ADMS 3531 N W2012
3/27/2012 Stock-Track Report
Eugene Myslinsky - 208083420
For the past three months we have been participating in a Stock-Trak Simulation
exercise to experience what it takes to trade in the stock market. In this report, we will explain
which strategies I chose to follow, which investments were the most and least successful to my
portfolio and lastly, what advice we would give those who are looking to trade with real money.
Investment Strategy and Selection
The strategy I employed for our Stock-Trak simulation was to diversify our portfolio
among different sectors, various stocks with relatively low risk, and stocks which were
positively/negatively correlated with other securities in our portfolio. My goal was to make a gain
of 10% return on our overall. The policies put in place to achieve my 10% goal are as follow:
a) Trading with the exchange trend: Mathematical analysis has shown that equity price
changes are mostly random with a small trend component, this is an important pillar of
knowledge as this is the only strategy which will give positive results in the long run
(usually seen within 4 weeks)
b) Cut losses: When faced with a stock that has been underperforming beyond reasonable
doubt and expectations it must be cut off in order to protect the return on my portfolio.
c) Long Positions are kept until they stop performing well: I’ll hold onto our long or short
positions as long as they consistently provide us with a favourable ROI.
d) Manage Risk: Asset allocation and diversification are of great importance in this area as
they are the key contributors to the mitigation of risk. Diversifying the type of assets I
invest into allows us to eliminate unique risk from the investment and market risk can
also be decreased by investing into foreign markets.
The asset allocation policy that I chose to follow in the beginning consisted of roughly half of
my portfolio value in futures commodities and the other half split between energy, technology,
retail and financial. I only invested in the U.S. market due to the lack of information and
unfamiliarity with markets other than the U.S. and Canadian ones. I wanted to diversify my
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Eugene Myslinsky - 208083420
portfolio with bonds; however the meagre return that they offered did not entice us at the time as
we felt that the money could be used for more profitable investments.
My Best and Worse Investments
Best and worst Equities in our portfolio
CLNE (Multiple Trades)
Clean Energy Fuel Corporation, a firm that finances, builds and develops renewable gas
fuelling stations all across Canada and the US had released their earnings report the month
prior; the resulting report triggered an enormous amount of volume traded over the next two
days with a sharp increase in price in the first day which continued to hold an upward trend
consistent with the index. However; I was feeling slightly sceptical in buying the stock as
StreetRatings had rated the stock as “Hold”; instead I kept our eye on it and finally decided that
a long position was right for this stock. It earned 27% in 3 weeks.
This was partially due to the negotiations with the U.S. government for possible
contracts to create renewable gas stations all across the United States which would have given
the company preferential government treatment and expected earnings. However; analysts
were beginning to speculate that the stock was overvalued as they expected only a $0.17
increase in EPS while the stock price was still soaring 30% above the correct value. In turn I
shorted the stock and made a small profit.
DGAZ (MMF) Inversely Linked to the S&P Natural Gas Index Excess Return
This was a younger stock that had just increased it’s price by 100% in 4 weeks. When I
looked at the S&P Index I could see that natural gas and heating oil were dropping; as were the
futures for heating oil and natural gas. These price changes came during a period of warm
weather during the winter in Canada/U.S.; however I thought that the stock would drop as the
energy prices went up. The opposite happened and I lost $3000 only to watch it drop
significantly at a