Tuesday, April 24, 2007

CNBC Million Dollar Portfolio Challenge: Top 0.2%

This seems to be as good a time as any to provide an update on my dalliances in the CNBC Million Dollar Portfolio Challenge. At the moment, I stand as #2091 out of 1,246,562 contestants – my best showing to date. While I am delighted to be sporting a 57% return and have so many contestants in my rear view mirror, I decided a week ago that each day I would put all my chips on a particularly volatile stock in hopes of maximizing my chances for reeling in those who are ahead of me.

As you can see from the trades outlined below, my goal is to maximize volatility in my portfolio more than it is to pick winners. In the process, I have developed a system for picking potential earnings spikers that I will be glad to provide some more details on when the contest is over. In the meantime, I will be the first to acknowledge that skill is not a significant element in this contest, unless you consider it a skill to be able to develop a portfolio that will have a week to week volatility of at least 25%.

Here is a recap of what has transpired in the past seven trading days.

I started my single stock approach by tempting fate with an ‘all in’ bet on Vertex Pharmaceuticals (VRTX) on Friday the 13th. It looked like a disastrous move when VRTX traded down 6% before the market opened on Monday and opened off more than 5%. Fortunately, VRTX rallied slowly over the course of the day, finishing down only 0.8%. I was impressed by the reversal, held on for another day, and was rewarded with a 5.9% gain. I made the mistake of holding one more day, however, watched VRTX drift sideways, and dumped it at the end of the third day.

In my worst move and only losing trade of the contest so far, I rolled the dice on earnings AMC Wednesday. EBAY looked like the obvious high flier trade, so I went against the crowd and went all in on NVLS, losing 5.8% of my portfolio and negating the gains from VRTX.

Thursday night I sold NVLS and hopped on the OO express. Oakley turned in a great quarter in terms of both revenues and earnings, raised full-year guidance, and saw their stock jump 11.7% the next day.

By Monday morning, I was back at the earnings roulette wheel, with all my chips riding on Arch Coal (ACI) – and they handily beat expectations, trading up over 7% at one point during the day and finishing the day up 4.4%.

Today looks to be an even better day for my single stock ‘portfolio,’ as AK Steel (AKS) turned in another strong earnings report, pushing the stock up 5.8% as of this writing.

I still think it will take a portfolio of at least $3 million to make it to the top ten and get a pass into the finals. Assuming I can hold on to today’s gains in AKS, that means it will take a minimum return of 22% per week (compounded) over the last three weeks to put me in the ballpark. That type of performance is not impossible, but time is becoming a a more significant obstacle each day.

If my good fortune continues, I will provide more frequent updates…

2 comments:

Trading said...

Wooooooooooohoooooooooo!

StockRake said...

Congrats on your position. I'm in the top 2% and looking to catch you :).

I made the mistake of holding onto TOA too long.

Stock Rake

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