Some days turn out to be quite unprofitable. One of my larger holdings is Depomed – it was down 58% today (a phase 3 drug trial failed to significantly reduce pain when compared with placebo with Depomed’s formulation, not the kind of news you want for your company). Oh well, you have to take the bad days as an investor (at least I do) if you expect to see the good days (if you invest in individual stocks you have to accept that you will have some bad days). It was the largest holding in my Darvamore marketocracy fund. I imagine the fund, which beat the S&P 500 by 3.5 percentage points annually since it was started, is going to see that result take a huge hit. This day will be noticeable on the chart for a long time.
At least I have the sense to know it was a risky stock – I didn’t have any in my sleepwell fund, for example (the sleepwell fund is beating the S&P 500 by 1.5 percentage points annually since inception – 17.4% to 15.9%, and remember marketocracy reduces returns to account for a 2% annual management fee and trading commissions). Of course that is a bit misleading as most any individual stock can have huge losses on a given day or week. Google is my biggest holding there and while I think a sharp decline is unlikely right now, I would not be amazed to see it drop 30% in some week during the next few years. Given that Google is up 149% even a 50% decline would still make it quite profitable for the the fund. Taken as a whole for a long period of time I think the sleepwell portfolio is pretty solid.
Well, even though I am sure I will have more days like this I hope I can avoid them for awhile and build up some profits first.