Covestor’s Most-Bought-Stocks smokin’ it

by on August 30, 2009

For kicks, I just did a small test last week.  I created a portfolio of the most bought stocks on Covestor over the last month and wanted to compare how well these picks perform versus the greater market, say the S&P 500.

Results were interesting and a bit misleading (a nice sample set of the most bought stocks also appear on the most sold, which I didn’t monitor).  Regardless, I was interested to see how this would play out and how the stock picks from participants in the leading expert network were doing.

Beginning August 23rd, Covestor’s 10 Most Bought Stocks have returned 12.98% while the market was pretty much flat.  Not too shabby.

Portfolio value:

  • beginning= $100,000.00
  • currently= $112,978.79
  • change = +$12,978.79
  • % change = +12.98%

As I said, I need to compare these returns over the long term (Alpha Clone, you listening?) to track this type of performance and juxtapose the results against the returns of the most sold stocks (some like AIG and FNM were on both lists and accounted for the man-size returns) for this to really mean much, but thought the 1-wk results were notable.

Alpha Clone tracks and rebalances cloned portfolios of the top hedge fund managers in the world and has begun to track our friends at Market Folly’s top picks as well.  It would be interested to begin widespread tracking of these types of things.  There are a lot of interesting ways this data can be spliced and analyzed and totally benefits investors and stock pickers alike.

Tagged as: aig, alpha clone, covestor, fnm, market folly, portfolio, stock picks

  • Mazin

    We're listining Zack! We really like that idea. Conceivably, our Best Ideas strategy applied to our AlphaClone Index group is a good proxy for your “most bought” approach. Take the Best Idea clone for the AlphaClone Index group. That clone buys the largest new position from each fund we track as measured by market value each quarter. If there are several managers taking new positions in a stock AND that stock is their top new position then the clone will “overweight” the stock. The clone also limits the number of holdings to a max of fifty. When all is said in done, you have a “most bought” strategy but with a conviction bias (since we're only taking the largest new postions). How does it do? Over ten years the clone has returned 8.5% annualized vs. -1.6% for the S&P 500. Smokin indeed!
    Maz
    CEO and Founder
    AlphaClone

  • newrulesofinvesting

    Thanks for the feedback, Maz. It's funny timing– was just reading through the Best Ideas research from Cohen, Polk. Awesome to hear the return on the Alpha Clone index using Best Ideas approach has done so well. It's such a hard call because the reseach is conflicted as to whether just best ideas works or whether you need to layer in smaller holdings. I guess it's most conviction vs. bread and butter portfolio management.

  • Mazin

    I think also you have to look at the details behind how a particular strategy is being defined (e.g., Best Ideas). I will say that adding a “conviction” bias to any strategy tends to be a good thing ;-) .

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