This is a general explanation of the world of Stock Gumshoe, I update it every few years. No big news here, but we have new folks coming through the door every day… so, FYI:
Stock Gumshoe’s primary reason for existence is to help investors think for themselves, and to avoid swallowing the hyperbole-laden investment ideas that are touted and teased by the investment newsletters and other pundits. That’s not because the ideas are bad — sometimes they are, sometimes they aren’t, in my judgement — but because the influence of marketing and group-think short-circuits our ability to think critically about almost anything, and that goes double for investments and money.
So although we offer something a bit extra to our paid members — a bit more of my opinion, and my more thoughtful and more fully researched writeups of stocks that I own or am considering, a few other tidbits here and there and, in the case of other authors or columnists we might feature from time to time, some outside perspective — I am a strong believer in individual research, in open discussion and debate about stocks and valuations, and in the importance of critical thinking for investors.
Our paid membership, the folks who I call the Stock Gumshoe Irregulars, was started not because we have something brilliant or secret to sell to you — but because, soon after I started writing these teaser solutions and sharing them with people, readers started sending us money. I didn’t know what to do with it, but after a few months of checks in the mail we started more formally inviting people to be paid members to help support the future of Stock Gumshoe, allow me to invest in the site… and, in exchange, get a bit more from Stock Gumshoe as a reward. The Friday File and the other writings I share with our paid members are my way of saying that although we value our free readers greatly, I promise to spend at least one day a week writing just for the Irregulars as a way to, well, repay them for helping Stock Gumshoe to survive and thrive.
So in that vein I share my Real Money Portfolio with our readers, and write about my reasoning when choosing to buy or sell a stock, and often write about my asset allocation or other decisions as well… but I specifically do not have a recommended portfolio or trading alerts that I think other people should follow, and any guest columnists we host will not not offer that kind of guidance, either. We are sharing information and research and opinion, not guiding individual investment decisions that you might make. I am not the world’s best trader or investor, not by a long shot, and I may well be below average some or all of the time — all I can offer is my thought process and my research, and hope that our readers find it valuable, interesting, entertaining, or profitable.
Most of what I write here at Stock Gumshoe involves the solving of investment “teaser” ads, the critical discussion of ideas that are hyped by newsletters, and quick explanations of investing concepts that might be sold by pundits as mysterious secrets. But I also write some about my portfolio, and we have guest columnists who write about a variety of topics. I choose guest columnists based on their ability to explain, follow, and discuss interesting stocks and ideas, and because I like to read what they write.
For those who don’t know me, I am an individual investor, I read a lot and attend investment-focused conferences sometimes, but have no experience as a “Wall Street insider.” I was a direct marketer long ago (I got some of the same training as the copywriters whose work I decipher, I imagine — though I was raising money for charities, not selling newsletters), and I’m more recently a recovering academic. I had been blogging about my investment research and my strategies for a few years, as a side project, before I started Stock Gumshoe in 2007 as a venue for deciphering and demystifying the ridiculous hype and promise of investment newsletter ads. I found it more rewarding than the tenure track, so after a while I left my faculty position and started working on Stock Gumshoe full time. Stock Gumshoe was born in Washington, D.C., where I lived for a long time, but now makes its home in the Pioneer Valley of western Massachusetts.
I don’t manage other peoples’ money or buy all the stocks I write about, and I’m not a particularly active trader, but I invest my family’s portfolio and write about that, and I continue, with most of my time, to write about and decipher the promotions and hype of the stock teasers… which, despite (or perhaps because of) our best efforts, have grown only more ridiculous in Stock Gumshoe’s first dozen years. Some years I “beat” the S&P 500, as I have for the past few years, some years I don’t (2014-2016 were pretty weak for me, for example). I just turned 50, and most of my investing is done with a long time horizon as I try to build a nest egg for my family and pay for future obligations like college tuition and retirement (though this work is pretty fun, so maybe I won’t retire) — but, like most of us, I can’t resist being opportunistic when something looks interesting as a shorter-term bet.
Sometimes when I write about a teased stock, particularly if it’s a small capitalization company with a big, loud marketing push behind the teaser, the stock goes up in part because we’re “revealing” it — there’s not much we can do about that, but I do try to make sure that I don’t profit from any movements like that, which is why all paid Stock Gumshoe authors, including me, have a three day blackout period after writing an article when we’re not allowed to trade the stocks we cover. I do write largely about my portfolio, so I often write about stocks I own or write about them because I decide to buy them, but I hope that three-day embargo means that our authors won’t be in a position to profit from any short-term “bump” that our coverage might give to a stock price (usually we have no impact on larger stocks, we’ve grown to have thousands of daily readers but it’s not like we’re the Wall Street Journal over here… sometimes with a little fella, though, even a little surge of attention can impact the shares and the trading volume).
We’ve had several different columnists in the past, but right now we have just one regular one in addition to myself. Michael Jorrin, who is an old personal friend, is a longtime medical writer who writes about broader medical and health issues and generally doesn’t specifically opine on stocks or on the investment prospects of drugs or companies. He is not a doctor, he is quite obviously not giving individual medical or other guidance to readers, and his articles often spur heated discussion of sometimes controversial topics — particularly hot-button social issues like alternative medicine, genetically modified organisms, vaccination and the like. He is a paid columnist who chooses his topics and is responsible for his own opinions, and we do not fact-check or edit his work to any substantial degree (as with most of the columnists we’ve hosted, his work requires just some light proofreading and formatting).
Michael is required to divulge any ownership in the stocks he writes about and to follow the same trading restrictions that I do (not trading a stock he writes about for three days following publication), but he’s usually not writing about the investment side of health so that is rarely a relevant restriction. I gave Michael the moniker “Doc Gumshoe” (he is not, as he is clear to note, a doctor), and brought him on board in the Spring of 2013, largely because health marketing is at least as pervasive as investment marketing and readers were asking me about stuff that I couldn’t easily understand.
It is a standard saying of investing that you should “only invest what you can afford to lose,” and though that saying has become worn and weak with overuse I consider it absolutely true when investing in small and volatile companies whose future is based on ongoing scientific work, unproven products, or assets that are otherwise not clearly understood or are many years from “realizing” value — small biotech stocks without approved products, small cash-burning technology companies, exploratory mining or energy companies, insert your favorite volatile sector here. There are plenty of stocks in the world where the company has a nontrivial chance of becoming worthless because of a single piece of news, or nearly so, and though I think understanding the science (or geology, or market dynamics, or whatever) behind the products these companies are developing is extraordinarily important and valuable, and it may well increase your odds of success, even dramatically so, it does not, by any means, provide a real margin of safety or a firm foundation for the shares of these kinds of stocks. The only viable risk management strategy for trading in this kind of sector, in my opinion, especially in the smaller stocks, is position sizing — which means, quite literally, only investing what you can afford to lose entirely in any one company. Really.
I know we have many seasoned investors in this space — including both long-term investors who are comfortable with volatility, and traders who like to ride very volatile stocks and the roller-coaster charts they often create — that warning isn’t directed primarily at those folks, and I’m not trying to tell you how to invest… but I know, also, that we have many novice investors who read Stock Gumshoe, including new readers and many excited traders who see biotech and tech and mining stocks doubling overnight and want a taste. Please be careful. Sometimes the worst thing that can happen to an investor who is just getting started, or who is exploring new sectors or strategies, is to strike gold on your first or second trade and see your portfolio double in a few months, that brings with it a feeling of bulletproof acumen and leads to a loss of fear, a loss of perspective, and a failure to diversify. We are, most of us, our own worst enemy when it comes to investing (that’s true of all sectors and all ages — Warren Buffett isn’t smarter than everyone else, that’s not why he’s considered the world’s best investor… he just had the mental fortitude to act differently than most people in the market… and, probably, was smarter than average and lucky on top of that).
So that’s who we are, and what we do, from my perspective. I always want to take the opportunity to remind our readers that I do not offer a “tip sheet” for anyone to mimic, and neither will anyone else who we host here as an author — we’re trying to help you think for yourself and make your own decisions, and to facilitate discussions of interesting investment (and other) ideas. I hope you find it valuable, and I thank you, very much, for helping me to keep growing Stock Gumshoe into a useful resource for all investors.