The Popcorn Strategy
Pareto principle in action on penny stocks
Missing out?
There’s an old saying that if you keep giving stock ideas, they’ll only remember the good calls.
Well, that saying has been proven wrong with Jim Cramer a day after he recommended IBM (I lost a lot with his Bear Stearns optimism, and it still stings)
But what if he was right?
And your timing is wrong?
When I used to go to the gym, the retired fireman turned day trader, loved to watch Cramer. Some of what he argued for turned out very very good.
But truthfully, we must realize he has a daily show to do, and there is no possible planet you can really manage 1000 market calls. The only thing you can do is be consistent with your methodology. And expect listeners to observe, or not put all their eggs into one dud.
And expect that 20% of the recommendations make up for the other 80%
That is what is known as the 80/20 rule, or the Pareto Principle. You know, the guy that came up with it.
What I have observed when you buy investments and penny stocks that you like, you need a bunch of them because you really don’t know which one bring home the bacon.
They are not well covered. And it’s hard to gauge the real potential they have.
So after presenting to you the FatDogs Index, and a way to invest in a blue chip portfolio, I share with you today
The Popcorn Strategy
Is it a combination of my stock ideas I share from time to time?
With a trading trigger to capture that wonderful popcorn pop…and not the seeds that are left in the bottom of the pan (man, my metaphors are good).
If you take the time to read further, I will show you the results, but they are even better if you pick wonderful penny stocks that are primed for breakouts like
ABAT 0.00%↑ as an example at the end of this post
Equal price weighted index
So how does an equally weighted index of the stocks I discussed perform if you invest an equal amount?
Flat essentially.
But if you apply one strategy to it, a simple one
The performance tends to look very nice.
This data assumes $10,000 on every position.
A few years ago, I came up with this as I was waiting YEARS for the nuclear industry to take off after Fukushima. I simply asked myself, “Why wait?” “Why get frustrated”
My favorite penny stock, American Battery Technology, had a huge reversal from $3.50 to $2.80, and people started to wonder.
My favorite and very locked-in analyst Mith Besler was role-playing potential scenarios the company could pursue.
After a big reversal, this is the time when the folks who know the business intricately may feel a bit like defending themselves.
Which I argue, never!
Warren Buffett is the greatest at deflecting a dud of a trade with Dale Carnegie maxims.
"If you're going to be a net buyer of hamburgers for the next ten years, do you want hamburger prices to go up or down? People get this right about groceries and exactly backward about stocks. Falling prices on something you intend to keep buying is a gift, not a tragedy."
But what if you used a simple strategy with ABAT 0.00%↑
You would have had a nice year.
It truly is a penny stock with legs.
Even with this, you are not in the market a lot… notice that it says you only participate 26% of the time
For a quick devil’s advocate, what about 2000 year crash involving the perpetual dog Intel?
Intel was Nvidia until it wasn’t and until the US government investment languished.
The equity curve shows you would not have fun for 20 years but it isn’t horrible.
Like anything in life, you have to wait, from popcorn to investment gains.
If you need a song to reinforce that there is no better than the Supremes.
It goes without saying that my research is not complete. There is survivor bias. But I want to believe that while the majority are holding on, you are out.
And those that are out, you are in.
If you would like to receive signals based on this premise, subscribe.
I’m almost finished with an alert system that I created for subscribers only. Why do you need to be in anguish over a wonderful company that just needs some more time before it buds?
While I’m subtle, since I’m really too busy to market anything in any meaningful way, here is a quick list of things that we covered during these amazing months together
Captured some amazing sector moves together
Created 3 portfolios
An 8-step weekly review of the health of the market
2 strategies to maintain a portfolio: conservative and growth
Frame of reference that you won’t find easily (and you may not want to)
And if you are going to have some popcorn tonight, Dave Bongiorno and I recommend Clockers.
Eric
PS. It goes without saying that my postings reflect what I find interesting, and they are truly for educational and entertainment purposes only. Anything that I write about can go to $0, and you can lose all your money.
