I’ll admit it–I spent 10+ years trading penny stock special situations trying to squeeze a booger out of George Washington’s nose on any quarter I could find.
I was destined for Warren Buffett fame and fortune because I “did my homework” and had 10 copies of Security Analysis and The Intelligent Investor on my bookshelf. What a stud I was.
It was a lot of fun digging through SEC documents, calling up managers, chatting with other investors, visiting the firms, etc. The name of the game is try to collect as much insider information as possible, without it being official “inside information.” The difference between “official” insider information and “doing your homework” is about 10 years in jail, but the information is basically exactly the same. Semantics.
I eventually realized that stock picking is a complete waste of my time and that I am a total loser. I just rely on simple models run on a computer and enjoy watching the fancy lights whiz around.
Truth be told, I still have the “stock-picking” disease. In fact, I dabble in one-off situations in penny stock land.
Every gambling junkie needs their fix, eh?
My “fix” has been PRXI. If you haven’t heard the story, there are a laundry list of promoters talking about the merits of the investment thesis:
When I’m out of quant mode, I succumb to human bias more than I should. PRXI is a classic “get rich quick,” “the stock is a sure 3x if you just hold,” or “the market is stupid” type of play. In other words, I assume I will double my money in a week, the market is completely mad, and there is selling pressure from a mutual fund that is creating the opportunity, etc etc etc. The basic pitch is that PRXI holds these titanic assets that are worth a lot of money (2x the current stock price) and they have a stable operating business. How can one lose? An imminent asset sale and a subsequent home run for a patient investor. I tell myself these “stock stories” over and over in my dreams and it always works out. Well, I’ve been waiting for 2 years now…
How has PRXI done for me? In a nutshell–it feels like I’ve been on the Titanic crash.
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Picking stocks might be the biggest suckers play on the planet.
Punt on perfection; follow the model. I love quant.
After serving as a Captain in the United States Marine Corps, Dr. Gray earned an MBA and a PhD in finance from the University of Chicago where he studied under Nobel Prize Winner Eugene Fama. Next, Wes took an academic job in his wife’s hometown of Philadelphia and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management firm dedicated to an impact mission of empowering investors through education. He is a contributor to multiple industry publications and regularly speaks to professional investor groups across the country. Wes has published multiple academic papers and four books, including Embedded (Naval Institute Press, 2009), Quantitative Value (Wiley, 2012), DIY Financial Advisor (Wiley, 2015), and Quantitative Momentum (Wiley, 2016).
Dr. Gray currently resides in Palmas Del Mar Puerto Rico with his wife and three children. He recently finished the Leadville 100 ultramarathon race and promises to make better life decisions in the future.
Performance figures contained herein are hypothetical, unaudited and prepared by Alpha Architect, LLC; hypothetical results are intended for illustrative purposes only. Past performance is not indicative of future results, which may vary. There is a risk of substantial loss associated with trading stocks, commodities, futures, options and other financial instruments. Full disclosures here.