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Dangers of Stock Picks

April 16, 2024
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In the beginning of 2022, I tweeted my top 5 stock picks for 2022.

I had reservations of posting something like this because I felt like it's not really a good way to invest i.e. basing your investment decisions from a list of stock picks. 

On 14 January, I posted this:

"Something I struggle with on Fintwitter. Is it more harmful or beneficial to share stock picks? Suppose I post my top 5 US stock picks for 2022, will majority of people just jump in or verify/validate/research/opinion picks?"

However, I went ahead and posted it anyway as I thought it might be a good thing to look back at e.g. how did these stocks perform in 2022?

The reasoning for the stock picks can be found here:

https://twitter.com/FourieStephens/status/1491528195400781828?t=pEZOgL-pKvTapmZe0T3Kwg&s=19

So, how did it go?

Overall, it went quite mediocre to say the least. The stocks picks in general were all essentially consumer discretionary type of stocks or stocks which would generally fare worse in inflationary environments. This implies that I discounted the effect inflation would have on these type of stocks. This is true since I grossly underestimated the rise of inflation and the rise of the fed fund rate.

Results:

$RH -53%
$SONO -42.5%
$GPN -31%
$MAT -23.7%
$MBUU -21%

SP500
$VOO -19.6%

So all the picks performed worse than the benchmark. Note, I still hold these stocks personally. However, if you invested in these stocks without any due diligence on your part you would probably not feel the same way because of conviction levels and reasons for owning the stock.

The bottomline is it's mostly a bad idea to invest in stocks based on a top 5 list, if you want to copy or invest in stocks you need to do some due diligence. It's a good resource to get initial stock ideas, but you'll never really develop a lot of conviction in your holdings if your reason for owning it is because someone else told you to buy it.


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