Home > Uncategorized > I’m a Great Stock Picker With 76,117,945,311,128% Returns!

I’m a Great Stock Picker With 76,117,945,311,128% Returns!

November 24, 2012 Leave a comment Go to comments

Although I usually invest in index funds we know that stock picking isn’t dead. And to back that up I made a rare prediction about individual stocks two months ago. Specifically I predicted that since everyone loves Apple and hates RIM, if someone were to make a trade betting that the price of Apple would fall and/or the price of RIM would rise, they could have good profit potential. Even if one stock went in the wrong direction they could still get closer together and make a profit. This could be executed by using options or by shorting one and buying the other each of which can require minimal cash outlay.

Well it’s not too early to call the results of this call since we’re just 3 days short of 2 months since that prediction. On September 27, Apple shares closed at $681.32 and RIM shares closed at $7.14 on the NASDAQ. As it turns out the Apple share price was essentially the peak for the week and beyond since it has not regained those heights. The RIM price on that date was only a few days away from a time when it almost touched the 52-week low. It may even be a few days after the actual 52-week low, I’m not too good at reading stock charts.

So what would the result be so far? Let’s look at the simplest way to do this by shorting and buying instead of using options.

If you shorted 30 Apple shares with a starting value of $20,439.60, you would have been able to buy 2862 RIM shares. Adjusting for the initial trading commissions and the leftover change you would pay less than $16 to enter this trade with a $10 trading commission. Let’s add some interest too. I don’t trade on margin but I’ll guess that you pay 4.5% interest for 2 months to short Apple, for a total interest cost of $153.30 (ha, I’d love to get that kind of interest for sticking $20,000 in a high-interest savings account). So the net cost for the first two months of the trade would be around $170.

If you liquidated this trade at Friday’s closing price, you would sell your 2862 RIM shares for $33,370.92 (Holy @#%”(*$@%(*!). You would then buy back 30 Apple shares for $17,145.00 (awesome). Subtracting the trading commissions again, that leaves you a net profit of $16,205.92. Or to put it another way you would earn a return of 9,555% on the $170 in cash that you started with in only 2 months. If you kept this up all year you would have an annualized return of 76,117,945,311,128%. I think that’s enough to buy the world.

And as you can see this is a foolproof trade. Even if Apple had gone up by 50% to reach a market cap large enough to buy the entire USA you would make a profit of nearly $3,000 (a 1,769% gain) because RIM did better.

In conclusion I must be a brilliant stock trader. Where’s my hedge fund? After all if even a joker who bought Apple can get a mutual fund I should get something better! Or do I need to start with a newsletter? I don’t know how this whole thing works, I’m just an index investor. I might have to switch though. This stock trading looks fun.

  1. Joe
    November 24, 2012 at 11:53 pm

    lol great call. After the most recent bounce, I’ve been telling anybody I know who owns RIM who happens to be in the black or break-even to take this as a graceful exit opportunity and be thankful they got it.

    I think the BlackBerry Bold 9900 is THE BEST smartphone for doing business on the market. I think with QNX10 and a dualcore processor, the Bold will continue to be the best for people who actually need to accomplish things with their smart phones.

    Heck, Jim Balsillie is a hometown hero. He’s done awesome things for his community and his country and he tried to give the Hammer a hockey team to compete with the Teachers Pension Plan monopoly.

    But just because I like their product doesn’t make it a good stock. They’ve never paid a dividend. Even when their value exploded and they were enjoying huge cash flow they refused to pay back investors for years and years of waiting. It’s just not a good buy.

    • November 25, 2012 at 4:06 am

      Wow, I never knew that about the dividend. Dying companies can be very profitable but not if they go down with the treasure on board like a Spanish galleon! There’s definitely a difference between a popular company, a successful company, and an investor-friendly company.

      To weigh in with my expert opinion again, I would exit this trade on the spot and not look back because the easy profits are gone. Now that a few people think RIM might survive and Apple has come down a bit the easy profits are gone. In the long-term Apple can’t hold up and RIM might even come back (it’s not cool to be seen with one? Sure, tell that to the vast majority of the world that doesn’t read the NYT). But if you’re waiting that long the returns might fall under 1,000% per year. What kind of stock picker would settle for that?

  1. January 25, 2013 at 7:41 pm

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