05 Jan Stock Portfolios for 2024
Stock Portfolios for 2024
Jan. 5, 2024
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As you probably know, I’ve been writing this Newsletter since 2013, and it’s mostly been about Forex.
But it’s time to branch out.
And as you know from the Newsletter earlier this week, the most popular posts from 2023 were all about stocks.
What a coincidence! I’m going to be trading stock accounts going forward and will be doing a ton of equity research.
But what type of stock trading will we talk about?
In 2023, I ran a stock program that focused mainly on trend following breakouts on long-term charts. It was initially a terrible time for trend following (from Nov. 2022 through early 2023) but we were able to find some stocks that took off.
The problems with this style of trading are twofold:
- It’s very tough to take stop-outs. I really don’t like waiting for a breakout and then having it reverse into a loser. I don’t like it if it happens to you, either.
- There are no targets. How to properly exit a trend following trade is a conundrum that has puzzled traders for centuries. And there’s no easy answer.
On one hand, trend following gives us the potential pain of a stopout.
On the other hand, we get the even greater pain of being in a winning trade. Successful trades are more stressful, in a twisted truth of psychology.
Can we fix that?
If we focus on Deep Value.
Deep Value means we’re buying on sale. And we’re not selling it for a very long time, if at all.
Is that similar to Warren Buffett and Charlie Munger? Yes.
So it’s got that going for it. Which is nice.
We can buy something that’s way below “fair value” and then hold it forever, if we like.
Or we can hold it until it reaches “fair value”, and then move on to another stock.
And if we get into trouble (go negative in our position) we have a “fair value” number to trade to. We can buy more if it drops and then, again, sell everything when it hits our “fair value” goal.
In short, if it goes to our target, we win. If it gets into trouble, we have a way to get out of trouble. We win.
Here’s a possible way to use this style of trading.
Back in October, I found Goldman Sachs’ Top 40 list of undervalued stocks. (I have many different equity subscriptions, so I see these sort of lists all the time.)
How has that list of 40 stocks done?
In 86 days, it’s returned 16.3% (which is an annualized return of 47.9%).
Here are the Top 10 most undervalued stocks from that list:
You can see Goldman’s projected return and, next to it, the actual return since October 2023. Any stock that hasn’t taken off yet might be interesting.
However, that top 10 has only returned 4.8% so far. That isn’t great but also might tell us that these have a lot of upside remaining.
I then took that same list, analyzed it with technical indicators, and made my own Top 10 list:
My Top 10 is up 10.6% since it started, which is an annualized return of 31.2%. Not bad.
In the far right columns, you can see my Projected Return (how far it has to go to “fair value”) and also the actual price target (under “SW SMA”).
Feel free to investigate the ones with the most upside, or any others.
These are NOT RECOMMENDATIONS, however. They’re meant to educate and entertain.
That said, I have many more portfolios I’m tracking in real-time.
If you’re interested in this sort of thing, let me know. I’m considering running a Deep Value program.
As always, happy to have feedback.
Talk to you soon.
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.