These Billionaires Are Washed Up By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - Some billionaires have lost their touch…
- How TradeStops bested them…
- Sector winners and losers for September…
- And which could outperform in October…
- Jason Bodner’s latest Hotlist ideas…
- Last day to join TradeStops Pro and start trading smarter…
A billionaire is not a sure bet… Subscribers will know that we track the investment portfolios of some of the world’s top billionaire hedge-fund traders and money managers. As Mike Burnick and I showed you on Saturday, you have easy access to the stocks they hold… and can even construct diversified portfolios from the best of them. But there’s something you might now know about billionaires… And that is, plainly, some of them are not good investors. At least, not anymore. Take Ray Dalio. Dalio is one of the better-known billionaire hedge-fund managers in the world. He’s made a splash with a few confident books about how he views debt, principles for investing, and other topics. His firm, Bridgewater Associates, has also put up some exemplary years in the past, contributing to a (previously) high rate of return. But he’s been wrong on a lot of stuff lately. Setting aside the recent stimulus-driven surge in the Chinese stock market, Dalio has been dead wrong on his big bet on China for years – no matter how admittedly convincing the argument once was to these ears. Beyond this singular bet, Dalio’s Pure Alpha fund has actually lagged the market since inception – putting up returns of just 7.7% from 1991 to 2023, with recent years of underperformance most contributing to that lag. We track all of Bridgewater’s positions as part of our Billionaire’s Club here at TradeSmith. And we recently ran the numbers on it and other billionaire portfolios to see if they’re really up to snuff. You might be surprised by what we found… I sure was. Out of the 27 billionaire portfolios we track, nine of them (one-third) have failed to beat the market for as long as we have data for. Dalio is in this crowd, along with names like John Paulson, George Soros, and Charles Schwab. The worst of these is Michael Dell, who has put up just 8% of the S&P 500’s return. The best billionaires to track, it turns out, are the lesser-known ones. Jeffrey Ubben has beat the market by 7X, the top performer in our Billionaire’s Club. He’s trailed by Andreas Halvorsen (a 6.25X outperformer) and Chase Coleman (4.4X). As you’ve come to probably expect from us, though, we took this analysis a step further. Right now, anyone who joins up with TradeStops Pro gets access to our Billionaire’s Club list as well as our TradeStops software. So, what better test to the software than to run each of these billionaire portfolios through it and see if we can beat them? Now before I go on, understand that this is a little bit like swapping out an engine of 27 very different cars with a V8 pulled straight from a ’69 Chevy Camaro. Sometimes, you’re putting the engine into a Mustang. Sometimes, you’re putting it into a Fiat 500. And in either case, that could actually turn out to be a good or a bad thing. Anyway, here are the results: - Out of all 27 portfolios, TradeStops improved the performance of the billionaires 67% of the time.
- So, nine weren’t improved, for which performance got dragged down by an average of -73%. (Most of that came from Michael Dell’s portfolio, which we impacted by -413%.)
- But of the nine Billionaire portfolios that lagged the market, TradeStops not only improved results, but turned them into outperformers.
- Three Billionaire portfolios that beat the S&P 500 were improved by an average of 117%.
- And on average, across all 27 portfolios, TradeStops improved performance of the Billionaire’s Club by 127%.
Now the metaphor probably makes more sense. Overall, TradeStops did much more good than harm. But at least in the case of Michael Dell’s portfolio, it was very much like sticking a V8 Engine into a Fiat 500 and having it explode on the key-turn. It tracks with what Keith Kaplan said yesterday – on the whole, TradeStops made bad portfolios better, good portfolios great, and great portfolios incredible. So, odds are, no matter what kind of portfolio you have, TradeStops can make a positive difference. If you haven’t already learned about what TradeStops can do for you, go here and check out the recent research presentation with Keith Kaplan and global macro expert Eric Fry. Even if you don’t wind up joining us, the information in this webinar is well worth your time. Shifting gears, let’s check in on which sectors dominated this month… This is the last trading day of September. And for what’s typically a poor-performing month, the sector performers show the market is decidedly still in “risk-on mode.” Here’s the sector snapshot for September: 
As you can see, Consumer Discretionary (XLY) dominated September with a 7.8% return. Utilities also kept charging higher, keeping the crown as the best sector trade of 2024, as you see here in the full year-to-date numbers: 
Utilities (XLU), Communications (XLC) and Technology (XLK) are the top three performers of the year so far, trailed closely by Financials (XLF) and Industrials (XLI). What we can’t forget, though, is that we’re in an election year. And in election years, seasonal volatility has tended to peak in October… with stocks falling -1.37%, on average, from today through the trough on Oct. 25: 
With that in mind, let’s run the numbers and see which sectors have historically performed the best during this period… Over as much as the last 25 years…setting aside relatively short trading histories for Real Estate (XLRE) and Communications (XLC)… the best sector to own from now through the end of the seasonally weak period on Oct. 25 is Materials (XLB): 
During this seasonal window, Materials has seen a win rate of 68% and an average trade (wins and losses) of +0.94%. That, along with strong performance in Consumer Staples (XLP) and Utilities (XLU), highlights a relative risk-off tone for the period. Financials and Staples also put up the best average returns for the period. The worst sector to own through Oct. 25 is, notably, the one that just put up the best performance over the last month: Consumer Discretionary stocks. They have returned just 0.23%, on average, and have a win rate only slightly better than a coin flip. Keep these numbers in mind as you head into the session today – Utilities should remain a strong sector, but keep an eye on Materials and Staples as well. To wrap up, let’s check in with Jason Bodner’s Quantum Edge Hotlist… Powered by Jason’s Quantum Edge system, this list compiles the stocks with the biggest Big Money targets on their back – both the buyers and the sellers. Every Monday afternoon, Jason’s subscribers get the freshest numbers delivered straight to their inbox, along with his timely market update and any recommended action on his model portfolio. Out of courtesy for Jason’s subscribers, here’s last week’s list… 
Some new names are popping up here since we last checked in. Doximity (DOCS) a networking website for medical professionals, jumped straight to number 1 with a Quantum Score of 84.5. I looked into the chart on this one, and DOCS seems to be escaping a long post-2021 hangover after a positive earnings surprise: 
On the software front, CheckPoint (CHKP), ServiceNow (NOW), and Clear Secure (YOU) are all making repeat appearances on the Quantum Edge Top 10. And all of them (especially YOU) have outperformed the market over the last few months: 
Popping up at the bottom of the list is Trump Media & Technology Group (DJT) – aka Truth Social – which we faded back when it made headlines earlier this year. And we’re also seeing Icahn Enterprises (IEP) appear among the bottom-ranked stocks. That stock has lost more than 26% this year. And the institutional buyers Jason tracks haven’t been any kinder to it lately, despite the recent dismissal of a multibillion-dollar lawsuit related to claims made by famous short-sellers Hindenburg Research. If you’re looking for a regular feed of great growth stock ideas before they become headline news, and timebombs to avoid, you’ll want first access to Jason’s research. Go right here to learn more about it.  Michael Salvatore
Editor, TradeSmith P.S. We’ve got some truly exceptional model portfolios here at TradeSmith. Or, for a customizable approach, don’t miss the Pure Quant feature of TradeStops Pro. As Mike Burnick and I showed you in our video Saturday, Pure Quant isn’t just a simple stock screener. Pure Quant uses each stock’s precise volatility footprint to determine how much you should allocate toward each position, given a starting amount of cash. So not only does Pure Quant serve up a list of high-quality stocks for the environment we face… it includes a blueprint for how to construct a portfolio out of these stocks. Just pick the number of stocks you’d like in the portfolio, and Pure Quant does the rest, even giving you a “second string” of alternates if you see any you’d like to swap out from your main list. And Pure Quant is a perfect example of how to deploy multiple of TradeSmith’s key innovations at once… Just like Eric Fry is doing over at our corporate partner InvestorPlace. Eric is deploying TradeStops Pro to help him optimize his strategy. After all, it’s not enough to find the right companies for the current climate. You’ve also got to buy and sell those stocks at the right time. Click here to watch Eric’s presentation on his TradeSmith – driven research. | 
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