A model portfolio of large cap stocks

I’ve started an experiment where I’m keeping a public portfolio of large cap stocks via the Motley Fool CAPS system- you can view it here.  I would like to see if I can generate value on the long side… something that I find much, much more difficult than shorting.

My criteria are:

  1. Pick only the quality businesses in a particular sector.  For example, Dollarama is the clear leader among discounters.
  2. Not overpriced.  For that reason, Amazon and Netflix don’t make the cut (just look at what happened to Amazon during the Dot-Com Bubble).
  3. I avoid industries where there are no clear industry superstars.  Oil and mining stocks simply don’t make the cut as none of them are quality businesses.
  4. Lastly, I avoid dying or shrinking industries.  Profits ultimately don’t grow in dying industries and therefore those stocks almost never do well.

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An investor’s guide to search engine optimization (SEO)

Search engine optimization is about getting a website to rank higher in search engines.  The goal is to increase web traffic without having to pay for ads.

This primer on search engine optimization is relevant to these stocks:

  • RetailMeNot (SALE)
  • Demand Media (DMD)
  • Search engines (GOOG, Yahoo Japan, IACI/Ask.com, MSFT/Bing)
  • Phone book companies (YLO.TO, DXM)
  • Somewhat relevant to online e-commerce companies (AMZN)

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Online advertising (GOOG, FB, etc.)

I believe that online advertising offers significant value compared to traditional advertising because online advertising can be tracked very easily.  Internet advertisers can track the click-through rate on their ads and how many of those clicks convert into a sale.  This gives instant feedback on the ad’s return on investment.  Advertisers can optimize their advertising budget to maximize their profits and split-test different ads and landing pages (the webpage that the ad points to).

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