Sharepick Comp Experiment

[Winston001]

As a newbie, I can't contribute much so I thought everyone might be interested in a little experiment. I need to preface this by explaining that the stocks selected were by dint of pen and paper, late at night so I might have chosen inexactly.

Anyway, "The Wisdom of Crowds" got me thinking over the holidays. Given that the people who enter the 2005 Stockpick Competition are relatively informed about shares (as opposed to the hypothetical man on the Porirua unit), here was a crowd who might have collective wisdom. More on this later.

So I analysed the entries for the most popular - and here they are with results to 25/2/05:

Stocktrader Pick
NOG +22%
PPP +3.5%
APX 0
SLG -2.5%
AFF +12.2%

Total Gain 6.91%

Next I wondered if maybe the crowd should be compared with specific competition pickers. So I went back a couple of years and analysed those who seemed to be near the top of the pack. I selected Plynch, DOC, Onthemoney, Digger, and The POD.

From their picks, I built a second portfolio on what they agreed. There were 4 so I added MFT cos...............I needed a fifth and Plynch seemed to know his onions.

Stocktrader Alternate
IFT +8.3%
MFT +18.2%
PVO +19.7%
RPL +24.6%
WPL -14%

Total Gain 11.34%

So much for the wisdom of crowds girls and boys. However we are barely 2 months into the year so time will tell. I only wish I'd backed the Alternates with some dosh.

Cheers
Winston

[duncan macgregor]

WINSTOE001, Interesting little experiment it shows that you are thinking. The trouble with what you are doing is that most people that make the selections fall into three or four groups. The first group are the people out to win, that back the penny dreadfulls in the hope that they will fluke a win. Incidentely the winner of the competition will more than likely come from this group. The second group is the die hard fundamentalists, that do all the sums fall in love with the company, and back the same companies year in and year out. This group has no chance of winning. The last group that most of us fall into have a pick at what they think will come out on top in 12 months time, and use a bit of guess work, and probabely pick companies that are doing well at that moment. The people that in real life win on the market are the people that change with the market which will be totally different when the competition ends.
macdunk

[whiteheron]

Winston001

It is good to see you thinking about things

These are my comments for what they are worth on stock picking competitions and I am not trying to knock them
In fact I have joined the Aussie one , but not the NZ one as even though I live in NZ I do all of my trading with one exception in Aussie

The real world is entirely different to a stock picking competition
The difference is that in a stock picking competition you can pick shares that are rank outsiders and win , just like Macdunk says , but in the real world it is your hard earned dosh that you are laying on the line and this is an entirely different proposition
In a stock picking competition you can just say oh well that didnt work , hope I have better luck next year , but try that in real life and you will go broke real quick

Two examples;

Yogi in Oz , who picks based on some sort of horoscope system that I just fail to comprehend , came first in the 2004 Aussie competion but is currently last in the 2005 competition ( and yes , I am aware that there is a long way to go in 2005 yet )

Shares magazine has an article in the current issue on the winner of a competition that they ran last year
He was given a great deal of assistance to set himself up as a full time trader but after six months he gave up , being unable to make a go of it

Trading shares in real life is a serious and somewhat risky business , but there are ways to limit losses and maximise profits ( a loss prevented is equal to and just as important as a profit made --- stop to think about that for a moment , it may entice you to quit a dog or two )
It requires much research and a pretty good understanding of how markets are likely to respond to various events
To be successful in trading I believe that you need to have a good grasp on current affairs , both on the local scene and on the wider world scene

Above all else , keep thinking and researching

[SEC]

http://www.sharetrader.co.nz/topic.asp?TOPIC_ID=21137

[Steve]

Interesting thoughts Winston. Perhaps you could post an update at the end of each month, just like the the comp?

[Winston001]

Thanks SEC. In fact it was your initial post which gave me the idea.

And yes Steve, I'll update each month. I meant to wait until 1 March but for this thread but what the heck.

Thanks for the encouragement Whiteheron and Mack. I know these comps are a stab in the dark, but not always - Plynch noticeably has picked some mainstream stocks. I'll be interested to see how he goes.

[Doc]

Hi Winston,

That is an interesting little exercise you have come up with. I've had some success over the last couple of years with the stock picking comp, but must confess I haven't always bought many of the shares I have picked. Mainly this is due to a lack available funds to buy into 5 shares at a given point, that I invest mostly on the oz stock market these days, and that I tend to invest the lion share of my funds in only two or three shares at a time. This year I own mainly NOG, NOG options (but on the oz exchange) and NEO (oz stock) and have done well and expect to continue to do very well out of them this year. Recently I also picked up some AWE and CUE all on the oz exchange.

Having said that, when making these one year stock picks for the comp I do take my time, think about what will be in demand in one year, and take the odd calculated risk while limiting the potential downside. For my picks this year I have gone heavy in the oil and mining sector with eyes looking well toward the end of the year. With high oil, gas and resource prices prevailing, I reckon companies that are turning the corner from explorers to producers will do very well. I own NOG and CUE, but not the APX, PPP or WPL picks. NOG is rock solid, and as close to a guaranteed winner over one year as you can get. PPP probably has limited downside, and reasonable upside potential depending on how they will fund their share of development costs in the offshore TAP field. PPP is also talked about as a takeover target, but I wouldn't bet the house on it. CUEVA has a lot of upside if the large santos oil find is proved up and put into production quickly. CUEVA has the right to buy back in to that field as a partner in the permit. APX is the most speculative, and how it fares will depend largely on what they find and can produce out of the current cardiff gas exploration well. No matter what the result in cardiff, they have other projects progressing well enough to limited any potential downside. WPL is the sleeper in my stock picks. WPL are proving up how much nickel is in their vietnamese tenement, and the shareprice at the end of the year should appreciate significantly if they shore up reserve estimates and announce they will move toward production.
That has been my thinking for this year, and I half expect and half hope that they will do alright come December.

go the alternates! (even though the current worst performer is the only one I picked)

Doc

[Winston001]

End of March update - oh dear...........[:0]

Stocktrader Pick

NOG -8.5%
PPP +0.7%
APX -0.45%
SLG -20%
AFF +2.45%

Gain/Loss -5.2%


Stocktrader Alternate

IFT +1.8%
MFT +17.8%
PVO +10.5%
RPL +1.5%
WPL -39%

Gain/Loss -1.5%

Interesting results, particularly given the recent drop in the market. These figures could be worse but will have been partly lifted by end of financial year pricing. Still, the alternate picks which are less volatile stocks may show the wisdom of at least a few people, if not the crowd.

[PLYNCH]

Hi Winston
Did you include RPL`s 2c dividend?

[K9]

Winny, this site could do with some interesting posts


hows your experiment coming along?

[Winston001]

Hi there K9 and Plynch. Apologies all around. Plynch is right - I didn't take account of dividends. And sorry I haven't updated but I will. I have to admit to crawling into a deep dark cave about March when my portfolio dived. Only about 15% in hindsight which has since been regained.

But just when I advanced feebly into the daylight - wham - Feltex fell out of the sky. I decided the cave was safer.:D

So I'll update as soon as I have some time. Thanks for the reminder.

[Winston001]

Ok, I've done a quick tally. Here are the current results of the two portfolios:

Stocktrader Pick

APX -3.41
AFF 7.32
NOG -3.85
PPP -3.45
SLG -28.57

Total -32.08


Stocktrader Alternate

IFT 12.74
MFT 28.89
PVO 10.53
RPL 9.48
WID -25.57

Total 36.07

Interesting divergence. This is only an experiment of course and not scientific. It also only covers 6 months. But so far the evidence is that a few folk are vastly better at share investing than the majority. Even when that majority are knowledgable.

This rather flies in the face of "the wisdom of crowds". Mind you next month could see a complete reversal in the other direction.

What it does do is support the investment approach of finding a successful investor and following that person. An approach which has attracted me at times but actually finding such a person is problematical.

[The P.O.D.]

This is a completely random occurence that the alterantives are beating the stocktrader picks. nothing more. you would be unwise to blindly follow anyone, including warren buffet.

I have had some good returns and terrible returns over the years.

The only advice to follow is to make regular additions to your portfolio. i.e. keep investing/saving.

The last 3 years has been kind and everyone thinks there is a magic formula. there isn't. As I have said a few times before - monkeys could of achieved the same result. After running the asx comp for a few years and looking at the distribution of results no-one in this forum is exceptionally better than the group.

Mind you, if you want a good return in the next 3-4 months then MXI on the ASX is cheap and ussually a great buy before august and hold for a few months. Mind you, history is random as well, so you never quite know, do you?

[trackers]

It is important to reiterate how a person trades is absolutely pivotal to their success - timing, exit strategies etc. whilst i have done pretty good in this years contest, i admit to picking stocks that i was familiar with for a rise in the short term.