We talk a lot about stocks. We talk a lot about the markets. We talk a lot about things like the Fed, the economy and what's happening with interest rates.
But you know what we don't talk about enough, if at all, we don't talk about timeframe, the timeframe you have when you buy stocks and hope they pay off.
Today at CNBC we had a remarkable display of this very issue when we held our annual stock draft with some terrific personalities selecting three stocks from a draft pool of 61 equities that are to be held for a full year to see who has best performance.
But there's a second derivative. We are allowing home-gamers to select the player with the stocks they think will perform the strongest for the next month.
Now before I get started let's take a moment out to talk about the notion of this contest or any stock-picking contests.
These are gun-to-the-head games and if you asked me what stocks to pick for the contest I would say, take that gun from my head I don't' play that way.
So, lesson one: There is no "sell by" date in real life. This is not a trading show. This is a teach a man or woman to pick her own stocks and hold them for a long time.
The idea of a timeframe is only artifice. In the game we played today you do not get to include dividends. The whole notion, I believe, of good stock-picking is to own some stocks with great dividends that can compound over time. That's the freest money imaginable and it doesn't count in the game.
Plus, a stock that you want for the ages may be the tortoise. The stock for a month is the hare. We aren't in Aesop's Fables land but I will bet on the tortoise any day unless we have only a month to go.
Second point about the contest? The only other free lunch besides dividends is diversification. I know diversification is boring as all get out. The contest itself doesn't favor diversification because when you are going at it for a year and a year only you may want to swing for the fences with every pick. The timeframe itself may be considered feckless, not to mention a month-long deadline. But then again, we are having fun and creating stock awareness and I am not against trading, I just don't think most people have the time or inclination to be a good trader.
However, I will not adopt the dogma of index fund or else. Anyone who denigrates these individuals for picking individual stocks because somehow they "don't know how" is ignoring how many of these stock-pickers have crushed the averages. Those who say "index fund only" to the home-gamers are people who are insulting you. Imagine if I saw you at a party and you said you just picked Amazon (AMZN) as a stock to own. If I were an index-fund zealot and I was willing to say to your face what they say in other venues, I would have to say "yo Beardstown Ladies, you are out of your league. I have to take that money away from you. How dare you pick Alibaba (BABA) , Biogen (BIIB) and Visa (V) . You couldn't pick yourself out of a paper bag, you couldn't even pick your nose! You have to own the S&P 500."
I regard that as nothing less than selfish condemnation in the name of raising money for your own interests. That's right, it's a capitalist imperative not an imperative meant to encourage or help you.
My take? You want to own some stocks and you want to own some index funds with the latter being built first and then when you have Mad Money to put away you can then select some stocks. My position is regarded as reckless by the zealots. I regard their thinking as retrograde, demeaning and ridiculing in order to browbeat you out of your money.
Which brings me to the contest itself. I have to tell you that I was totally impressed with the picks, and said I believe the Beardstown Ladies will win over the next year. Let me give you my analysis: Alibaba is a coiled spring, the Amazon of China, with a country that is making a major comeback. I think that it will have the biggest Singles Day ever -- that's that November made-up gift-giving day. At $187 it's not cheap and to win I think this stock has to advance about 100 points -- just eying that. But I want exposure to the best stock in China and this is the one.
Second is Biogen. Now Biogen's Alzheimer's drug failed and since then the stock's been in the doghouse. But it has other drugs and there are plenty of big-pharma companies that need to buy other companies -- look at how Bristol-Myers (BMY) bought Celgene (CELG) . So, you have huge upside over the next year.
Visa, their third pick? Harder. It just reported Thursday. The company didn't deliver an outstanding number, unusual for this amazing company. But the fact is that it went down so little on a suboptimal number who knows how high it could go on a good one.
If I could have a close second, I would go with the picks of Oz the Mentalist, who went with Disney (DIS) , Bitcoin and Goldman Sachs (GS) . Amazingly, I showed our fellow on-air personalities a stock, Disney, and I said I would ask Oz what stock I was thinking about. He said I was thinking about what he was going to pick, Disney. Insane!
Why do I like these three? First, Disney's stock, after being dormant for ages, is now a coiled spring and it may not be done going higher. The Fox acquisition is playing out brilliantly. Bitcoin? I don't like it. But for a year anything can bounce. I like Goldman Sachs for a simple reason: If they resolve this Malaysian scandal I think it can tack on 50 points and bring home the bacon.
But now, how about the month-long contest that you can play along at home? Totally different kettle of fish. There are two stocks, two semiconductor stocks, that report in the next month: Nvidia (NVDA) and Advanced Micro Devices (AMD) . They have both been amazing performers over time but ever since the last couple of quarters there's been an inventory adjustment that has hurt both of them. If that inventory adjustment is over, these two rivals, could have remarkable, scorching runs. So, Nick Lowery, last year's winner, I think has the edge, even with his last pick, Microsoft (MSFT) , not being the type that can win in a month, although you wouldn't' know it from the spurt it had after an amazing quarter Wednesday night.
All in all, I like the game very much. I am always blown away by how much people know about individual stocks when it is entirely possible, just like in the NFL draft, their real intended picks were already taken. I salute all of the participants and remember, they are emblematic of all of you who are trying to augment their index funds with the stocks of companies they know and have researched.
Congratulations to all and remember, home-gamers, suspend diversification and dividends at your own peril unless you are entering Friday's one-month winner contest.
