World’s Greatest Stock Picker®

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My Sunday Washington Post Business Section column is out. This morning, we look at The world’s greatest stock picker? Bet you sold Apple and Google a long time ago. (Thats the print headline; online it was Why the world’s greatest stock picker would’ve ditched Apple).

This is the third (and likely final) installment of our World’s Greatest ®” series. In our first episode, we looked at how well the world’s greatest trader did against an ordinary indexer. As it turned out, they finished more or less about the same. Blame short-term capital gains taxes, which took a huge bite out of the WGT’s performance. In the next chapter, we considered how well the world’s greatest market timer did against a dollar-cost-averager. You might think that only buying at bottoms would generate great returns. They were not bad, but as it turns out, they are so rare, that method creates lots of missed opportunities.

Today, we look a slightly different tack for this installment of our “World’s Greatest ®” series. In those prior two “World’s Greatest” comparisons, what evened out the final performance results in each case were taxes and costs. While those things matter in the current case, our focus instead will be on something else. As it turns out, the key determiner of your success is your own psychology – and how your emotions work against your rational judgment.

Here’s an excerpt from the column:

“Let’s imagine for the moment that you are the World’s Greatest Stock Picker. You have an uncanny talent for ferreting out “the next Microsoft” — companies that are on the sharpest edge of what’s next, that are about to undergo tremendous growth. These firms will rule the world: They will be the most powerful, profitable and influential corporate entities known to man.

Even better, your superpower is that you can find these companies when they are tiny, before they have had their explosive growth, when hardly anyone has heard of them. You find and buy these stocks while their prices are still in the single digits. Companies like Apple, Google, Tesla, Netflix and Chipotle that will one day measure their growth in increments of thousands of a percent.

Can you imagine how much wealth you could create?

I have some bad news for you.”

I really like the way this one came out . . .
 

Source:
The world’s greatest stock picker? Bet you sold Apple and Google a long time ago.
Barry Ritholtz
Washington Post, October 5 2015   
http://www.washingtonpost.com/business/even-if-you-could-pick-huge-winners-could-you-hold-them/2014/10/03/bd426e34-49ba-11e4-891d-713f052086a0_story.html