Comments for entry "Winning by Picking Losers" at Dilbert.com Blog

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Comment from HumbleOpinion

SunPMCDTE_Rthth

People used to be able to make money in the stock market by buying the 10 "Dogs of the Dow" on the first trading day of the year and selling them on the last day. It got too popular and doesn't seem to work now, but you are usually better off going against the flow. It is just as hard to pick losers as it is winners.

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Comment from EMU

FriPMCDTE_Rthth

Hi! I just asked around. You short the (relative) underperformer and buy the (relative) outperformer.

Comment from dugfromthearth

FriPMCDTE_Rthth

Over what time period? Apple is almost certainly a loser over the next 5 years. It is a company based on temporary peaks when it releases a revolutionary product and then loses the market to others. Over the next year it may do well, over 5 it will go down. Try price/earnings ratio. Drop the 50 with the highest price/earnings ratio and see how you do. That is a direct measure of stock to company performance. Of course it is based on past performance.

Comment from EdCondilbert

FriPMCDTE_Rthth

I'm personally avoiding large bank stocks, which requires also avoiding S&P 500 and other large cap index funds. My mid cap index fund may or may not be safer. It's an experiment.

Comment from EMU

FriAMCDTE_Rthth

Scott: "[In my context, a "loser" is any stock that doesn't go up as much as the index. That's a huge universe compared to the ones short sellers profit from. -- Scott] " An index is (or used to be, before all that retail stuff popped up) supposed to capture the average performance of its market segment. Therefore, about half the stock in the segment will underperform it and the other half will outperform it. So, I'd guess you have a 50% chance of picking a loser. I don't know how to do it but with options it ought to be possible to construct a set of trades whose profit lies in the relative outperformance of the index.

Comment from yariva2

FriAMCDTE_Rthth

Scott, You're confusing picking losing companies and picking losing stocks. The first is easy (as it is with winning companies), the second is very hard. The differentiating factor is price. It isn't enough to pick a company that is going to decline in the future if that is alreasy priced into the stock - the company will have a hard time,but the stock may fluctuate or even go up. So, it's mispricing you're looking for, not future prospects. The same is true for the reverse - picking winners. We all know Apple is going to make a ton of money and crush competitors. But is that already priced into the stock? That's hard to tell.

Comment from Icono

FriAMCDTE_Rthth

@tigerh8r: "Assuming fossil-fuel magnates who secretly rule the universe don't have them eliminated! :)" How do we know this has not already happened, maybe even several times?

Comment from RogerWilco

FriAMCDTE_Rthth

Of course back in the "dot.com" boom/bust era when companies ipo'd with a power point and Lots ofvrazzle dazzle there were tons of spectacular winners and losers and the (in)Famous site F***ked Company.com tracking it all, but of course specializing in followw Ing and picking upcoming losers who often had spectacular and amusing flame outs. But also often had tell tale signs making it possible to easily pick their impending doom.

Comment from Melvin1

ThuPMCDTE_Rthth

I'm surprised at the number of people saying "don't try to pick stocks or time the market; it can't be done." Actually, as a financial advisor, I agree with the first part - that MOST people shouldn't try, because MOST people are lousy at it. It's probably also good advice for installing electrical wiring and gas lines. But it's a big leap to say that because it's often (perhaps usually) done poorly, that it can't be done well. Most people buy high and sell low. They buy what's already gone up, and is in the news, and is likely overpriced, and sell whenever it goes down significantly. This is true even of their timing in buying/selling index funds, so they don't solve the problem. Fund managers are plagued by this issue. For example (hypothetically): let's say your niche Emerging Markets fund doubled last year; THEN money pours in. Even if you (the manager) think the sector is over-priced, you're bound by the prospectus (and your investors' desires) to buy with all of that new money. Then it falls by half (as you expected). The fund has broken even (doubled, then halved), but most of the investors lost half of their money, because they bought AFTER the doubling. So they pull out what's left (just when Emerging Markets are poised to rebound) and move on to the Gold Fund, which has recently doubled... Repeat and fade...

Comment from Drowlord

ThuPMCDTE_Rthth

Anyone competing against the iPad? This makes the supposition that an iPad is displacing other computing devices. Traditional computers are dying for their own reasons. The biggest problem is really that computer specs aren't moving in meaningful ways, and software requirements have stalled. For most purposes, an 8-year-old laptop is just fine for a modern user -- it plays video, has decent networking, fast enough processor and enough memory to run all office applications, most development tools, and tons of games. It doesn't help that we haven't seen a killer app in half a decade...

Comment from Tigerh8r

ThuPMCDTE_Rthth

I can't help but feel that as soon as someone identifies a company as a "loser" it will start to tank regardless of what the company is actually doing. The stock market is only partially based on a company's actual value, the rest is paranoia, pop culture, and possibly voodoo. It obviously doesn't work the other way around, just look at facebook. BUT - I think most green-energy stocks will be a dead-end until someone makes a real and profound breakthrough. Assuming fossil-fuel magnates who secretly rule the universe don't have them eliminated! :)

Comment from servenvolley

ThuPMCDTE_Rthth

Scott asked for losers and I don't see where anyone is actually naming loser stocks. I pick Tiffany (tif) as a loser as its prospects for growth are so tied to China and I think China is coming down hard over the next year as europe goes into recession. ALso, Genesee & Wyoming (gwr) which is a railroad company with strong ties to China in Australia. I went short them both but didn't make much money because (as usual) I was early. Since I got off my shorts they have come down but I bet they go down more.