Thursday, April 01, 2010

Let Us Now Praise Famous Baskets

The Biotechnology Basket suffered a 73% loss with GNVC.  Yet, two weeks after inception, the basket is up 3.36% or about 87% on an annual basis:

This is what works in Basket Theory.  Spread the risk and reward across multiple stocks, avoiding letting one mistake bring you down and increase the odds of hitting a huge winner.

The ten stocks in the Income Basket have an average dividend yield of 10.7%.  The same risk/reward concept applies here as well, spreading the risk across multiple names, so any one mistake doesn't bring down the entire portfolio. 

(Apologies to James Agee.)


Jo said...

While this is nice, the email we subscribers got seem to suggest getting a "core" position and speculate on the rest. I only had the core positions so obviously I am in the (very) red.

To say now that we should have spread the risk seem a bit of an excuse. I don't feel that was suggested in the original email.

I know I am fully responsible for my own trading and I still do appreciate your hard work! Just hope I can start making some money soon.

Well, if NNVC hits $100...then it's all good.

Anonymous said...

I can sympathize with the pain you are currently feeling given I've found myself in similar situations.

It might be helpful to go back and read Allan's original email to his subscribers now that GNVC has had a set back - it might offer you some different insight to what he wrote Vs your original interpretation of it. In the past I know I would have read it with only dollar signs in my eyes, that is to say focusing on all the upside potential these stocks have to offer but not giving the downside risk the same level of consideration.

In the first sentence of his email he stated that these stocks hold "the promise of excessive speculative profits and/or losses" - I think this accurately describes GNVC's price action of late.

In the past I had blindly invested in mining shares, naive to their extreme volatility. Needless to say, I've been to heaven and hell with many of those stocks - it was an expensive education but one that has taught me to understand and respect the volatile nature of certain classifications of stocks, biotech being one of them.

He also mentioned the bullishness of the long-term trend models of these biotech stocks, so keep in mind the time frame component as well- it’s still early in the game.

It's great you understand and realize that you are responsible for your trading and I second your appreciation of all Allan's hard work!!

Anonymous said...

The biotech stocks are definetly wild swing plays. Look at SOMX, on 11-30-09 the stock hits a high at 4.80 then proceeds to crash and burn hitting a low of .90 on 12-16-09. Recently SOMX had a high of 10.60 Buying at the lows after a stock gaps lower can test the nerves of steel but sometimes the payoff is huge.


Rob McCain said...


I have been a reader of your blog for about a year and wa an inaugural subscriber to your premium service.

The most valued experiences in life are those which exceed our expectations. I count you and your work among those special experiences. It is not only the quality of your work, but your generosity of spirit, loyalty, consideration - the respect you give to your readers and subscribers that really sets you apart.

I am very proud to 'know' you. You are a rare and inspirational character. You have earned my respect, gratitude and affection. Thank you for that.


t said...

great responses.

GNVC was a painful educational experience... bound to happen sooner or later no matter how good an investor we are.

The basket idea is always sensible.

Doing your own due diligence is Essential, no matter how much good 'advisory' input we receive from Allan or anyone.

The comments about the volatility of miners is a good example of the need to fully understand a specific sector and how it functions.precious metals prices and the miners are heavily manipulated and suppressed by the government/JPM . always expect that.

wild swings in biotech stocks can be understood in the context of the FDA system,keeping abreast of the company's R and D success,trial studies, etc...seems to be critical to the price movement of stocks.
Other biotech company stocks can collapse like GNVC ... IF their R+D,and trial studies,FDA approval, FAILS....thats the risk for biotech stocks.

Seems like the key point to take away from this is that we need to Understand Clear details about the Whole company...what their research and development is specifically about, what makes them special over other companies,what makes them advanced over others, etc...what makes their product superior, what makes their technology revolutionary...disease curing... and These companies, would be the ones to invest in ....and forget about those that are not making new breakthroughs.
This is a race to the finish line....

In addition to benefitting from Allan's subscription service and this blog....I highly recommend folks subscribe to Patrick Cox's Breakthrough Technology newsletter (Agora


Anonymous said...

Did nobody who is griping about the GNVC loss notice it had been on a daily sell for days leading up to this huge loss?