You clicked a link with that title?  Oh best believe you’re on his watch list now for sure….

So I bought CG and KKR on January 18th, after noticing strength in each name – particularly CG – as each seemed poised to break out to new highs. Normally I’d look for stocks with better sales and earnings growth, but in this case, I’m trying to zero in on some names that will benefit from strength in the overall private equity space.  You see, university endowments that know what they are doing regularly allocate 20-30% of their assets to the private equity, and as the market surges and educated folk feel flush with cash, they will give-give-give to their alma mater.  More importantly, a rising public equity market will provide exit opportunities galore for companies within the portfolios of these managers, allowing them to chalk up “ten baggers” with the ease with which they don their pants.   Lastly, the buzz word on the lips of every two-bit financial advisor these days is “alternatives.”  They don’t know what the word means mind you, but they want expanded access to these magical investments as they will no doubt forever endear them to their equity-market-loathing clients.  This explains why today, you see REIT mutual funds (which 5 years ago were known as “sector equity” funds) now rebranded as an essential “alternative” holding.  But I digress….  My point is that I do see expanded future opportunities for hedge fund and private equity managers who wish to offer their services to the unwashed masses via a good old fashion 40 act mutual fund.

Names like KKR and CG should benefit from aforementioned trends.   The Fly chose, BX – I might add that as well so I have multiple horses pulling my chariot.  Here are some fancy pictures.

PS I wanted to publish this a few weeks ago, because I liked the idea of the title I had chosen, but I’m busy

In my only other post thus far, I talked about the importance of having a strategy.   Notice I used the singular, and not “strategies.” I think that for many of us, it’s important to keep our overall approach as simple as possible.  I find that when I try to add an additional strategy to my arsenal, I focus on the stocks purchased via the new methods far too much, and wind up ignoring buy and sell signals in the kinds of stocks that I’ve historically done well in.  That’s not a good recipe in a market as difficult as this.

Here’s my criteria – I tend to do well when I restrict my stock purchases to fast growing businesses sporting high ROEs, with stock prices breaking out to new all-time highs.  Ideally, these companies are engaged in a business that have the potential to capture the imagination of the public.  I recently got myself in trouble with a “buy and hold come hell or high water” approach to the social media space.  While social media meets that last criteria, it didn’t meet all the others.

But let’s not dwell on the past.  The market was up today and I’m back at the turret.  I screened the market for my typical stocks, but also added in some additional criteria.  I further restricted my hunt to stocks that were up over 2% today, on good volume, and that were being accumulated by institutions.  I don’t want to focus on a stock that had been doing well solely because of its defensive nature, and the second the market bounced, it became a source of funds.  PPT members can find that watch list here.  I’ll tell you non-members that $UA is one of my favorites from the list.

Never question the power of specialization. BEHOLD!  The man in the video is able to author books and apparently make a living as a professional pencil sharpener.  Before you motherfuckers laugh, note that his pencil of choice is a Blackwing.

Let me clear my throat….

I am here tonight, to talk about the difficulties that I, no doubt, share with others in this realm.  In the halls of IBC, we are surrounded by traders and investors of considerable talent.  They share with us, on a daily basis, their picks – and I applaud their charitable ways.  However, I advise many citizens of IBC to take caution.  It is extremely difficult to have real conviction in a thesis or call that is not your own.  And when you find yourself in a situation where you lack conviction, you are prone to indecision, and ultimately failure.    That isn’t to say that you can’t make money off of the calls of others and pick up some invaluable knowledge in the process.  But take care not to wake up one morning, only to find your metamorphosis into a remora fish complete.

My advice:  have a strategy.  Make that strategy your own.  Test it under live fire conditions with small positions.  Learn to believe in it. If you find, that over the course of a market cycle, your strategy begins to fail consistently, experiment with something else.  In the end, it’s real conviction that will earn you real money.

The Fly consistently shares ideas in which he has great conviction.  While I have the utmost faith in the ultimate winship of Le Fly, it’s only natural that I find it’s in those stocks where I have the most difficulty succeeding.    Let’s examine my own performance in a few of Fly’s recent “public conviction” buys.

WNR – Horrific loss.  I sold on the gap down to $12 on earnings, prior to the start of the conference call.

GSVC – Horrific loss.  I couldn’t have bottom ticked this one any more perfectly

TZA –  I know this is technically a PPT systems trade, but I consider  a direct product of the the good doctor’s brain.  At any rate, my trade in this case was another horrific loss

YELP – In an attempt to learn from my past failures, I made painstaking preparations prior to my first YELP purchase.  First, I entered a small limit order for my initial purchase.  Second, while I was waiting for that order to execute, I hooked up an IV of Jack Daniels mixed with liquified crystal meth.  Imbued with liquid courage, I added fearlessly (well, almost fearlessly) as dark clouds emerged over the entire social media space.  I still plan to add more – hopefully on strength – to this position, which currently represents a loss of over -15%.  The good news is that my emotions are completely in check because of the manner in which I approached building the position.  I allowed myself to become comfortable with holding YELP over time, much like a deep sea diver adjusts to a long slow decent underwater.  Had I added too quickly, I’m sure I would have had a case of the bends.

In short, I applied my own strategy to building a position in the Fly’s pick.  And while not a perfect approach, I think that improves my chance for success.  Bring on the month of June and the historical weakness that comes with it.  I’ll be ready.

Conviction, my friends.  It’s the word of the evening.  And with that, I’ll leave you with a remix of a popular poem that pertains to the subject at hand

One night I had a dream–
I dreamed I was walking along the beach with the Lord  Fly
and across the sky flashed scenes from my life.
For each scene I noticed two sets of footprints,
one belonged to me and the other to the Lord Fly.
When the last scene of my life flashed before me,
I looked back at the footprints in the sand.
I noticed that many times along the path of my life,
there was only one set of footprints.
I also noticed that it happened at the very lowest
and saddest times in my life when I was holding a large equity position trading against me.
This really bothered me and I questioned the Lord Fly about it.
“Lord Fly, you said that once I decided to follow you,
you would walk with me all the way,
but I have noticed that during the most troublesome times in my life
there is only one set of footprints.
“I don’t understand why in times when I needed you most,
you should leave me.”
The Lord Fly replied, “My precious, precious child  small pleb,
I love you (no homo) and I would never, never leave you
during your times of trial and suffering.
“When you saw only one set of footprints,
it was then that I carried you.”