Better Than Random Scattershot

Better Than Random Scattershot

May 22, 2024

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In our last Newsletter, we talked about a “Scattershot” portfolio of high Short Interest stocks.

The idea was that one or two of them might catch a meme-type move and make us hypothetical money.

As it turned out, the high Short Interest Scattershot portfolio was only half as good as the market.

I was going to move on to talking about a new portfolio I might start trading live, but I realized that I hadn’t really closed the loop on the Scattershot idea.

I said there might be a better way to use this method and left it at that.

I gave a problem but no real solution.

So, I’m going to fix that before moving on to something else.

As mentioned, I don’t think a random monkeys-throwing-darts method makes sense.

Why choose not thinking over thinking?

So, here’s an example of what I mean.

Back in January of this year, I put together a list of large-cap stocks that have beaten the market over the past ten years.

All of them beat the market. No random monkey choices.

While the Scattershot idea of a couple doing well, several doing okay, and a few doing worse still applies, my idea was that making several good choices instead of several thoughtless random choices would be better.

Is it?

Here’s the portfolio I made on 1/14/24. All of these would be considered “good picks” in my mind:

How has it played out?

Here’s where we’re at as of this writing:

True to form, a couple have done very well and a couple are down. Many are doing decently.

But here’s the difference.

This portfolio is actually beating the market, up 12.3% to the market’s 10.8%.

The random Scattershot Short Interest portfolio has dramatically underperformed.

The thoughtful Scattershot portfolio is beating the index funds.

It’s only been five months, but it’s interesting.

Talk to you soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.