Every Tuesday I post a list of stocks with the highest bullish intensity in trader’s tweets. The list is comprised of stocks that a lot of people are excited about on Twitter so they have very high bullish sentiment scores. So what happens if you simply buy the most bullish stocks on Twitter? First of all, let me specify that I’m not recommending this as a strategy. This is just an illustration.
Since the first of the year I’ve been tracking a mechanical investing strategy that buys the top ten bullish stocks over the past month. I’ll call it the “Twitter Top 10 Portfolio”. The list is created on the first Friday of every month and I use Friday’s closing prices for buying and selling. Now that I’ve got three months of history I thought you might like to see the results. First is a chart of performance comparing the Twitter Top 10 Portfolio against the S&P 500 Index. Below that I’ve listed the stocks it would have owned each month. Note: The March totals have been updated to include Friday’s closing prices.
As you can see the portfolio has out performed over this very short bullish period. The out performance comes from catching a lottery ticket or two each month without too many blow ups. This is consistent with the way most mechanical investing strategies that I’ve seen work. Generally, mechanical stock screens tend to give a list of stocks with a higher probability of advancing than just throwing darts at a random list. The obvious down side to mechanical investing is that you make trades on a specific date (you’re not buying dips in an uptrend) and you’re buying with very little information about the company.
What I’m personally interested to see is how this portfolio performs in a sustained down trend. Specifically, does it get crushed like most momentum strategies do or does it find stocks that are out performing the market? Will it find stocks that are showing a positive divergence from the rest of the stock market before durable lows? Only time will tell.
|Start Date||Symbol||Shares||Start Price||Start Total||End Price||End Total||% Gain / Loss|
|Note: HNZ was skipped due to a buyout offer in place|
Below is a list of stocks that will be in the Twitter Top 10 Portfolio as of the close tomorrow. Notice that it varies slightly from the Most Bullish Monthly list created just two days ago. This is just another reminder that mechanical investing strategies are fluid and results can vary widely simply based on the day you create the list and make purchases. Going forward I’ll show the new list on the first Friday of every month and update the prices after the close on Friday.