What is this about?

Since launching this series I have had good questions on three general themes.  Here are the questions and some brief answers.

  1. The model characters are fun, but please tell me more about what they do.

I include the general personality of the model at the end of each article.  I will begin featuring one approach each week with more detail, and soon provide a reference page for readers.

  1. Why don’t you show a track record on performance?

I understand that those trying to sell a newsletter or chat room often provide some sort of time-stamped real-time record.  You will find that most of these people are not subject to compliance rules.  The “track records” tell you nothing, since they do not have enough trades to get into the “long run.”  Confidence in a model comes from knowing how it is developed and tested.  I would rather ask a few questions to a developer than see a few months of real-time picks.  It is easy to spot the amateurs.

  1. Why should I care about these model picks?

You probably read many articles with stock ideas.  Some are a single idea based upon technical analysis from a source you do not know about.  At the Stock Exchange, you get four different recommendations from technical “experts” as well as some fundamental commentary as a rebuttal.  I am not trying to sell anything.  We are developing an institutional product.  The results are good enough that I am willing to share and discuss with readers.  Some of my clients are invested in these models, so I am not going to provide every trade in real time.  It is supposed to be interesting and fun!  Look at the ideas and do your own research.

Cast of Characters

Felix is fussy, precise, and very cautious.  He looks for what is working, but it also must have upside potential.  He is an investor who thinks long term.  Felix will not usually announce new picks, but he will answer questions, saying what he thinks about specific stocks.  He will also comment on favorite themes and sectors.

Oscar is naturally optimistic and a bit excitable.  He likes to go with winners, and focuses on a one-month time frame.  He trades either sector ETFs, or a basket of stocks (equally weighted) that reflect a sector.  Oscar will mention a favorite sector each week, and will also answer questions about sectors.

Holmes is a trader, but a cautious one.  Holmes emphasizes asset protection through profit taking, stops, and trailing stops.  He is careful in selecting new positions, and generally looks at an intermediate time frame.  While he does not know the definition of “mean reversion” he loves rebounds! There is no set holding period, but two or three months is not unusual.  Holmes will tell us one stock recommended that week.  For those who sign up for his email list (no charge, privacy respected, holmes at newarc dot com) he will report exits with a one-day delay.

Athena trades more frequently than the others, but still limits risk.  Her inspiration helps to find good ideas.  Her excellent quant skills find attractive risk/reward opportunities.  Her wisdom leads her to exit trades that are not working.  Athena will provide a new idea each week.

Jeff usually has some comments about stock or market fundamentals.  Unlike the other witty participants, he sounds like an old prof.

The conversation is light-hearted, but the stock analysis is serious.  We own positions in each of the stocks mentioned.

And finally, you can learn about the eternal debate between technical analysts and those using fundamentals.