Deep Value Portfolio Going Crazy

Deep Value Portfolio Going Crazy

Feb. 19, 2024

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Back on January 26th, I wrote about a small Deep Value portfolio.

It was based on a Tradestation scan I created.

And that was based on my favorite way to analyze Deep Value stocks, a long-term SMA, combined with momentum.

This maybe wasn’t smart because, as you know, value stocks have not been in favor the past couple of years.

It’s all AI, tech, and growth, growth, growth.

“Value” recently has meant “garbage stocks that don’t move”.

Which makes sense.

Why is a stock down in Deep Value territory anyway? It’s not because it’s doing well. It’s because something has gone wrong–according to the market.

But what if we took things that are beaten down but have suddenly shown strong momentum?

Warren Buffett has made billions on the idea that a stock falls, the market punishes, and then the market apologizes by taking the stock to the moon.

But when will we know it might go to the moon?

The chart tells us.

When the stock goes up, maybe the Deep Value pick is being revalued by the market. And if “fair value” is way above current price, that revaluation could take it up a long way.

That’s the idea anyway.

And that’s the idea behind that scan.

In that January Newsletter, the portfolio was small. Just three stocks.

Those were the prices at the time. What’s happened since then?

POET has gone nutty and the entire equally-weighted portfolio is up 22.41%.

For comparison, SPY is at the bottom is the market, and the market is only up 3.54% in the same span.

Yes, that could turn around and, yes, those are penny-type stocks. No, they aren’t recommendations.

But Deep Value plus momentum might be something to look into. (Full disclosure, I bought a few shares of POET and I’m up over 30%.)

If interested, I’m currently tracking over 50 portfolios in real-time. Some are my own creation and others are famous names and ideas.

On one hand, I want to know if famous traders and famous ideas really do work well or are just hype. On the other hand, I want to use this data for my own trading.

At some point soon, I’m going to make this google doc available, and I’m going to keep adding to it. The idea is that I want to build a top-level trading resource that shows real data on real portfolios.

Like I said, let me know if you’re interested. If not, I’m happy to keep my portfolios private and do this research on my own.

In our next Newsletter, we’ll talk about a simple 5-minute breakout strategy that’s shows great testing over the past several years.

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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.

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