Years ago, when we started MAPsignals, we were naïve: we thought we had to be all things to all people.
The last thing on our minds was simplicity. If only we knew to K.I.S.S. – keep it simple stupid!
It was chaotic, we threw everything and the kitchen sink against the wall to see what stuck. We just started our business and hadn’t found our way, but we did find our first growing pain.
We used to analyze markets that we had low interest in like: commodities, interest rates, and currency. We even published the phases of the moon! Perhaps you remember a guy who picked market movements based on the moon…crazy right?!
We had it all: information already available to everyone all in one place. But, tucked in a tiny nook of our research were stocks. The thing we cared most about, and had truly unique insights on was had to find.
The truth is we were scared to focus on stocks. We knew we had something special, but we were afraid: What if someone copied us? What if they back-engineered us? What if the secret gets out?
We spent countless hours each weekend focusing on so many different areas that we had no cohesive message. There was no focus. By wanting to appeal to everyone, we made our research complicated, cluttered, and not particularly useful. And our biggest strength was hidden from anyone’s plain sight.
Looking back now, we just didn’t know any better.
Then came our big breakthrough: we got in front of a few hedge funds and pitched our research. All of them had one thing in common: they only cared about our stock picking process.
Some funds tested our data and it wasn’t long until we had a subscriber. Then another… and another. Then a lightbulb went off because the message was clear: forget the other stuff. We made the bold move to revamp our research and focused solely on Big Money movements in stocks!
What was initially 5% of our weekly research became 100% overnight. Aside from immediately becoming totally proprietary, we liked our work much more too because we love stocks.
Over time we found our groove: for life and investing – Keep It Simple Stupid! And we think you should too! We say, cut out the noise and follow the juice!
We look at thousands of stocks each day and Big Money movements give us the near-term picture. But we learned not to overcomplicate it. The real prize is simply holding onto outlier stocks for the long-term.
But to find the outliers, we need to look at the data to figure out where in the stream we are. So, let’s take a peek. You’ll want to read through to the end because there I’ll share one of my biggest investing blunders ever.
Stocks Sellers Pressure Big Money Index
It’s August. As we’ve been highlighting, that means to be ready for summer volatility. But with major indexes near all-time highs, it might be hard to know that there’s more going on under the surface than meets the eye.
Below we see the Big Money Index, which measures big money going in and out of stocks. It’s been falling for a month and is about to break below levels not seen since October:
What’s interesting that you don’t see in a rising S&P 500 is that small caps are dragging down the BMI. Fears of new restrictions due to the COVID-19 delta variant have crushed small companies.
Discretionary & Energy stocks are getting sold hard. And you see that looking at the Big Money Stock Buys & Sells chart. We are witnessing yet another nasty thematic rotation into Tech and growth stocks, and out of small-caps:
A zoom in shows it nicely. When sellers increase (red bars), it drops the BMI:
We can see it in ETFs too. High-quality growth and bond funds are getting bought while cyclical stocks feel the pain:
That nasty red bar from weeks ago was July 19th when 80 ETFs were sold. Since then, markets have rallied to new highs which is just what we expected after extreme ETF selling.
While that’s encouraging it’s not an all-clear. That’s because until we see more buyers step in, conviction for a rising market is low. In other words, we expect some market bumps until we see clear buying… but hey, that’s August for you!
You may wonder: should I be worried about this data? Typically, a falling BMI typically means to plan for a pullback, right?
Short answer: Yes.
But remember today’s message: Keep It Simple Stupid! Particularly when it comes to investing.
Let me show you why.
Keep It Simple Stupid: Learn from My Mistake
Years ago, I loved trading stocks for a quick profit. It was a lot of ins and outs and it could get complicated. And by not keeping it simple, I was being stupid: the following trade cost me over $700,000!
Back in October 2007, I made a quick 150% gain on call options in Mastercard (MA). I was following the Big Money and quickly bought 2 November $150 strike calls, paying $11.50 per contract.
You can see the Big Money activity from back then:
It was a glorious trade. Mastercard crushed earnings and the stock skyrocketed. My calls blew up and I sold them with a smile…reaping $3,000.
Keep in mind, I knew this stock was awesome. They had the hallmark fundamental traits that I look for: growing sales and earnings. It was likely an outlier.
But my winner trade was shortsighted. I hadn’t yet learned how to keep it simple stupid and this single trade cost me dearly. Had I exercised my right to buy 200 shares of MA back then…for $30,000, I’d be sitting on well over $700,000 in profits! That’s because MA shares had a 10:1 split years later.
Those 200 shares would now be 2000 shares, worth a stunning $736,000! I only left $700,000 on the table haha! To rub salt in my wound, here’s what transpired then until now:
Yeah, Mastercard ended up being one of the greatest investments of all time. Those blue bars are the stairway to heaven…that’s Big Money taking this stock to the mooon!
I eventually learned to focus on the long-term and leave the short-term trading to someone else. Of course there are always dips and rips. But glory comes from holding outlier stocks for years.
Let’s wrap this up.
Here’s the bottom line: Back in the day we overcomplicated our research and investing process. We wanted to be all things to all people.
But we eventually learned our strength was to focus which helped us keep it simple stupid. We no longer look at the moon for clues… let someone else do that.
We follow Big Money into outlier stocks that can take our portfolios to the moon!
Now we focus on the bigger picture and see momentary pullbacks for what they really are: opportunities to grab amazing companies on sale.
Selling Mastercard felt good for a moment. But looking back now, it was one of my biggest blunders.
Thankfully I learned from it: Buy great companies and hold them. And we learned to focus our research finding the next mega winners…like Mastercard.
So, I urge you to learn from me: Keep It Simple Stupid!
Do you have some big investing blunders? Leave us a comment and don’t make me feel alone!
***Lastly, check out our latest video: Best ETFs for August 2021. Jason cranks on the 5 ETFs seeing Big Money.