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:
- Pick only the quality businesses in a particular sector. For example, Dollarama is the clear leader among discounters.
- 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).
- 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.
- Lastly, I avoid dying or shrinking industries. Profits ultimately don’t grow in dying industries and therefore those stocks almost never do well.