Prior to Tuesday’s (3/20/07) open, I posted a shortlist of stocks that I thought had a good chance to head higher this week. Obviously, the post-Fed move and a more bullish tone to the market made picking winners easier so I won’t be patting myself on the back too hard. From Tuesday’s open until Friday’s close, the S&P 500 advanced 2.43% and an equal weighted portfolio of the 79 stocks I mentioned would have performed 75% better than the benchmark index for a 4-day gain of 4.26%. Of the 79 stocks, 85% went up and of the 12 losers, LUB was the worst at -3.4% and the average of all losers was -1.7%. Winners fared much better with an average gain of 5.3% and the best was IMCL at 26%. The top 10 gainers all exceed 9.5%.

These lists are only guesses of stocks that I think have an abnormally high probability of moving during the week that I publish them. HEDGEfolios is not a stockpicking site and does not make recommendations for buying or selling any security. Each investor is unique and should analyze each stock and discuss it with their financial advisor before taking any action. I know this sounds like a standard cover my ass disclaimer but I actually believe this stuff and I greatly dislike stockpicking sites. One of my concerns with services that send out emails of their top picks every night (or however frequent) are that they do not encourage investors to do the fundamental and technical work that must be done to improve the chance of success. Do not confuse shortlists with shortcuts!

I have been asked why I don’t provide these lists every week and then follow each stock until it is removed or why not provide model portfolios or top ten lists, etc. The answer is that I do not believe your performance will be improved by others (including me) doing more work. I know everyone is busy with family, careers, etc. - but investing and trading is not a part time gig. Unless of course you want to index and then, I would suggest not wasting your time at HEDGEfolios. If you want to make money with stocks, you must do the work and be accountable for the results. HEDGEfolios will help you identify stocks that meet your fundamental criteria and give you some timing help on entry and exit points that I think have a high probability of being good.  But you should be using it to generate ideas or provide confirmation for your own ideas.

I cover over 4000 stocks and ETFs each week and I treat each one the same. I have no certainty about which stocks are going to move 1% vs. 10% or tomorrow versus next week and after looking at so many stocks, I cannot narrow down 200 that I really like to the top 10. About 3 months ago, I studied a long list of 200 stocks, a subset of 100, a subset of 50 and finally a top 10 for a one-week period. Remember - these lists are only my thoughts for the week after being published. Not surprisingly (at least to me) the statistics were not good. The performance of the 200 and 100 portfolios were relatively the same, the top 50 was slightly better and the top 10 performance was slightly less than the top 100. What concerned me the most was that the shorter lists had too many big winners and too many big losers. While the average was good, the negative extremes were bad. Why would this be? My analytical weakness causes it - stocks at support levels tend to either break through extremely or break down extremely and that is why I always accompany these lists with a suggestion of tight stops. Based on this analysis, my decision was to stick to prior beliefs and skip the pursuit of providing lists of defined limits. Some weeks, I generate lists of over 400 and other times, it may be between 50 and 100. It’s up to you to decide which ones, if any, that you like.