Still another relatively flat week for my equity portfolio. My PnL may look stagnant however things are boiling beneath the surface of my flat performance. I was active everyday buying and selling stocks usually in increments attempting to build sizable positions in the fund.
I currently have 99% of my fund short $SEAS – I have highlighted very briefly my thesis on this stock in a prior post: https://theselfishspeculator.com/category/the-equity-portfolio/.
While it may look like placing 99% of your assets into one stock may seem like a risky think to do – it is important to understand that I trade with an emphasis on aggressive risk-control thus I operate with a tight leash, and am usually never in a position to lose more than 2% of my capital on any one trade. In similar fashion to technical traders, my position size is determined by the distance between my entry and stop-loss, as well as the amount of my capital I’m willing to lose. See the follwoing post on position sizing: https://theselfishspeculator.com/2017/01/15/a-quick-post-on-how-to-determine-position-size/.
I’ve been in and out of Advanced Micro Devices for the last two weeks, this was one of the best performers in the year 2016 soaring over 300%. I’m sure by now this will come as no surprise to you I am shorting the stock. My approach to the markets regardless of timeframe involves arbitraging the gap between price and value of any traded instrument. I live for boom/bust cycles as they offer the greatest risk/reward opportunites.
$AMD ran up from roughly $3 a share to $11 in 2016. At the start of the year the company appeared to be headed for bankruptcy, however a slew of positive news including a licensing deal with China and a foray into virtual reality fueled investor hopes and in my opinion drove investor sentiment parabolic in tandem with the stock price.
The market in its infinite wisdom quotes $AMD at $9.8b, the business has a terrible balance sheet with an equity deficit of $400m against total liabilities of $3.5b. Over the past decade management has diluted existing shareholders to the tune of 300 million shares, raising share count from just under 500 million to 800 million this past year.
Eventually the market will see what is hiding in plain sight – that being said by now we are all aware markets really can remain irrational longer than one can remain solvent. $AMD constitutes roughly a third of my portfolio. I consider myself to be fully invested at this point but as you know and will continue to learn with me, my portfolio is completely amoebic in nature, $AMD could be gone by Tuesday morning and back again Thursday.
I would rather churn commissions than rack up big losses (i’m a brokers delight). The ultimate goal with this portfolio is to have a very high average win to average loss ratio – this is the key to the outstanding returns I am after.
In the words of a true investing great – it’s not about whether you are right or wrong, what matters is how much you make when right as opposed to how much you lose when wrong.
As always for complete transparency here’s a link to the real-time portfolio: https://stockfuse.com/match/bohv/theselfishspeculator#/chatbase