAGR
Last 10 years 13.76% CAGR
DIA, from February 1998 to end of December 2020

Best year +29.64%
Worst year -47.05%
Sharpe ratio 0.49
Sortino ratio 0.72
Maximum drawdown -47.05% with 3 years and 6 months underwater after 1 year and 4 months of bear market
Longest drawdown -31.09% with 5 years underwater after 2 years and 9 months of bear market
Rolling 15-year CAGR : average 7.48%, highest 10.74%, lowest 4.96%
Rolling 10-year CAGR : average 7.19%, highest 16.64%, lowest -0.72%
Rolling 7-year CAGR : average 7.57%, highest 16.64%, lowest -2.81%
Rolling 5-year CAGR : average 7.52%, highest 16.17%, lowest -5.61%
Last 3 months +10.70%
Last 1 year +9.61%
Last 3 years 9.67% CAGR
Last 5 years 14.48% CAGR
Last 10 years 12.78% CAGR
As you can notice, throughout the last 23 years

The portfolio's *lowest *15-year return is higher than QQQ's *highest* 15-year return
The portfolio's *lowest *10-year return is nearly has high as QQQ's *highest* 10-year return
The portfolio's *lowest *7-year return is nearly has high as QQQ's *highest* 7-year return
The portfolio's *lowest *15-year, 10-year and 7-year returns is higher than SPY's and DIA's *highest* 15-year, 10-year and 7-year returns
The portfolio's *lowest* 5-year return is... 15.64% CAGR
The portfolio's *lowest *3-year return is... positive
The portfolio's 3-year and 5-year rolling returns have *always been higher* than QQQ (and also SPY and DIA)
The portfolio managed drawdowns much better than SPY, QQQ and DIA
From year 1998 to year 2020, the portfolio has beaten SPY *every single year* (23 years out of 23)
From year 2000 to year 2020, the portfolio has beaten QQQ 19 years out of 21
From year 1999 to year 2020, the portfolio has beaten DIA *every single year* (22 years out of 22)
QQQ, SPY and DIA are ETFs which have holdings that changes over time. We'll see what happen to a fix 25-holding portfolio where a company going bankrupt would affect the final performance. Some stocks could drop and stay down for a very, very long time, like what happened to some stocks in the energy sector (even though this portfolio has no energy exposure, what sector will be next?).

As of today, Portfolio Visualizer points out these exposures (may not represent what's shown on the ETFs official website, but I use Portfolio Visualizer as a common reference for simplicity)

The portfolio
72% Large Cap
20% Mid Cap
8% Small Cap
28% Technology
28% Healthcare
20% Industrials
16% Consumer Cyclical
4% Consumer Defensive
4% Basic Materials

QQQ
94.81% Large Cap
5.19% Mid Cap
43.72% Technology
20.35% Communication Services
19.33% Consumer Cyclical
6.44% Healthcare
4.88% Consumer Defensive
2.66% Industrials
2.02% Financial Services
0.61% Utilities

SPY
83.68% Large Cap
15.91% Mid Cap
0.41% Small Cap
24.18% Technology
13.78% Healthcare
13.46% Financial Services
11.08% Consumer Cyclical
11.04% Communication Services
9.13% Industrials
7.28% Consumer Defensive
2.88% Utilities
2.53% Real Estate
2.33% Basic Materials
2.30% Energy

DIA
96.28% Large Cap
3.72% Mid Cap
18.24% Healthcare
17.92% Financial Services
17.62% Technology
16.89% Industrials
13.98% Consumer Cyclical
7.62% Consumer Defensive
4.63% Communication Services
1.93% Energy
1.18% Basic Materials

So... How do think the portfolio will do in the next 10-15 years? What's your opinion on this?


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## Jimmy (May 19, 2017)

Pretty conclusive and amazing but not surprising. Indexes like SPY have good companies but as many lousy companies and are simply the largest by market cap not the best. The law of large #s tells you these wont be the fastest growers either.

Higher returns and lower risk w a stock portfolio though. Stock analysis can be a little more work but the rewards are there.


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## james4beach (Nov 15, 2012)

A "test" like the one proposed here only works if we adjust for survivorship bias.

That means we should not only look at @MrBlackhill 's results, but also the results of all the previous stock pickers which showed up at CMF over the years and had stock recommendations. Many of them stopped posting.

Then we should look at the average results of all the stock picking attempts. That will give us a true idea of how well stock-picking works out. Some will always succeed, but some will fail.

Kind of ridiculous to exclude all the failures and only talk about the successful stock-picking, right?


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## james4beach (Nov 15, 2012)

To see how some past stock-picking worked out, I analyzed a 10 year old thread with a large number of stock picks:

Interestingly, the US picks underperformed the index and the Canadian picks outperformed!

The US portfolio from a decade ago achieved 0.9x the index performance and the Canadian portfolio achieved 1.6x the index performance in terms of CAGR.


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## Karlhungus (Oct 4, 2013)

Would be far easier to propose this challenge - anyone on CMF can build a fake portfolio for 2021. Then, lets compare it at the end of the year to its benchmark index and see what wins.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> Then we should look at the average results of all the stock picking attempts. That will give us a true idea of how well stock-picking works out. Some will always succeed, but some will fail.
> 
> Kind of ridiculous to exclude all the failures and only talk about the successful stock-picking, right?





Karlhungus said:


> Would be far easier to propose this challenge - anyone on CMF can build a fake portfolio for 2021. Then, lets compare it at the end of the year to its benchmark index and see what wins.


Good idea!


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> To see how some past stock-picking worked out, I analyzed a 10 year old thread with a large number of stock picks:
> 
> Interestingly, the US picks underperformed the index and the Canadian picks outperformed!
> 
> The US portfolio from a decade ago achieved 0.9x the index performance and the Canadian portfolio achieved 1.6x the index performance in terms of CAGR.


What I see is a US 10-pack of mostly some of the largest caps back then and the "underperformance" isn't very significant as the charts crossed just a few months ago, in June 2020. Whereas the Canadian 8-pack totally outperformed.


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## Jimmy (May 19, 2017)

james4beach said:


> To see how some past stock-picking worked out, I analyzed a 10 year old thread with a large number of stock picks:
> 
> Interestingly, the US picks underperformed the index and the Canadian picks outperformed!
> 
> The US portfolio from a decade ago achieved 0.9x the index performance and the Canadian portfolio achieved 1.6x the index performance in terms of CAGR.


That is cherry picking some stocks from some arbitrary thread and not representative of a real portfolio. Most are large cap deadbeat value stocks for their dividends perhaps and 2 oil companies.

Here is a good and proper comparison. MF's 10 picks for 2010.







View attachment 21039



















View attachment 21039






View attachment 21039
2010 held for 10 yrs. destroys the substandard mediocre S&P . Again lol









The Best Stocks for 2010 | The Motley Fool


Which investments will make you the most money in the coming year?




www.fool.com


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## depassp (Mar 22, 2020)

Jimmy said:


> That is cherry picking some stocks from some arbitrary thread and not representative of a real portfolio. Most are large cap deadbeat value stocks for their dividends perhaps and 2 oil companies.
> 
> Here is a good and proper comparison. MF's top 10 picks for 2010 held for 10 yrs. destroys the substandard mediocre S&P . Again lol


Why did you only consider the "top 10"? In 2010, MF suggested 13 stocks, 3 of which are now missing from your representative example and explain exactly why this kind of analysis is tricky. Hindsight is always 20/20. You shouldn't just "pick and choose"

Where are:

ATP Oil & Gas (NASDAQ: ATPG)
Silver Wheaton (NYSE: SLW)
Smart Balance (NASDAQ:SMBL)


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## Jimmy (May 19, 2017)

depassp said:


> Why did you only consider the "top 10"? In 2010, MF suggested 13 stocks, 3 of which are now missing from your representative example and explain exactly why this kind of analysis is tricky. Hindsight is always 20/20. You shouldn't just "pick and choose"
> 
> Where are:
> 
> ...


I didn't consider the 'top 10' . They were 10 I could find. Wheaton changed their name. Smart balance became Boulder Brands. ATP apparently went bankrupt. You would have dumped it anyway well before that happened. There is nothing tricky about this. I just put in 10 stocks they recommended 10 yrs ago to compare. Don't conflate the issue. Their stock picks destroyed the S&P. Other studies have show the same.


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## depassp (Mar 22, 2020)

Jimmy said:


> ATP apparently went bankrupt.


Yes, exactly.
ATP Oil & Gas filed form 25-NSE (DELISTED) on 2012-09-14: EDGAR Filing Documents for 0001354457-12-000197

You need to include that loss in your "comparison portfolio". 1/13 of your picks in 2010 went bankrupt so erase 7.69% of that initial capital.

Silver Wheaton: renamed to Wheaton Precious Metals (NYSE: WPM)

Smart Balance: Renamed Boulder Brands (NASDAQ: BDBD) in 2012, Smart Balance products discountinued in 2013. Boulder acquired by Pinnacle Foods in 2015. Pinnacle Foods became a subsidiary of Conagra Brands in 2018. What happened to the capital you would have invested in Smart Balance in 2010?



Jimmy said:


> You would have dumped it anyway well before that happened.


When exactly would you have dumped it? Down 30%? Down 50%? 80%? 

AKAM was -57.75% in Sep 2011 (compared from Jan 2011). Would you have dumped it then? It's now recovered to +123.15% but in 2011 you wouldn't have known it was going to do that.
WPM was -67.97% in Jan 2016, now recovered to +22.06%.

If you're going to try to concoct a hypothetical portfolio, you should clearly specify the rules.
If it's buy-and-hold forever, you need to include the total loss of a bankrupt company. If you specify explicit stop-losses, you also need to account for those losses.

With perfect hindsight knowledge, today anyone can build a hypethetical portfolio that outperforms the "mediocre S&P".



Jimmy said:


> Don't conflate the issue. Their stock picks destroyed the S&P. Other studies have show the same.


It's not conflating. The point is that stock picking is hard and requires explicit rules and/or constant babysitting. Hindsight bias is dangerous when trying to make these comparisons and "prove" that stock picking outperforms passive index investing. If you're going to try to make a point, do so accurately.


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## Jimmy (May 19, 2017)

depassp said:


> Yes, exactly.
> ATP Oil & Gas filed form 25-NSE (DELISTED) on 2012-09-14: EDGAR Filing Documents for 0001354457-12-000197
> 
> You need to include that loss in your "comparison portfolio". 1/13 of your picks in 2010 went bankrupt so erase 7.69% of that initial capital.


Wrong and that is faulty. It isn't hard to dump losing stocks. Companies don't fail overnight as you should know. But regardless the portfolio still beats the S&P even w subtracting the full 7.69% from the total $.



depassp said:


> Silver Wheaton: renamed to Wheaton Precious Metals (NYSE: WPM)
> 
> Smart Balance: Renamed Boulder Brands (NASDAQ: BDBD) in 2012, Smart Balance products discountinued in 2013. Boulder acquired by Pinnacle Foods in 2015. Pinnacle Foods became a subsidiary of Conagra Brands in 2018. What happened to the capital you would have invested in Smart Balance in 2010?


So one renamed.The other purchased which as you know is usually at a premium. Omitting them provides neither a gain or loss so erroneous.



depassp said:


> If you're going to try to concoct a hypothetical portfolio, you should clearly specify the rules.
> If it's buy-and-hold forever, you need to include the total loss of a bankrupt company. If you specify explicit stop-losses, you also need to account for those losses.
> 
> With perfect hindsight knowledge, today anyone can build a hypethetical portfolio that outperforms the "mediocre S&P".
> It's not conflating. The point is that stock picking is hard and requires explicit rules and/or constant babysitting. Hindsight bias is dangerous when trying to make these comparisons and "prove" that stock picking outperforms passive index investing. If you're going to try to make a point, do so accurately.


Yes it is and you miss the main pt their portfolio is clearly superior and it is accurate. It wasnt' hindsight. These companies were chosen in 2010. You are being deflective and rhetorical actually.

Either way I just did another study from 2015 that I will post that shows the exact same results from 7 companies still in existence so we don't have to go through this excercise.


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## Jimmy (May 19, 2017)

Here is another study due to all the conflating and deflecting above to remove any doubt.

From 2015 MF destroys the S&P again. All 7 stocks still in existence so no more of the deflections and conflations from above









7 Top Stocks to Buy for 2015 | The Motley Fool


Qualcomm, Facebook, Apple, and -- surprise! -- SeaWorld Entertainment are on this Foolish list of top stocks to buy for 2015.




www.fool.com


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## MrBlackhill (Jun 10, 2020)

depassp said:


> Where are:
> 
> ATP Oil & Gas (NASDAQ: ATPG)
> Silver Wheaton (NYSE: SLW)
> Smart Balance (NASDAQ:SMBL)


The article was published at the end of 2009, so I'll start @Jimmy portfolio in 2010.

Let's take the absolute worst case where all the money invested in ATPG, SLW, SMBL *was lost*, even if realistically that would not be the case.

Scenario 1

$13,000 invested initially ($1,000 in each stock) but then 3 stocks going down before you make a move, so that's as if you had invested only $10,000
No rebalancing, just buy & forget
Scenario 2

$13,000 invested initially in SPY
So I'm comparing the final investment value of $10,000 in those remaining 10 stocks to the final investment value of $13,000 in SPY.

Scenario 1 - Final value of that $10,000 invested in 2010 : $89,605 (considering $13,000 invested initially, that's 19.18% CAGR)
Scenario 2 - Final value of that $13,000 invested in 2010 into SPY : $54,295 (that's 13.88% CAGR)

So, even in this worst case of buy & forget where you completely lost 23% of your initial investment ($3,000 lost out of $13,000), you wake up 11 years later with 65% more money ($89k vs $54k). The investment is outperforming since end of 2017.


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## james4beach (Nov 15, 2012)

depassp said:


> It's not conflating. The point is that stock picking is hard and requires explicit rules and/or constant babysitting. Hindsight bias is dangerous when trying to make these comparisons and "prove" that stock picking outperforms passive index investing.


This is also why the Motley Fool mutual fund has much worse performance, about similar to the index.

It's easy for a newsletter to claim, and bend the truth to say they are "blowing away the index". But their mutual fund is where they have to prove it with real $.

With real money at play, they did not even beat the index. The Motley Fool mutual fund was pretty average. It's easy to bend the truth or produce misleading claims on a web site. But I still want to know why, if the Motley Fool brothers are such genius stock-pickers, why can't they demonstrate big returns when real money is at play?


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## james4beach (Nov 15, 2012)

Here's another old thread with stock picking. These were my own non-dividend stock picks from Nov 2016, which is over 4 years ago. Initially I made some big mistakes in that portfolio construction, but learned to to improve my diversification. Thanks to everyone who helped me refine my approach back then.

Those 9 stocks, equally weighted, returned 14.5% CAGR since I posted that. In comparison, XIC returned 7.8% CAGR.

Huge outperformance...

(I did actually maintain that portfolio with real $ since then, and recently measured my actual performance 13.9% CAGR which is very close to the above)


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> This is also why the Motley Fool mutual fund has much worse performance, about similar to the index.
> 
> It's easy for a newsletter to claim, and bend the truth to say they are "blowing away the index". But their mutual fund is where they have to prove it with real $.
> 
> With real money at play, they did not even beat the index. The Motley Fool mutual fund was pretty average. It's easy to bend the truth or produce misleading claims on a web site. But I still want to know why, if the Motley Fool brothers are such genius stock-pickers, why can't they demonstrate big returns when real money is at play?


Nope, the reason why mutual funds can't outperform the index is that you can't put 5% of your $500M fund into a $300M market cap stock trading at $2 with an average daily volume of 100,000.

Stock-picking advisors can tell where retail investors should put their small money to outperform, whereas hedge fund managers can't put their big money in those small stocks about to soar.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Nope, the reason why mutual funds can't outperform the index is that you can't put 5% of your $500M fund into a $300M market cap stock trading at $2 with an average daily volume of 100,000.


This isn't what held them back. Motley Fool's TMFGX fund only has $300 million in assets today and started with around $60 million in its early years. Even with heavy concentration of say 5% in one position (about what they have) that's only $3 million in a single stock position, perfectly doable.

So in their early years at ~ 60M of assets, any of these thin small caps would have been accessible to them. And yet, their performance in the early years was also about average.

And look at the Fool stock picks @Jimmy is posting. None of these are thinly traded.

I think the Fool brothers are "fool of it"


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## Jimmy (May 19, 2017)

james4beach said:


> This is also why the Motley Fool mutual fund has much worse performance, about similar to the index.
> 
> It's easy for a newsletter to claim, and bend the truth to say they are "blowing away the index". But their mutual fund is where they have to prove it with real $.
> 
> With real money at play, they did not even beat the index. The Motley Fool mutual fund was pretty average. It's easy to bend the truth or produce misleading claims on a web site. But I still want to know why, if the Motley Fool brothers are such genius stock-pickers, why can't they demonstrate big returns when real money is at play?


That is all nonsense. There is real $ at play. The index mutual fund is incidental to their real business which are the services but you know this already. They aren't in the mutual fund business, they are in the advisory business. The time horizons and portfolios are completely different . They have documented their out performance pick for pick. You are the only one being misleading and obfuscating. They destroy the lazy S&P returns w even their public site picks.


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## james4beach (Nov 15, 2012)

Jimmy said:


> That is all nonsense. . . . They have documented their out performance pick for pick. You are the only one being misleading and obfuscating. They destroy the lazy S&P returns w even their public site picks.


Their web site claims they've returned *5X the index*. They are very likely fibbing, bending the truth, or using a questionable interpretation to show these fantastic returns. There are a hundred ways that kind of trick can be pulled off, and I'm sure they've chosen a kind of interpretation that isn't illegal, but still misleading. For example, they flood you with huge numbers of stock picks. That's not actionable; you can't realistically invest in every damn stock pick they send you.

So with real money, you will be forced to choose a subset of what they send you. When you inevitably underperform, it's therefore YOUR fault ... you didn't invest in all stocks that were recommended, right? I wouldn't be surprised if they are using some variant of this.

Whatever they are doing is likely technically legal and legitimate (based on some technicality), but not investable in the real world with real money. Otherwise, they could make a ton more money than selling these subscriptions at $8/month on 50% sale -- the cost of two Starbucks coffees! lol!

But if you really do believe that their stock picks have produced 21% CAGR over 18 years, then I guess you really should go hand over $199 a year to them.

They're cheating you, Jimmy. And it sounds like they are close to cheating @MrBlackhill too.


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## james4beach (Nov 15, 2012)

Check out:



Motley Fool Stock Advisor - Bogleheads.org



One trick they might be playing is choosing a benchmark to make themselves look good. Their picks appear to be tech-heavy, so they probably should compare to the NASDAQ. Or possibly some other variation like small cap tech.

It's pointed out that in 2002, they had "ten or more portfolios". Most of them disappeared because they sucked. This is actually one of the classic stock investment newsletter scams... you run a bunch of different newsletters, and then heavily market the survivor. This makes the surviving newsletter look like it's fantastic, but it's a meaningless result.

Here's a useful post from that Bogleheads forum, in 2012



> I used to read them a little many years ago. They used to have individual stock portfolios which they published and kept day to day track of accurately. Then the crash of 2000 happened - *their portfolios did terribly - so they eliminated them*. Made me see them for what they are ... financial porn.


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## Jimmy (May 19, 2017)

james4beach said:


> Their web site claims they've returned *5X the index*. They are very likely fibbing, bending the truth, or using a questionable interpretation to show these fantastic returns. There are a hundred ways that kind of trick can be pulled off, and I'm sure they've chosen a kind of interpretation that isn't illegal, but still misleading. For example, they flood you with huge numbers of stock picks. That's not actionable; you can't realistically invest in every damn stock pick they send you.
> 
> So with real money, you will be forced to choose a subset of what they send you. When you inevitably underperform, it's therefore YOUR fault ... you didn't invest in all stocks that were recommended, right? I wouldn't be surprised if they are using some variant of this.
> 
> ...


This has already been proven to you so these are just sad attempts to discredit proven record and being misleading. You are welcome to go back and look at their 2015 record too it is right in front of your eyes. . Your -ve suppositions are amusing though They have ten starter stocks that destroy the index even more.Sad you aren't motivated or are too averse to want to learn anything more then low return indexes and lazy low return portfolios but good luck either way. It is $99 btw.


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## james4beach (Nov 15, 2012)

Jimmy said:


> Don't criticize them because they are smarter and better investors than you.


Ok I give up. I'm trying to help you not get scammed, but you are committed to this idea.

Their claims of very high returns are unrealistic. There's something funny about this.

What happened to all their pre-2000 portfolios, Jimmy? How about the dozen other portfolios they used to run... what happened to those?

This classic scam is described in Fooled by Randomness, which I've recommended several times. To be a successful investor you have to learn some of the classic cons and pit falls in this game.


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## Jimmy (May 19, 2017)

james4beach said:


> Ok I give up. I'm trying to help you not get scammed, but you are committed to this idea.
> 
> Their claims of very high returns are unrealistic. There's something funny about this.
> 
> ...


Buying Berkshire Hathaway, BIP, CN, Mastercard etc and other good core stocks has easily beaten the market and shouldn't be so confusing for you. Enough w the black helicopter paranoia.


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## Jimmy (May 19, 2017)

james4beach said:


> Check out:
> 
> 
> 
> ...


None of that is true. All their services still exist. maybe you shouldn't get your head warped by some disturbed posters om a shitty blog site you can reread the real reviews we posted for you already vs just being misleading and disingenuous.


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## james4beach (Nov 15, 2012)

Jimmy said:


> None of that is true. All their services still exist. maybe you shouldn't get your head warped by some disturbed posters om a shitty blog site you can reread the real reviews we posted for you already vs just being misleading and disingenuous.


All of it is true. I don't know why you're being so ungrateful as I try to help you.

Since you're in denial, here it is, directly from the historical record. Here is how Fool.com looked in February 2001. In this article they describe their old, failed, stock-picking strategies:





__





Fool.com: Discontinued Strategies -- Lessons Learned






web.archive.org





Here are old, dead strategies of theirs. I'm including additional strategies that were still live in 2001, but which have died since then:

Retiree Portfolio (discontinued 12/4/00)
Boring Portfolio (discontinued 11/6/00)
Harry Jones (discontinued 8/26/99)
Running with the Market (discontinued 1/96)
Rule Maker
FOOL 50 Index
Drip Port
Small Cap Foolish 8
Workshop Port
Don't Mimic Us
It's a scam, Jimmy. Where are these portfolios today?

I want to hear their new picks of their "FOOL 50 Index". How is that portfolio doing?

I've now listed for you 10 previous stock-picking portfolios they used to have, that don't exist any more. They are not good at picking stocks. Creating many portfolios, and then ignoring the failures and only talking about the 1 or 2 which happened to work out well, is *extremely misleading.*


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## james4beach (Nov 15, 2012)

The Motley Fool from the year 2001. You can see there are 10 stock-picking strategies which have since died. Near the bottom are their current strategies in 2001, hardly any of which exist today.


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## Jimmy (May 19, 2017)

james4beach said:


> All of it is true. I don't know why you're being so ungrateful as I try to help you.
> 
> It's a scam, Jimmy. Where are these portfolios today?
> 
> ...


*That isn't the case at all. They post their results for the main services so that is just misleading . *They* replace old services w new services * based on themes of the day which you also omitted and who cares about services changed over 20 yrs ago? . One of their new services is 5G for example Another is 'Cloud Disruptors' They have ~ 20 services too tired to count them all. These uninformed biased opinions are really a waste of time.

All you are doing is making attempts to discredit them.


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## Pluto (Sep 12, 2013)

james4beach said:


> A "test" like the one proposed here only works if we adjust for survivorship bias.
> 
> That means we should not only look at @MrBlackhill 's results, but also the results of all the previous stock pickers which showed up at CMF over the years and had stock recommendations. Many of them stopped posting.
> 
> ...


Your method seems flawed. It is similar to this:
Suppose we want to know if race car drivers are any good. In order to do that we include all drivers in the study, such as granny and grandpa who are about to lose their licence because they are almost blind, the drunken teenager in hospital because he just cracked ked up mom and dad's car, all those with learners licences who don't even know how to park a car yet...Of course the results will show that race car drivers are not very good. 

Why would you study the performance of below average drivers to determine if race car drivers were any good?
The reality is that skilled stock pickers far out perform indexes and averaging in the poor performance of unskilled pickers doesn't change that.


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## capricorn (Dec 3, 2013)

Pluto said:


> Your method seems flawed. It is similar to this:
> Suppose we want to know if race car drivers are any good. In order to do that we include all drivers in the study, such as granny and grandpa who are about to lose their licence because they are almost blind, the drunken teenager in hospital because he just cracked ked up mom and dad's car, all those with learners licences who don't even know how to park a car yet...Of course the results will show that race car drivers are not very good.
> 
> Why would you study the performance of below average drivers to determine if race car drivers were any good?
> The reality is that skilled stock pickers far out perform indexes and averaging in the poor performance of unskilled pickers doesn't change that.


The trick is to recognize who is skilled vs average for future picks. Past does not help much.
So, this thread would be interesting if we can establish a portfolio today against all expert pickers and then track it against comparable index.
When I was younger I complained to a financial advisor as to why his picks were doing so much worse than index. He said that I was comparing the balanced allocation vs all equity. I still remember that. For me index returns are adequate to meet my needs and stay within my risk profile.
The reason I say this is to make sure when we do the comparison we don't do small cap stock picks vs all market etc..


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## Pluto (Sep 12, 2013)

capricorn said:


> The reason I say this is to make sure when we do the comparison we don't do small cap stock picks vs all market etc..


If I understand you correctly you say in order to compare a stock picker with another method, the stock picker should not be able to use his best picks if they are small caps. 

If his best picks are small caps why handicap him? Sounds like the goal is to have a preconceived conclusion.


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## capricorn (Dec 3, 2013)

Pluto said:


> If I understand you correctly you say in order to compare a stock picker with another method, the stock picker should not be able to use his best picks if they are small caps.
> 
> If his best picks are small caps why handicap him? Sounds like the goal is to have a preconceived conclusion.


No no.. I might not have written it correctly. Pick whatever but compare at least to similar index rather than say Russell 2000.

That was minor point though. The major point is to not identify skilled pickers by looking at a large field and hand pick the best performers.
The real test is to pick whoever you want today and see how they perform against even VTI over 10, 15, 20 yrs. 
Someone like Bill Miller, who beats index consistently comes once in a while. Yes, some experts will beat index. But we would be extremely lucky to follow that person.


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## fireseeker (Jul 24, 2017)

Pluto said:


> Why would you study the performance of below average drivers to determine if race car drivers were any good?
> The reality is that skilled stock pickers far out perform indexes and averaging in the poor performance of unskilled pickers doesn't change that.


I think the racecar-driver metaphor is slightly off. 
Granny, Grandpa and the drunken teenager have virtually no assets. The Formula One driver is backed by millions. Their investments don't move the markets in the same way. 
To put this another way, retail investors made just 10% of U.S. trades in 2019. In the UK, the Financial Times estimates that 15% of the UK stock market is held by individual shareholders.
So most trading is between the skilled drivers/investors. That means they can't all crush the index.


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## fireseeker (Jul 24, 2017)

In the debate between @Jimmy and @james4beach, they both may be right. 

James appears to be taking the broad view -- multiple portfolios over different time periods to identify survivorship bias -- while Jimmy appears to be looking narrowly at the current portfolio and its current record.

I share James's skepticism, but Jimmy's confidence in the Fool portfolio's record may not be misplaced. The record may well be accurate. And for $99 it is certainly a low-risk way to gather investment ideas.

For anyone thinking about fully emulating the Fool portfolio, I would offer these considerations:
1) The portfolio record looks backward. There are no guarantees it will continue.
2) If you believe the Fool pickers can reliably crush the index going forward, ask yourself what most investors would do with such insight. Would they a) trade on it privately so as to make a killing? b) sell the formula to a hedge fund so as to make a killing? or c) peddle it to retail buyers at $99 a pop?
3) Assuming the answer above is option c), think about the implications of that. Whenever a new pick is made, that info will be sent to thousands of people simultaneously -- maybe tens of thousands of people. What happens to the price/opportunity then?


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## Pluto (Sep 12, 2013)

fireseeker said:


> I think the racecar-driver metaphor is slightly off.
> Granny, Grandpa and the drunken teenager have virtually no assets. The Formula One driver is backed by millions. Their investments don't move the markets in the same way.
> To put this another way, retail investors made just 10% of U.S. trades in 2019. In the UK, the Financial Times estimates that 15% of the UK stock market is held by individual shareholders.
> So most trading is between the skilled drivers/investors. That means they can't all crush the index.


No one claimed they can all crush the index. Most individual investors should just use etf index funds because they don't have the insight, temperament and skill to stock pick. 

I get involved in these discussions because all too often indexing advocates falsely claim that everyone is too foolish to make money on individual stocks. Plus some people come here wo do have the right temperament to be successful in individual stocks and I want to encourage them to get the experience and develop the skill.


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## Pluto (Sep 12, 2013)

capricorn said:


> No no.. I might not have written it correctly. Pick whatever but compare at least to similar index rather than say Russell 2000.
> 
> That was minor point though. The major point is to not identify skilled pickers by looking at a large field and hand pick the best performers.
> The real test is to pick whoever you want today and see how they perform against even VTI over 10, 15, 20 yrs.
> Someone like Bill Miller, who beats index consistently comes once in a while. Yes, some experts will beat index. But we would be extremely lucky to follow that person.


OK. I think the trick is to learn to be a stock picker yourself, then you don't have to have blind faith in someone else. Study the ones who are good, then incorporate their style into your own.


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## MrBlackhill (Jun 10, 2020)

MrBlackhill said:


> I've build a 25-stock portfolio that has beaten S&P 500 every single calendar year since 1998, that's 23 consecutive years (by at least 5% of alpha every year!). *Interestingly, we're now mid-year and that portfolio is at only 6.64% YTD while S&P 500 is at 15.18%.* Will I witness the first year ever where S&P 500 will outperform that portfolio? Or is the portfolio about to bounce back before EOY? Or is S&P 500 about to suffer a big correction before EOY? I'm eager to know.


Well, that was when I had results up to June.

July performance is out. The portfolio is now at 13.42% YTD vs 17.92% for S&P 500.

5 more months to go to bounce back and beat again the S&P 500 for a 24th year in a row.


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## Spudd (Oct 11, 2011)

MrBlackhill said:


> Well, that was when I had results up to June.
> 
> July performance is out. The portfolio is now at 13.42% YTD vs 17.92% for S&P 500.
> 
> 5 more months to go to bounce back and beat again the S&P 500 for a 24th year in a row.


Is your portfolio all US stocks?


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## james4beach (Nov 15, 2012)

Pluto said:


> OK. I think the trick is to learn to be a stock picker yourself, then you don't have to have blind faith in someone else. Study the ones who are good, then incorporate their style into your own.


I think it's possible to do if you learn how to do it well and have great discipline. Properly diversify sectors, avoid individual stock concentration, know how to manage and update the portfolio etc.

A person can do well. The problem is that few people are able to pull that off, over the long term. And even if you do it perfectly, it's doubtful that you will beat the index by much -- if at all.

I have two stock picking portfolios, both with real money (no hindsight games here)

*My high growth picks*

My results over ~ 4 years with a real portfolio (no hindsight games here) are 11.6% CAGR compared to the XIC index at 10.2% CAGR as of Friday. Some might say this 1.4% extra annual performance is worth it, but this remains to be seen over the longer term. I'm really curious if I will beat XIC over 10 years.

*My 5-pack picks*

It's about 5 years of performance and my picks performed at 10.3% which exactly matches XIC at 10.3%

Goes to show you that XIC really isn't so bad. I don't mind some stock picking... it's kind of fun... but I think I will likely match the index over the long term


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## MrBlackhill (Jun 10, 2020)

Spudd said:


> Is your portfolio all US stocks?


The portfolio is provided in the first post at the beginning of 2021, so all the prior years are hindsight biased. It's all US, yes. It's not my portfolio, it's a test. I'm testing a portfolio statistics-driven. Maybe 10 years from now I'll wish I had made it my portfolio. Maybe not. But so far so good.


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## Spudd (Oct 11, 2011)

MrBlackhill said:


> The portfolio is provided in the first post at the beginning of 2021, so all the prior years are hindsight biased. It's all US, yes. It's not my portfolio, it's a test. I'm testing a portfolio statistics-driven. Maybe 10 years from now I'll wish I had made it my portfolio. Maybe not. But so far so good.


The reason I asked is people often use the S&P 500 for a benchmark even when their portfolio might be consisting of different things. But since you're all US it's a good benchmark.


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## MrMatt (Dec 21, 2011)

Picking stocks is a tough game.
That being said, with a bit of luck you can do well. 
I just ran a report, my full portfolio has a >10 year 12% annuallized return.
That includes the cash portion.

It's shockingly good and while I think I did a good job, a lot of that has to be luck.


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## agent99 (Sep 11, 2013)

Pluto said:


> I get involved in these discussions because all too often indexing advocates falsely claim that everyone is too foolish to make money on individual stocks. Plus some people come here wo do have the right temperament to be successful in individual stocks and I want to encourage them to get the experience and develop the skill.


I can't see choosing a portfolio and then seeing how it performs (or performed) over time. A portfolio needs to be reviewed and adjusted as time goes by. Our portfolio still has a number of the stocks we started with, but others are long gone!

When I first decided on DIY investing about 19 years ago, I talked to a few others in somewhat similar situation to see what they did. One well off pharmacist told me that he avoided mutual funds and chose his own stocks. ETFs were not as common back then. What he would do, is look at the largest holdings of the best performing mutual funds to see what they were invested in. Then choose his own stocks, mainly from those.

I followed a similar plan early on, while building our portfolio. I have mostly avoided index funds and etfs. At best a portfolio performance will be average if they are used  Not saying that they are not a good choice for those without the ability or inclination to try and do better.

Our overall portfolio has had average annual return of ~8.6% over 18/19 years. Target FI/Equity ratio was 40/60, but that has varied as markets have fluctuated. If, instead of picking our own stocks, we had bought, for example, XIU and XSB - our annual return would have been about 5.6%. And I am a rank amateur.

Perhaps not all of you follow the Dividend Earner blog. He has done much better and beaten the indexes hands down over 12 years. He is at an earlier investment stage than I am. Seems stock picking works for some


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## MrMatt (Dec 21, 2011)

agent99 said:


> Perhaps not all of you follow the Dividend Earner blog. He has done much better and beaten the indexes hands down over 12 years. He is at an earlier investment stage than I am. Seems stock picking works for some


Honestly the dramatic drop to historically low interest rates has really helped dividend stocks.
Also the right tech stocks have had meteoric rises.

I'd say it's more macro effects than skill. they got lucky... just like I did.


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## MrBlackhill (Jun 10, 2020)

MrMatt said:


> I'd say it's more macro effects than skill. they got lucky... just like I did.


It's still beating the index, no matter the context. The index was also helped by low interest rates and tech stocks.


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## MrMatt (Dec 21, 2011)

MrBlackhill said:


> It's still beating the index, no matter the context. The index was also helped by low interest rates and tech stocks.


But the index was not helped as much as those two. Which is the point.

Really going back to all these things afterwards is pretty much survivorship bias IMO.

yes dividends stocks are good, I personally am overweight in them. But to think that I'm a great stock picker because I just happened to be heavily into dividend stocks when interest rates plummeted is silly.
Compare the dividend heavy portfolio to a comparable dividend index is more appropriate IMO.


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## agent99 (Sep 11, 2013)

MrBlackhill said:


> It's still beating the index, no matter the context. The index was also helped by low interest rates and tech stocks.


Excellent point. Shows that for some stock picking can outperform the overall indexes handily. And that is what was being compared. 

By the way, in my case being retired, about 1/2 of our portfolio return was withdrawn and not re-invested. Dividend earner's numbers are based on reinvestment of all income. I had very little in tech stocks (because they don't pay dividends!) Our overall 60/40 portfolio yield was dragged down by the low interest rates.


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## MrMatt (Dec 21, 2011)

agent99 said:


> Excellent point. Shows that for some stock picking can outperform the overall indexes handily. And that is what was being compared.
> 
> By the way, in my case being retired, about 1/2 of our portfolio return was withdrawn and not re-invested. Dividend earner's numbers are based on reinvestment of all income. I had very little in tech stocks (because they don't pay dividends!) Our overall 60/40 portfolio yield was dragged down by the low interest rates.


Was it the stocks, or picking the wrong comparitive index?
I


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## Jimmy (May 19, 2017)

I looked at dividend earner's portfolio and he has a nice mix of value and growth stocks. Some dividend payers can be hurt (banks, insurance companies) w interest rate declines, some benefit ( utilities) and some are indifferent ( REITS). Some tech companies are actually relatively stable. Amazon,Netflix, Microsoft, Constellation etc all seem to have dependable organic and growth by acquisition. many are going to subscription services. They may have got an extra 20% boost from a drop in in interest rates but they will grow 20-30% yr on their own anyway.

If you have a good balance in all sectors and you can pick decent companies you can beat an index of 300 or 500 stocks. The customer service manager on Motley Fool who I chat with at times has made 20%/yr for 15 yrs and he admits he knows little to nothing about investing. I think you can find good advisors to follow and beat the market easily too.


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## james4beach (Nov 15, 2012)

Jimmy said:


> If you have a good balance in all sectors and you can pick decent companies you can beat an index of 300 or 500 stocks. The customer service manager on Motley Fool who I chat with at times has made 20%/yr for 15 yrs


Next time you talk to him, why don't you ask him why (with results like those) does he not advise a pension fund or hedge fund. Anyone with such amazing performance would make an absolutely fortune on Wall Street, and he wouldn't have to answer the phone at Motley Fool.


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## Jimmy (May 19, 2017)

james4beach said:


> Next time you talk to him, why don't you ask him why (with results like those) does he not advise a pension fund or hedge fund. Anyone with such amazing performance would make an absolutely fortune on Wall Street, and he wouldn't have to answer the phone at Motley Fool.


If you are so jealous of his results maybe you should join the MF and you can chat w him too.


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