Category: Investing

CNBC’s Million Dollar Portfolio Challenge: Initial Picks

CNBC I just made my first trades on CNBC’s Million Dollar Portfolio Challenge. Unfortunately, I didn’t have time yesterday to make them. This means I might have missed yesterday’s price movements. Though, according to a comment from B. Hopper, this may not matter, because the prices aren’t yesterday’s prices. Oh well.

My stock selection strategy here is not what I use for my own real-world portfolio. Since this contest is only measuring the total portfolio value up until May 25th, only short-term growth stocks matter here. So my entire selection is based on quick and (hopefully) big wins. They are mostly in the technology sector, where I have the most domain knowledge.

My initial picks:

  • Cognizant Technology Solutions (CTSH)

    CTSH is an IT consulting firm located in India and competes against IBM, Accenture, etc. They reported strong Q4 2006 earnings, just opened their 8th location in India, and are making successful investments in employee retention & recruitment (which is a key business driver for consulting firms).

  • Advanced Energy Industries (AEIS)

    AEIS develops power conversion & control systems used in plasma-based thin-film processing equipment, such as semiconductors, flat panel displays, and solar cells. Solar cells alone grew over 200% YoY in 2006. They have strong sales, high margins, and high insider ownership, all very positive traits.

  • Akamai Technologies (AKAM)

    AKAM provides Internet content delivery services, notably speeding up the download time of websites. They’ve been acquiring competitors and grew their customer base faster than expected. They now have the capability to serve applications and video (against YouTube’s provider Limelight).

  • ValueClick (VCLK)

    VCLK is an online marketing services company. One of their offerings is Commission Junction, their affiliate & search marketing division, which offers services similar to Google’s AdSense & AdWords.

  • Nam Tai Electronics (NTE)

    NTE is a China-based electronics manufacturing & design services provider for OEMs of telecommunications & consumer electronics. They have a low P/E, a high market cap, and is highly rated by many investors, despite being a little-known company.

  • Cabot Oil & Gas Corporation (COG)

    COG is a natural gas producer with operations in the US and Canada. On March 30th, they’re doing a 2-for-1 split and raising their dividend payments. That alone is worth a buy, even though consumers don’t use as much natural gas during the summer.

  • Yahoo! (YHOO)

    YHOO is an Internet search and media company. I’m an employee at Yahoo, so hey, I gotta support my peeps!

CNBC’s Million Dollar Portfolio Challenge

CNBC The email read: Do you have what it takes to compete in CNBC.com’s Million Dollar Portfolio Challenge? Ooo, a challenge!

This started when two buddies and I made a bet to see who could earn the most money out of one dollar, after one year. We started the challenge last December 2006. If I can appreciate that dollar significantly by December 2007, I’ll win!

(We’re just playing for bragging rights and are going by honor that each of us will keep track of just that single dollar’s earnings accurately.)

With all that talk of investing bets, entering the Million Dollar Portfolio Challenge was a no-brainer. Here are the rules:

On March 5th we’ll give you $1,000,000 CNBC Bucks to play with. Make your picks on NYSE, NASDAQ, or AMEX and see how big a return you earn on your portfolio. Make up to 50 trades per day.

Each week one player will win $10,000. After ten weeks, only twenty players will make it to the finals for a chance to compete for the Grand Prize – $1,000,000!

You can earn bonus dollars to grow your portfolio. When you register for the contest, you’ll have a chance to refer 5 friends. You’ll receive an additional $1,000 CNBC Bucks for each one that signs up to play.

Ah. So that’s why he referred me. Dammit, he’s already $1,000 CNBC Bucks ahead of me.

If anyone else would like to enter this challenge, let me know! C’mon, it’ll be fun! Plus, I get an extra $1,000 CNBC Bucks!

Every once in a while, I’ll publish my trades & holdings on BizThoughts, so you can see how poorly I’m doing. I’m an amateur investor at best (and am nowhere near as good as someone like, say, a Playboy Playmate). But, heck, it’s only CNBC Bucks. And who doesn’t love a good challenge?

Huge Chinese Investment Fund

Growth Chart of China This is huge. In a few months, China is going to to build the world’s largest investment company: The State Foreign Exchange Investment Company.

It will be funded about 210 billion dollars. Reportedly, that’s only one-fifth of China’s foreign exchange reserves (China has one trillion dollars for foreign exchange?? Holy moly!).

In contrast, the world’s largest mutual fund, the Growth Fund of America (AGTHX), has 160 billion dollars. Bill Gates, the wealthiest individual in the world, has 53 billion dollars.

This is huge because an investment company this size will have an impact on global economies. George Soros, an individual investor with only 8.5 billion dollars (I said “only,” geez, wish I had “only” 8.5 bill), infamously pressured the British pound from joining the European Exchange Rate Mechanism (ERM) and thus, adopting the euro. If one guy with a few billion dollars can do this, imagine what 210 billion dollars could do.

Fortunately, China realizes this. Zhou Jiangong, a Shanghai-based economic analyst, comments:

The outflow will be carefully managed since a stable asset market is in the interest of China.

This also means a potential profit for those who follow the company. Zhang Ming, a Beijing-based economist with the Chinese Academy of Social Sciences, offers:

Other investors will be following it closely and try and guess its next move. They’ll buy assets that the company is likely to buy, and withdraw from markets if that’s what they believe the company will do.

This is one company I’m going to definitely keep an eye on.

How Do YOU Feel When You Trade?

Brett Steenbarger of TraderFeed posted a personality questionnaire a few weeks ago. It is designed to assess the emotions you experience when trading in the stock market. Here’s how I scored:

Questionnaire

  1. I feel happy when I’m trading = 4 (often)
  2. I feel stressed when I’m trading = 2 (occasionally)
  3. I feel alert and energetic when I’m trading = 5 (most of the time)
  4. I feel discouraged when I’m trading = 1 (rarely)
  5. I feel capable of succeeding at my trading = 4 (often)
  6. I blame myself when my trading doesn’t work out = 1 (rarely)
  7. I feel satisfied with my trading results = 4 (often)
  8. I feel edgy and frustrated when I’m trading = 1 (rarely)
  9. I feel in control of what happens in my trading = 3 (sometimes)
  10. I make impulsive decisions when I’m trading = 1 (rarely)

Totals

My positive emotional experience score (all the odd questions): 20
My negative emotional experience score (all the even questions): 6

Steenbarger next post describes what these scores mean. Basically, a high positive score and a low negative score is good. So I’m doing well. Whew!

He cites several studies that describe a concept called subjective well-being (SWB). One study, from the Annual Review of Psychology, entitled “On Happiness and Human Potentials: A Review of Research on Hedonistic and Eudaimonic Well-Being” by psychologists Richard Ryan & Edward Deci, describes SWB as having three components:

  • General life satisfaction
  • The presence of positive emotions
  • The absence of negative emotions

They may sound familiar; they’re basically the components of happiness. One of the more interesting finds from this study is that we’re happier when we pursue autonomous goals.

When we are free to set and pursue our own goals, we tend to be much more fulfilled than if we are pursuing goals that have been set for us.

You’ve probably heard the axiom that good-looking people are happier in life. Well, another notable find from the study:

Interestingly, such factors as salary and physical attractiveness do not predict SWB. In fact, people whose values show a preference for high income and job success over personal relationships tend to report less happiness and self-fulfillment than those who emphasize interpersonal attachments.

The questionnaire was designed to “assess well-being and stress in the context of one’s trading.” The positive emotional experience questions focused on feelings of personal satisfaction, perceived competence, and perceived autonomy. The negative emotional experience questions focused on feelings of anxiety, frustration, and loss of control.

In other words, it’s much more important to have self-confidence and control over your own trading goals, than to be in the market purely for a profit. Steenbarger summarizes this well:

Trading may not always be profitable, but it is important that it contribute, over time, to a sense of autonomy and competence and that it be accompanied by experiences of personal fulfillment.

The Link Between Breasts and Stocks

TradingMarkets.com just completed their Playboy 2006 Stock-Picking Contest. In this contest, ten Playboy (PLA) Playmates each selected five stocks to be tracked throughout 2006. The one with the highest percentage gain received $50,000 to be donated to a charity of her choice.

So, does beauty have a brain? If I were to correlate something like, say, augmented breast size with overall portfolio percentage gain, would there be a relationship? Let’s see.

Playmate Breast Size Portfolio Gain
Deanna Brooks 36C 43.43%
Courtney Culkin 34C 32.84%
Amy Sue Cooper 34C 28.19%
Kara Monaco 34C 16.59%
Lindsey Vuolo 34DD 13.39%
Pennelope Jimenez 34D -1.28%
Christine Smith 34DDD -1.93%
Pilar Lastra 34C -3.32%
Jillian Grace 36D -5.39%
Amy McCarthy 34D -36.95%

I converted each cup size into a 20% fraction, starting with a C cup. So:

  • C += 0.2
  • D += 0.4
  • DD += 0.6
  • DDD += 0.8

Here is the chart of their percentage gains, ordered from highest to lowest:

Percentage Gain Chart

Now if there is a correlation, this next chart should have a similar curve:

Breast Size Chart

However, it does not. So apparently there is no correlation. Too bad. What does this exercise teach us? That:

  • 34C is the minimum breast size needed to be a Playmate
  • They’re doing wonders with plastic surgery nowadays
  • I had to do this “research” at home, otherwise I would have gotten an interesting email from IT
  • Yamana Gold (AUY) went up 99.39% in 2006!
  • Deanna Brooks is turned off by hairy backs

Wallstrip Chat… Smaaart Cat…

For some reason, everytime I watch Wallstrip’s interview of James Altucher, I crack up. The quirky Lindsay Campell starts the clip off with this bluesy line:

Wallstrip chat… James Altucher… Smaaart cat… Check it out.

Cracks me up!

It was my introduction to Wallstrip. After seeing it, I thought that Lindsay was going to open up every show with a similar bluesy line. Alas, she does not (bummer) – though she does do & say plenty of quirky things in the other shows.

Yesterday’s show, Greetings from Phoenix, is good too. Check out how proud Lindsay is after she hits the first ball. Also, from Howard Lindzon:

One thing that I’ve always wanted is clean balls… very important.

Them’s words to live by.