Is there life after DEATH? As Thursday is the one-year anniversary of my catchy-named "DEATH" model portfolio, I would say there is not.
DEATH is an all-short portfolio with 10 nearly-equally-weighted positions. As of Thursday at 2 p.m. ET on its first birthday, DEATH is showing a gain of 73.69%. That is not a typo. I would like to think I know how to pick stocks, but I would also like to think that means I know how to pick against individual stocks.
DEATH is a menagerie of borderline-shaky companies which, one year ago were being accorded what I judged to be unjustifiable valuations. Mr. Market has a way of figuring these things out.
Some of the DEATH names are ones which I have written about (negatively, of course) in my Real Money columns, and some were new ideas to me last year as I scoured the market for short ideas.
At least two of the names -- Teladoc Health (TDOC) and SelectQuote (SLQT) are the two DEATH names for which I remember using this method -- were chosen solely because I had recently read financial media articles that featured Ark Invest's (ARKK) 's Cathie Wood pumping them. Seriously.
As a stock analyst, one's real purpose is detective work. I would like to think that 30+years of researching equities has taught me how to spot a stock that is overvalued either because of misunderstanding -- to the plus side -- of business prospects, or "aggressive" accounting.
We are the True Detectives. Our function exposes malfeasance at companies' misjudgment by fund managers. Or, as so often happens, both.
As Peloton (PTON) announced the recall of two million of its bikes Thursday morning, I sighed a happy sigh, knowing that PTON is a DEATH name. I walk by PTON's headquarters every time I leave New York's Penn Station and head west, and I never fail to yell "sell your stock" to any unfortunate employees walking out of the building. OK, I don't actually do that, but Peloton was the poster child for Covid-era buffoonery via "non-valuation" by fund managers combined with non-analysis by PTON's sell-side analysts, which was, in hindsight, positively awful.
But, as satisfying as producing a 74% one-year return is, my work is not done. Two of the DEATH names have actually posted gains over the past 12 months. Robinhood (HOOD) and Coinbase (COIN) both had substantial value erosion earlier in DEATH's life, but have recently recovered and both are showing about an 8% gain since DEATH'S inception. That's not a wild gain, but is still enough to bring down DEATH's average return.
I will be working round-the-clock (literally, I guess, since Robinhood will soon offer 24-hour-a-day stock trading) to expose those two companies and to continue to stomp all over the eight that have fallen.
As a general rule, my model portfolios are proprietary to my firm Excelsior Capital Partners, and to my clients and newsletter subscribers, but, as a birthday present, I will list the DEATH names, along with one-year share-price performances, below.
DEATH encompasses many sectors, but all 10 names have one thing in common: hype. While blowhards go on FinTV and use Twitter to hype their stock picks, my clients and I reap the benefits of taking the other side of those trades.
Public Enemy rapped "Don't Believe the Hype" in 1988. Don't believe the hype in your portfolio, either. There is no life after DEATH. Only value erosion and investor pain.
Here are the 10 DEATH names. Either via put options or outright short-sales, ExCap has a bet against all of them.
| Short Lock | |||
| 5/11/23 | 5/11/22..11:00 | ||
| (CVNA) | $11.83 | $35.70 | -66.86% |
| (PTON) | $6.96 | $13.64 | -48.97% |
| (PTRA) | $1.40 | $4.96 | -71.77% |
| (RIDE) | $0.35 | $1.72 | -79.65% |
| (GOEV) | $0.65 | $3.25 | -80.00% |
| (HOOD) | $9.59 | $8.89 | 7.87% |
| (RIVN) | $13.96 | $21.42 | -34.83% |
| (TDOC) | $24.88 | $29.72 | -16.29% |
| (SLQT) | $1.61 | $2.40 | -32.92% |
| (COIN) | $60.84 | $55.90 | 8.84% |
