The Losers are Winning!
If you’ve been following my blog, you’ll know that I’ve asked readers to give me the names of the worst stocks they know.
I tossed this group of degenerates into a heap–creating a single portfolio out of them yesterday.
I also asked you to give me the names of ten great mutual funds–those with amazing track records and reputations.
Then I made the most preposterous claim: that I think the portfolio of “losers” you created would keep pace with a collection of 10, super duper, super smart, somewhat famous fund managers that you also brought forward, compiling 10 American mutual funds into one portfolio.
Am I completely crazy to think that a bunch of stocks picked purposefully for having terrible prospects would keep up with the collective genius of some of the best pros?!?!
I don’t think I’m crazy–but what crazy person does? I’m a believer in the efficient market theory, suggesting that about 99% of what happens in the stock market is completely random–that there’s no such thing as good stock picking ability.
Let’s test my theory, shall we?
Here are the results from the very first day.
The Loser Portfolio had jumped out of the gate:
Taking more than an $8000 lead on the first day, the $500,000 loser portfolio is off to a great start. Leading the charge after one day are Zion’s Bancorp, up 7.24%; United States Gypsum, up 5.15%; Citigroup, up 5.15% and Ford, up 4.33%.
The Mutual Fund Gods
As the gate opened up, three of these ten funds (again, this is a $500,000 portfolio) got snagged on their way out. With front end loads, the two selected American Funds and the American Century fund tripped, and have to dust themselves off after taking an upfront 5.75% commission sales hit. These three funds will have to make 6.1% this year, just to break even, never mind keeping up with the pack.
The top performing fund for the day was the T Rowe Price Equity Fund, with a one day return of about 1.4%.
The loser portfolio is up 1.84% in a single day, beating even the best actively managed fund in our bunch.
But this is going to be a marathon, and not a sprint.
Still, I think the loser portfolio is going to edge out the all stars over the long run, making them look a bit silly.
Time will tell!
I’ll publish the complete portfolio lists soon.