Picking Up Pennies in Front of a Steamroller

Former Disney CEO Bob Iger once said, "Everything about our world is being disrupted, and faster than ever." Although this is true, people don't like change. It gets them out of their comfort zones. Sometimes reactions can be harsh when confronted with a new norm. For instance, in 1997, Fox Sports introduced the Fox Box to NFL viewing audiences. The Fox Box is the  bug on your television screen that displays the  game score and the game clock. How did we live without it? It's commonplace now. When introduced almost thirty years ago, the executive in charge of the decision received death threats because it took away from the purity of the viewing experience. At least according to disgruntled football fans. Go figure.  

For the past couple of months, I've been working with the Gemini AI Chatbot to screen for stocks that have the potential to take me to the promised land. At least that's the assumption. Although I'm primarily invested in the S&P 500, I still relegate a small portion of my portfolio for individual investments. My track record is spotty, but once in a while, I catch lightning in a bottle. Unfortunately, that's few and far between. 

That said, because of the AI revolution, investors have felt confident about their prospects going forward. Until yesterday. The S&P 500 fell more than 4.25%. The worst day in eighteen months. There are concerns of a slowdown in data center construction because of the blue wave after the midterms. It took down what was an above historical average year in the market to a mediocre year. We still have two more months to regain ground, but the selloff hurts. Especially if you relied on margin. 

I recently read Disruption Investing by Stephen McBride with Dan Steinhart. Not a great investing book but very useful. The writing style didn't grab me because they made investing sound too easy, but it's filled with terrific charts, graphs and statistics. One part of the book I found particularly interesting is the subchapter "Most Stocks Suck". The authors acknowledge stock market historian Hendrik Bessembinder and his findings between 1926-2023 which are (and these are taken directly from the book): 

• Fifty-eight percent of stocks failed to beat risk-free Treasury bill returns over their lifetimes.
• Just over 4 percent of stocks are responsible for boosting the stock market's overall returns above Treasury bills.
• Seventeen stocks had cumulative returns greater than 5 million percent.
• The average stock returned nearly 23,000 percent.
• The median stock experienced a ghastly return of -7.4 percent. The average is buoyed by those  seventeen outlier stocks that generated returns of 5 million percent or more.

The problem arises in that it's very difficult to pick those winners. That's why I primarily stick with the S&P 500 as my investment of choice. I do have some spotpriced Blockchain ETFs, but they don't constitute the majority of my portfolio. In fact, it's a minor percentage. You'll notice that I said Blockchain instead of crypto. This is because if you say crypto, people assume or associate it with Bitcoin. I don't invest in Bitcoin. I believe in it, but not to the extent the crypto enthusiasts do.

During yesterday's market implosion, I frequently checked my watchlist waiting to see if one of the stocks I've researched dropped into my buy zone. One landed below my limit price, Penguin Solutions, which fell from approximately $85 in August to $38 during the last hour of trading. A nice discount. Did I buy some shares? No. I got cold feet. This isn't my first rodeo. I've been burned too many times before with "can't miss" investments. At least from my perspective. I keep repeating the old Wall Street adage, "Don't confuse brains with a bull market."