My Wife’s Personal Mutual Fund Crushes the Markets, AGAIN

My wife’s so-called “personal mutual fund” returned 22.72% from August 5, 2014 through to last Friday, February 19, 2016 (approximately 18 months).

As a comparison, the following stock market indices performed as follows:

Dow Jones Industrial Average: -0.23%
S&P 500: -0.13%
NASDAQ Composite: 3.48%

Her buying habits CRUSHED the general markets, by a HUGE margin, just as they had from the day we were married back in 2004.

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The personal mutual fund (as outlined in the blog post, My Wife’s Personal Mutual Fund Outperforms the Pros, back on August 6, 2014), highlighted 22 stocks of companies whose products or services she religiously buys or uses on a daily or weekly basis.

Of the 22 stocks, 20 show gains while only two show a loss ($KORS and $XOM). The top five leaders are as follows:

  • Amazon ($AMZN) leads the pack with a 71% gain
  • Home Depot ($HD – actually my store) is second with a 56% gain
  • Starbucks ($SBUX) comes in third with a 53% gain
  • Netflix ($NFLX) is up 47%, a service used by the entire family
  • Facebook ($FB) is up 43%: yes I admit it, we are both addicted (very bullish going forward)

This is simple investing logic (for our family) as we use the products and services of these five companies every day (HD being the lone exception for daily use, but monetarily, it may lead the pack).

Amazingly, 14 of the 22 stocks show a double digit gain:
$AMZN $HD $SBUX $NFLX $FB $V $TJX $COST $TGT $CVS $GOOG $MA $PEP $DIS

The other six positive stocks show a gain between 0.1% and 9.94%:
$VZ $JNJ $PG $COH $AAPL $WFC

For the second time in less than two years, I am convinced that my skills, or lack thereof, are no match for the power of my wife’s product and service buying habits. Hands down, her habits are kicking the market’s a$$ and my a$$ for that matter.

Who needs a financial advisor or one of these “trendy” new robo advisors when I can just copy what she is buying and doing?

As I said back in 2014:

Peter Lynch subscribed to the idea of “know what you own”. I know what my wife owns and can take the lesson that many other wives (and people in general) are buying what she is buying. Consumers = profits and profits typically lead to earnings which leads to a rise in share prices. Sounds like a simple formula.

The formula is WORKING!

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How to Trade the Price of Crude Oil

My high level thoughts are as follows:

Oil ($WTIC) will bottom out somewhere in the $20 range (when, I don’t know). OPEC is flooding the market with hundreds of thousands of barrels each day to force the price down to the point where most if not all American companies are forced to cease operations. The bankruptcies are already piling up from 2015 and will accelerate in 2016. Once the majority close shop, OPEC will pull back production and the price will increase (perhaps rapidly).

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As it stands today, most American shale companies require crude to be at $60 per barrel to stay profitable. The leaders are getting by, by using efficient methods but the break-even point is still well above the current price level of crude oil.

Another thing we should watch is the proxy war between Saudi Arabia and Iran (hat tip to a friend on this perspective). When Iranian crude comes on-line, prices will drop again. Maybe that sends prices below $20 (unless already priced into the market, which it probably is). The United States and Russia will be squeezed tremendously, the question is, will the US bail out or prop up their oil companies (my guess is no, as that would be highly political, being oil companies). When gauging public opinion: propping up GM in 2008 is a lot different than bailing out the “big bad (& rich)” oil companies.

Bottom line: oil is not at the bottom yet and prices can drag along the bottom for a long, long time. But in the end, oil will come back up (it’s a matter of how long will that take). We just need to find the best vehicle to place this trade at the right time.

Do we do this using ETFs, leveraged ETFs (short term), futures, specific equities, etc.
Perhaps a combination of all of them, depending on the time frame of the trade.

I see crude a lot higher than it is today, 12, 18 and 24 months into the future but I haven’t determined the correct vehicle to make this longer term trade (ETFs decay, futures aren’t my game and individual equities are risky). I’ll keep you posted on my moves…

Charts: $WTIC $USO $UWTI $DWIT $XLE

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A Recap of Stock Trends for 2015

In the blog post, Stock Trends for 2015, twenty-eight stocks were identified as represented by six trends over the course of the year with the following results:

The lazy man’s portfolio had a total gain of 12.79%

  • 18 stocks ended in positive territory
  • 10 stocks ended in negative territory

NOTE 01: by “lazy man”, I mean that the 28 stocks would have been bought and held all year without any buy and sell rules. Clearly, the exercise was for observational purposes ONLY.

Comparison to US Markets:

  • NASDAQ: +5.94%
  • S&P 500: -0.69%
  • DJIA: -2.29%

Comparison to All World Markets:

  • All Markets (Average): -10.20%
  • Fifteen stocks logged double digit gains.
  • One stock logged a triple digit gain.
  • Six stocks logged double digit losses.
  • The big winner was Amazon.com, $AMZN, with a gain of 132.47%, moving from $290.74 to $675.89
  • The big loser was Barracuda Networks, $CUDA, with a loss of -47.40%, moving from $35.51 to $18.68

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It’s interesting to note that CUDA was actually showing a 22% gain in April 2015, running as high as $46.78 before crashing in the summer and ending the year at $18.68.

Six of the ten leading gainers started with a triple digit share price while the bottom three losers all started below $40 per share. One may argue that this outcome further confirms the observation from William O’Neil:

“What seems too high and risky to the majority generally goes higher and what seems low and cheap generally goes lower.”

Of the six trends, the groups performed as follows:

Digital Wallets (currency) & Mobile Payments, +43.53%

  • The group was up a collective 43.53%
  • Companies in group: $AMZN $GOOG $V $MA $AAPL
  • 5 of the 6 stocks showed a gain
  • 1 of the 6 stocks showed a loss (less than 1%)
  • The leading gainer was AMZN at 132.47%
  • The leading loser was AAPL at -0.69%

Self Driving Cars (Future of driving), +37.35%

  • The group was up a collective 37.35%
  • Companies in group: $NVDA $GOOG $TSLA $MBLY
  • All 4 stocks showed a gain
  • The leading gainer was NVDA at 65.13%
  • The trailing gainer was MBLY at 10.48%

Drones & Unmanned Aircraft, +9.25%

  • The group was up a collective 9.25%
  • Companies in group: $NOC $AVAV $LMT $BA $TXT $LLL
  • 4 of the 6 stocks showed a gain
  • 2 of the 6 stocks showed a loss (both less than 5%)
  • The leading gainer was NOC at 23.14%
  • The leading loser was LLL at -4.90%

Biotech, +5.68%

  • The group was up a collective 5.68%
  • Companies in group: $REGN $ILMN $CELG $JUNO
  • 2 of the 4 stocks showed a gain
  • 2 of the 4 stocks showed a loss
  • The leading gainer was REGN at 32.83%
  • The leading loser was JUNO at -12.31%

Social & Web based brands, -2.43%

  • The group was down a collective -2.43%
  • Companies in group: $FB $LNKD $BABA $TWTR
  • 2 of the 4 stocks showed a gain
  • 2 of the 4 stocks showed a loss
  • The leading gainer was FB at 39.21%
  • The leading loser was TWTR at -37.98%

Cyber Security, -4.86%

  • The group was down a collective -4.86%
  • Companies in group: $PANW $CYBR $CHKP $QLYS $RDWR $CUDA
  • 3 of the 6 stocks showed a gain
  • 3 of the 6 stocks showed a loss
  • The leading gainer was PANW at 40.90%
  • The leading loser was CUDA at -47.40%

NOTE 02: none of the figures above include dividends
NOTE 03: Google (Alphabet) $GOOG is represented in two groups when results are separated by trends

Of the twenty-eight stocks listed in 2015, I will definitely give a look and consider the following heading into 2016: AMZN, FB, GOOG, V, MA, TSLA, BABA, CYBR

Although many of these stocks have been up for one, two or even three plus years, don’t let that discourage you until the trend changes.

“The trend is your friend except at the end when it bends.” – Ed Seykota

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Stock Trends for 2016 will be issued shortly.

16 Trading Quotes & Books for 2016

“The obvious rarely happens, the unexpected constantly occurs.” – Jesse Livermore

“A speculator is a man who observes the future, and acts before it occurs.” – Bernard Baruch

“What seems too high and risky to the majority generally goes higher and what seems low and cheap generally goes lower.” – William O’Neil

“Successful speculation implies taking risks when the odds are in your favor.” – Victor Sperandeo

“Stocks are bought not in fear but in hope. They are typically sold out of fear.” – Justin Mamis

“Accepting losses is the most important single investment device to insure safety of capital.” – Gerald M. Loeb

“To me, the “tape” is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!” – Martin Zweig

“You have to master your ego & realize that being profitable is more important than being right.” – Martin Schwartz

“Losing a position is aggravating, whereas losing your nerve is devastating.” – Ed Seykota

“If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.” – Peter Lynch

“Risk comes from not knowing what you are doing.” – Warren Buffett

“You must learn that the market is a discounting mechanism, and that stocks sell on future and not current fundamentals.” – Stan Weinstein

“I was successful in taking larger profits than losses in proportion to the amounts invested.” – Nicholas Darvas

“The first rule of trading – there are probably many first rules – is don’t get caught in a situation in which you can lose a great deal of money for reasons you don’t understand.” – Bruce Kovner

“Intellectual capital will always trump financial capital.” – Paul Tudor Jones

“I have noticed that everyone who has ever tried to tell me that markets are efficient is poor.” – Larry Hite

Stock Trends for 2015

I’m always in search of trends that may offer solid investment opportunities (using individual stocks) but at the same time may not be “bleeding edge” technology. The best performing trend trading stocks don’t have to be unknown or highly touted IPO’s but rather they can be established companies. In searching for trends in 2015, the list of stocks I have developed is a combination of small growth, IPOs and established names.

So let’s identify a few trends that should continue to grow in 2015 and then identify a few stocks within each of these groups that could provide some upside. One caveat: the overall health of the market must be positive in order for the majority of these investments to do well.

Six trends come to mind:

  • Cyber Security
  • Biotech
  • Digital Wallets (currency) & Mobile Payments
  • Drones & Unmanned Aircraft
  • Self Driving Cars (Future of driving)
  • Social & Web based brands

Cyber Security
$CYBR, $PANW, $CHKP, $CUDA, $QLYS, $RDWR

One of the obvious trends that should continue in 2015 is cyber security as breaches at major corporations around the world continue. Home Depot, Target, Staples, Michael’s and most recently Chick-Fil-A have all admitted to being “hacked”. And who can forget about the fiasco at Sony (whatever the real story may be). These companies and especially financial institutions must spend more money to protect their servers, clouds, data and integrity. This is precisely why I initiated a position in the cyber security sector in late 2014 and will continue to add to the position (at ideal risk / reward entries), using multiple stocks to diversify within this growing trend. One idea I have considered is building my own cyber security motif which would likely include several of the stocks listed above. Taking that idea further, a motif containing many of stocks listed in today’s overall blog post is a possibility as well.

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Biotech
$ILMN, $JUNO, $CELG, $REGN

The next trend that I like is biotech (a carry-over from 2014) and the big winner over the past several years has been Regeneron Pharmaceuticals. I have had the unique perspective of working with $REGN as they have expanded their headquarters in Tarrytown, NY; consulting for them (Real Estate & Construction) since January 2010 when the stock traded at $25 per share – it’s now trading above $400. Due to this professional relationship, I have mostly avoided talking about the stock on the blog and twitter.

With that said, I still like the broad sector. Illumina was a rock star in 2013 but traded mostly sideways in 2014. I liked the action in 2014 and view it as a long term flat-type base that looks poised to breakout above $200 per share. Sounds expensive, right? So did REGN at $100, $200 and $300 (after running from $25). $ILMN made a breakthrough in DNA sequencing and looks poised to continue that trend as well as expand elsewhere.

Next up is Juno Therapeutics, a biopharmaceutical company that engages in developing cell-based cancer immunotherapies. The company develops cell-based cancer immunotherapies based on its chimeric antigen receptor and T cell receptor technologies to genetically engineer T cells to recognize and kill cancer cells. Young IPO stocks are risky and typically like to build bases within the first year of trading but I am placing $JUNO on the list (use caution with first year IPOs). Cancer is not going away and the fight against it will continue to grow.

Both CELG and REGN can be added to a portfolio as their businesses continue to be cash cows.

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Digital Payments (currency) & Mobile Wallets
$AAPL, $GOOG, $AMZN, $V, $MA

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