Here’s Proof that Fundamentals Matter When Investing in the Stock Market

Technical analysis can be effective when swing trading — but is virtually worthless when constructing portfolios for wealth generation. This isn’t meant to be a sale pitch for Exodus — but it might end up sounding like one because I am going to demonstrate a way to use it to easily gain an edge in the market.

For those who don’t know, I had Exodus built in 2007-2008 to help me with my business. I used to spend countless hours scouring quarterly reports, working Excel spreadsheets. Then I came up with the idea to have a program do it for me — ranking fundamentals on a 1-5 scale. After that, I added technicals and then married them together, producing a ‘hybrid score’, which is a combination of both — leaning more to the technicals since it’s helpful when trading.

Technical analysis larpers will tell you that fundamentals don’t matter. I can prove to you they do.

Here are the year to date passive median returns using our fundamentals screener. We grade fundamentals by debt/eq ratios, PEG ratios, price to book, price to sales, and profit margins.

Over 4.5: +14.14%

4-4.5: +13.11%

3.5-4: +12.5%

3-3.5: +7.44%

2.5-3: +3.23%

The returns literally decrease with each rung lower in fundamentals — clear and concise proof that investing in well run companies really does make a difference. Then something interesting happened on our way into the sewers: returns exploded. The very lowest scores are filled with money losing Biotechs and Crypto-proxies, all of the wild small capped stocks that made outrageous runs towards the end of the year. The median market cap is just $345 million for this quintile. And I think it’s fair to say no one in their right mind would construct a portfolio with these type of stocks.

Under 2.5: +16.68%

How else can we use this data? Well, I use it just fine in my Quant portfolio. I take the highest returning stocks and profile them, reverse engineering their data to find stocks just like them — and it works. In other words, if value is working now and companies with PEs less than 15, dividends of 3%+, are running higher — I will know about it and can easily find a basket of stocks to match that criteria. This is top down analysis that is constantly searching for Alpha. This is just one layer of the onion, finding out that good fundamentals matter. After this, I’ll dig a lot deeper and eventually come up with a group of stocks that is superior to all others — using only quantitative means to guide my portfolio decisions.

This will be the only method by which I will manage money in 2018, using big data, predictive algorithms, and AI learning to give me a discernible edge over my competitors.

This time it’s truly over, Bitfags. Your meme dollars have been annihilated and Ripple will soon become your overlord, presiding over a large cemetery filled with Ethereum and BitcoinFAGS — because the financial system said so.

Unlike Bitcoin, Ripple is making strong headway into the walnut paneled cigar smoked rooms on Wall Street.

With Bitcoin plunging to the $12,000 level and Ripple surging by 28%, the spread between the #1 and #2 crypto-currencies is nearing half.

Now that’s it’s over, you are afforded with closure and should start to feel better about yourselves. Ripple has already won the crypto-wars and there’s really nothing you can do about it.

God speed.

I’m calling the year over yearly, right now at 3:13pm. I have zero interest in scrounging around like an animal for new ideas, so I’m gonna shut it the fuck down and go enjoy the rest of my day doing other things.

I head into the New Year long JNUG, QD, AQ, BBG, GSUM, NXTDW, XNET, and UCTT — the type of portfolio that keeps you up at night and makes you rue the day you decided to trade for a living. On the quant side, my true passion, I am all cash and GLD, which is a placeholder until I get back to work next week.

Things to look forward to in Exodus next week.

New GARP portfolio, which is my long term portfolio of 15 stocks that I update twice per annum.
New Bubble Basket, which is a basket of stocks that gauges risk.
And new Quant portfolio, which is where I intend to focus my efforts in 2018. It is entirely quantitative and I will be updating it once per month.

Thank you for reading, fucked faces. Truth be told, you didn’t have much of a choice anyway. There aren’t many financial blogs anymore and the one’s that do exist truly suck.

Happy New Year’s.

I booked an immense loss in UVXY and HMNY — two of my worst ideas for 2016. They were emotionally driven and fucking retarded. Also, I sold MARA and FIZZ — all for tax purposes. Since I made ~30% in my quant driven portfolio in 2017 and a lot more in my discretionary, thanks to last minute crypto proxy plays on crack, I could afford to humble myself with these gracious sales.

I’ll have you know, Le Fly isn’t immune to the pangs of stupidity and on occasions delves into the black arts of gambling in the market. These sordid forays will cease to exist in 2018, as I intend to only invest in winners, eschewing losers for low level tiered fuckheads on StockTwits or Twitter.

I haven’t bought anything with the proceeds, but I’m actively looking.

It was a fine year for stocks, world wide. President Trump proved to be just as retarded as everyone thought he’d be, also the funniest President this country has ever seen — unintentionally. The site has gone through many changes, most recently marked by a sudden resurgence of my trading fervor, casting aside political nonsense for Bitcoins and crypto proxies.

Heading into 2018, I am filled with optimism. Truthfully, it’s hard not to feel good after 12 perfect months in the S&P 500. We literally had zero down months, an anomaly that is absurd as the faux Russian scandals that grip half the nation. My singular hope for 2018 is true happenings — panic and fear on a monstrous scale. “The Fly” thrives best under extreme pressure, like an ancient piece of coal.

I want to thank all of you for reading, sticking with me during my phases. This most recent Sean Hannity phase must’ve been trying for many of you — so a tip of the hat and double shot of Jäger to you, virtually speaking.

I have big plans for the site in 2018, bringing in some new blogs, upgrading Exodus, and launching a crypto bootcamp. Personally, I’ll be starting up my advisory business, which will be 100% quantitative, using the sublime harmony of mathematical precision (SHOMP) inherent in Exodus. Also, I’m currently working on a joint project to build an open source platform for crypto-currencies — bringing my algorithms and ideas about market intelligence platforms to the ignorant planet of fintech crypto — the most retarded and backward place in all of finance.

On this final day of trading, 2017, stocks look to trade higher. Cryptos are strong, especially Ripple, and I think it’s time for us to celebrate early — perhaps pop some bottles of champagne at the desk, aiming for each other’s eyes — because these halcyon days will not last. They simply cannot.

My final accomplishment of 2017 was learning how to make mean homemade onion rings and pretzels. In his spare time, Le Fly enjoys to cook, listen to WQXR classical music or The 1920s Network on Tunein Radio, whilst drinking copious amounts of gin martinis or wine. I’m no longer a vegan — but I still do not eat meat and I do not crave it whatsoever. Fish is just fine for me. I’ve slacked at the gym the past 12 months — partly due to an elbow injury, partly due to keeping busy with other things, and I managed to write two books — something I would’ve thought to be impossible in late 2016.

Life is filled with surprises and if you had a bad year, keep your chin up — because 2018 might just be your turning point.

Gentlemen

The S&P jumped higher by 20% this year, the Dow +25%, and the Nasdaq +29%. By all measures, it was a phenomenal year for stocks. We should all thank President Trump for making America great again and giving us the opportunity to greedily grab a large sloppy slice of apple’d pie.

Without further delay, here were the biggest winners of 2017 — minimum market cap of $500 million, sorted by sector.

Basic Materials:
CC +126%
KRO +122%
CENX +113%

Consumer Goods:
ROG +105%
RFP +105%
FCAU +101%

Financials:
TREE +232%
LGIH +162%
SQ +162%

Healthcare
SGMO +468%
ESPR 423%
RXDX +403%

Industrial Goods:
AVAV +112%
BLD +111%
NVR +107%

Services:
WTW +330%
CAI +233%
RH +194%

Technology:
SGMS +262%
ESIO +256%
EVRI +240%

Utilities:
TGS +154%
NRG +126%
EDN +75%

Chinese Burritos:
HLG +510%
BGNE +214%
YY +191%

Good afternoon lads

I’ve been a bit busy and will be a bit busy for the next month or so setting up my new entity. Plus anyway, it’s the end of the year and no one really gives a shit about stocks right now — but you should. Let this be a reminder: go sell out of your losers for tax purposes and spend those soft dollars now, preferably on Exodus, because come January 1st you’ll kick yourselves in the head for forgetting.

If you do not need the loss, fine. But if you don’t need the loss, you probably did something very wrong this year — so maybe you truly need to rethink your process, no?

I’ll be selling out of my retarded UVXY and possibly even my HMNY positions, both my largest losses of the year. I have immense gains in other areas and this will offset them nicely. It makes no sense to pay taxes on short term gains, when some of them can be offset by the losers. You can buy those idiot stocks back in 30 days.

As for Exodus, I will be updating the GARP portfolio soon, something I do twice per annum — and of course my new quant portfolio — which will be updated on a monthly basis in 2018. Right now I am 100% GLD.

Stocks are mildly stronger today and Bitcoin has recovered somewhat. I like gold and oil here, especially gold. The crypto proxies are a little tired, coming down from their sugar high. That trade might be flagging a bit here. But do not worry, things have a tendency to revive in January, with the new year and renewed spirits.

Here we go again. All of those cryptoFAGGOTS will have to HODL again — because prices are steaming lower this evening, thanks to brand spanking new S. Korea restrictions.

Reuters:

“The government had warned several times that virtual coins cannot play a role as actual currency and could result in high losses due to excessive volatility,” the government said in a statement.

It noted that trading prices of most virtual currencies were much higher on South Korean exchanges than they were on exchanges in other countries, although it did not provide specific examples.

The steps will include a ban on opening anonymous cryptocurrency accounts and new legislation to allow regulators to close virtual coin exchanges if needed, a measure recommended by the justice ministry, the statement said.

South Korea had previously announced its plan to tax capital gains from cryptocurrency trading to tackle what it sees as the risk of excessive speculation.

Bitcoin, the world’s biggest and best-known cryptocurrency, has gained more than 19-fold this year.

In South Korea, bitcoin has been extremely popular, drawing wide participation from housewives and students. As of 0304 GMT, it stood at $14,384 on the Luxembourg-based Bitstamp exchange.

Naturally, this is more bullshit, especially since the China ban only temporarily caused a drop in BTC, which was bought and sent sharply higher. I’d expect a rout in crypto proxies tomorrow. For the brave of heart, tomorrow you step in and claim what’s rightfully yours, prima noctae style.

Bitcoin is off by a harrowing 15%, thousands of points, clown style.

The counter-weight to this perverse act of risk aversion is gold. Get some, else get left choking on my fucking dust.

For many years OLED, previously known as PANL, was showcasing their OLED technology as the next standard in display technology. Most people discarded them because of MUH plasma and MUH led. Alas, here were are in 2017 and Apple has gobbled up all of the OLED supply, propelling shares of OLED through the roof.

There are ancillary winners in the space too, like UCTT and COHR, the latter pretty much having a monopoly on the lasers needed to produce OLED.

Today’s news out of WATT, getting FCC approval to produce wireless charging solutions up to 15 feet, has me thinking this is the next major technological advancement in the wireless space.

Here is a demo of their tech.

There were several big movers in the sector today, but the only tangible companies that I’ve found thus far are TESS, IDTI, SMTC and AVGO. The ‘wireless charger’ buzzword might help stocks like ZAGG and FH jimmy rig higher too; but make no mistake, this is a WATT story — with perhaps TESS playing a key role in distributing these devices.

With a market cap of only $187 million, there is significant upside to WATT.

Wireless fucking electricity. Amazing times.

Congratulations to all of those long WATT into today’s meltup.

The news for WATT was somewhat explosive. A new alien form of energy is about to enter the lexicon, ‘wireless electricity’ using radio frequency waves, courtesy of the FCC. WATT was granted approval today.

‘historic day in human’s use of radio frequency waves’
FCC determined as safe and meets guidelines set by FDA
‘Advances the potential for any devices that require batteries to operate’
Approved up to 15 ft
impact of certification ‘cannot be overstated’
specific absorption rate (SAR) was most important criteria for the co to prove device was safe
working w/ the FCC and partners on other advancements
now working w/ the international community
no timelines given
believes first mover advantage is ‘significant’
when asked by analyst, CEO noted, “The power is not that significant”

The subsequent result was more than a doubling in the price of WATT. Additionally, the entire alt-energy sector was on fire.

Here were the notable breakouts.

WATT +168%
RGSE +35%
LTBR +28%
IPWR +22%
SUNW +11%
DQ +8%
CPST +6%

Other than that, it was a boring as shit day, with utilities leading higher while retailers slumped. People are apparently winding down operations, preparing for New Year’s festivities.