Remember back in the summer when Josh and Austin did their first annual fantasy stock draft? This episode is all about the results! (Listen to part 1 here!) We won’t spoil who ended up winning, but Josh and Austin go over the stocks they originally drafted, see which ones performed well and which ones did not. They also talk investing for such a short period of time and of course, a dad joke of the week. Listen in now to see who owes who donuts and when to expect the next Invested Dads Fantasy Stock Draft!
Main Talking Points
[0:52] – Recap of Fantasy Stock Draft
[2:23] – Results
[9:02] – Stats
[12:27] – Dad Joke of the Week
[13:14] – Stock Performance
[19:20] – Conclusion
Links & Resources
Episode 029: Fantasy Stock Draft
Invest With Us – The Invested Dads
Free Guide: 8 Timeless Principles of Investing
Social Media
Full Transcript
Intro:
Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments. Here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, hey, hey. Welcome back to The Invested Dads Podcast, a podcast where we take you on a journey to better your financial future today, Josh. Wow. Six months have past.
Josh Robb:
That’s right.
Austin Wilson:
Now, we are going to be talking about what everyone has been waiting a full six months to hear, the results of the inaugural, first annual, repeating probably, Invested Dads fantasy stock draft.
[0:52] – Recap of Fantasy Stock Draft
Josh Robb:
That’s right. Just as a recap, Austin and I picked 10 different stocks.
Austin Wilson:
10 stock picks.
Josh Robb:
10 stock picks. They you could each be in one sector.
Austin Wilson:
10 stock picks in 10 sectors.
Josh Robb:
Each in one sector.
Austin Wilson:
Well, yeah. 10 stock picks in 10 different sectors.
Josh Robb:
There are 11 sectors, so we could leave one sector out, our choice. We could not choose the same stock and we had fake money involved. we could able to buy shares and show it as a returns in all of our fund formulas.
Josh Robb:
No real money was involved. This was just more a picking game. We see what happens over a six month period.
Austin Wilson:
Yeah, we each had a hypothetical, I wish it was real, but a hypothetical $100,000. That was divided equally among each stock pick. Each stock, so we would have ended up getting partial shares, but each stock, we got $10,000 worth of that stock on June… as of the close on June 25th.
Josh Robb:
That’s right. That was our start date.
Austin Wilson:
Then our close date just ended Christmas.
Josh Robb:
Christmas day.
Austin Wilson:
Which really, Christmas day, the market wasn’t open. It would have been Christmas Eve, but six or 12/25 or 12/24 is what ended up being the total return as of the close on that day for that six month period is where we were at. What that means is that any dividends that crept in would have been captured ideally in our calculations.
Josh Robb:
Yep.
Austin Wilson:
Josh, I’m just going to say this. You did okay.
Josh Robb:
Surprisingly, between the two of us, it turned out not like I would have anticipated.
Austin Wilson:
I’m just going to run this down.
Josh Robb:
All right.
[2:23] – Results
Austin Wilson:
The results are over that six month period, Josh Robb, his portfolio over six months was up 41.74%.
Josh Robb:
All right.
Austin Wilson:
41.74%. That means on a $100,000 initial investment, he made $41,000 in six months, hypothetically.
Josh Robb:
Hypothetically.
Austin Wilson:
My portfolio was up much less than Josh’s. My portfolio was up 15.87% over that same period. That means my hundred-thousand-dollar investment would have earned me an additional $15,000 on top of that. For reference, the S&P 500 with equal weight its sectors, so kind of the way we looked at it was, it would have been up 20.2%. A $20,000 return on that a hundred-thousand-dollar investment. Then if you look at the SPY or just the, think of the S&P 500 in market cap weighting itself. That was up 22.36.
Josh Robb:
That one wasn’t equal weighted. That was marked cap weighted.
Austin Wilson:
We’ve talked about that in the past, what the difference is.
Josh Robb:
Correct.
Austin Wilson:
High level, they were pretty close together. Yeah. Closer than I thought they would have been. That had definitely closed up the last month or so of the draft. If we look at how our portfolios did over time, it was kind of all over the place. Maybe we’ll throw a graphic in the post on the website, but there were periods where my portfolio was pretty up versus Joshua’s. There were periods where the market was doing much better. Then things turn quickly because this is the thing, we had 10 stock picks. When you have 10 stocks and something happens quickly, the diversification effect is not as strong. When you have 10 stock picks, it can work either drastically in your favor or against you. I’m thinking specifically the month of November, Josh, that was the month where I was up going into, and that’s pretty close to the end.
We’re two thirds of the way through and I’m already, and I’m up and I’m thinking I’m feeling real good about things. Then the month of November was very, very good for more cyclical kind of value oriented stocks that had been hammered during COVID that my portfolio was kind of built to avoid, and you had them and you rode them and they did very, very well.
Josh Robb:
Yep. Back in June, when we we’re making these picks, if you can think back to June of 2020, we were still coming into the summer months of COVID-19. The hope was that we’d be able to open back up the economy, but the worry was with the nicer weather, people get out and continue to spread, and we didn’t know which direction would be. Knowing I just had 10 stock options, I went the route of hoping that we’d have more openness in our economy and get more progress towards being open. A couple of my picks, so I picked Fiat Chrysler, which has the Jeep. The main reason I picked it is because I like Jeeps. I own a Jeep. I picked that one and that one was actually up 80% during our timeframe.
Austin Wilson:
Shoo.
Josh Robb:
81%, almost 82. Then the other one I picked was AdvanSix, which is a materials. They make a little bit of everything. They have a lot of stuff, but the idea there was as companies and they start ramping back up, they would need to resupply. That was the play. That was up almost 80% as well. A couple of those plays, another one that was more open up is I did own a Delta. That one was up 45% and was beating the benchmark. Those are a couple kind of more open place. Then that played to like what Austin said was, just the idea that depending on what would have happened, if they would’ve gone more towards lockdown, you’re more tech oriented holdings probably would have crushed mine.
Austin Wilson:
Yeah. They did really, until the vaccine news. When the vaccine news started rolling in hot and heavy there for a handful of weeks and we got Moderna and we got Pfizer and all these trials came out and everything was happy and very, very favorable for that, for the reopening play, is what we’ll call it. That was when the tide shifted for you. My portfolio was really built that this thing would last a little longer in terms of the market. It really didn’t. That was what works. Yeah. You had a couple, you had a handful of names that did very, very well. I had one name, particularly that did exceptionally well, and that was Nvidia. Nvidia was my tech play. It was up over 40% over that period. I also had WD-40, because I use a lot of that myself.
I thought that would be a good pick. That one was up 35 as well there. Our real estate holdings, however, Josh, so you had American Tower and I had Digital Realty Trust. Now, in the real world, the company’s businesses were not negative like our stocks were during this time. You were down 13% over the period. I was a little flat, but down a hair, 0.2%. The rest of the real estate industry was actually up almost eight.
Josh Robb:
Yeah.
Austin Wilson:
That is really due to the fact that going into this period, those two holdings that we had had done very well this year, and they’d gotten a little pricey compared to the rest of the real estate market. They were unfavorably impacted there. It’s just very interesting when you take a step back to look at how this worked out, at how it is exactly an example of what you would expect from active management.
Josh Robb:
Yeah. Yeah. That comes back to what we talk about. When we talk about financial planning, you need to build in assumptions to look at your plan, what do I need to be successful? You can’t just rely on, I think I’m going to always beat the benchmark. I think I’m always going to do better. If you put too high expectations on, you’re going to have trouble meeting that end result. It’s like you said, so I just happened to, in the six month period, beat the benchmark. Austin just happened to, in the six month period, underperformed the benchmark. Two active managers, two choices. Were any of these names wrong? No, because over a longer period of time, we’ve known historically all of these names have done well, but it just a matter of we’re looking at a short period of time.
Austin Wilson:
Exactly.
Josh Robb:
We know in any one year, it’s hard to guess who’s going to do well and who’s not against the benchmark. If you’re just looking at 10 names, it’s going to be hard to outperform every year. We know the longer you have though, of holding high quality names, the better you’re going to be.
[9:02] – Individual Days Won
Austin Wilson:
Yeah. That’s just kind of the nature of active management, look at things over a full 10 year economic cycle and the companies that you think are going to do well over that period. That’s where you, as active management, should be putting your money, but over a six month period, it’s anyone’s guess at this point. We chose to do it during the middle of a pandemic. That was, let’s just say, tough and things were volatile and there were big swings all the time.
Josh, something that kind of amazed me is that if, we have a calculation on the spreadsheet that we built. You did this cool part where you had days won. Days that you performed better than me and days that I performed better than you. How’d that turn out?
Josh Robb:
Yeah, which was really surprised. This is something I built early on as we are tracking. As I was watching it through, we were pretty much 50/50 for most of the six month time period. It was a toss up who would win day over day. The end result was I was up 69 days. You were up 58 days. Within 10 days of each other really, of who was up more than the other. How much we were up in those days is what ended up giving the difference between those two. Overall, if you’re just, again, looking at shorter periods of time, if you would have said, “Okay, am I going to go with Austin or Josh today on their holdings?” It was a 50, 50 chance who was going to get it.
Austin Wilson:
Exactly. Yeah. You’re right. It’s some of the swings that made the differences. A couple of statistics are Josh is highest daily return, his portfolio is up 5.59% in one day, 5.59% in one day. That was a $5,000 change in his, potentially even more than that or whatever, but on his a hundred thousand dollar investment, it bumped that much. That’s huge.
Josh Robb:
I remember that day, because that was when Delta and Fiat Chrysler had positive news because as those vaccine reports came out, those are some of the ones had been beat down so heavy. They were up significantly since we were equal weighted. I got pretty good participation about those.
Austin Wilson:
Whereas on the flip side of that, I had a good day too, but my good day was not near as good as Josh’s. It was about half actually. I was on my best day was 3.24%, which is still historically speaking-
Josh Robb:
Was good day.
Austin Wilson:
… extremely good. But considering what I was competing against, actually not as good. The equal weighted S&P, their best day was 2.4%. The thing is, the swings were a lot less for that than they were even for us. If you look at the flip side of that, so downside, on the downside, your lowest daily return was minus 4.37%, which is again, a huge number. A big swing in one day.
Josh Robb:
If we go back and talk real money, if you had a hundred thousand dollars.
Austin Wilson:
That’s a lot.
Josh Robb:
And you lost $4,000 in one day. Like you said, that’s again, we’re using fake money. When I looked at that, that day, I didn’t bat an eye. It didn’t matter. I was frustrated because that meant we were getting closer together when I was winning there for a little while, but the idea was, I have 10 names and if a couple of those underperform, then that could swing pretty significantly.
Austin Wilson:
Yeah. Whereas, my lowest daily performance was actually 4.81%, so almost 5%, which is even more. That just goes to show that the volatility, especially the downside volatility, so I was pretty heavily in tech and tech had had a really good run and thus was more susceptible to bad news. Oh, that definitely hit me a couple times. The market’s worst day, we won’t even really call it the market, the equal weighted S&P sector portfolio, their worst day was 4.01%. Again, less bad on the bad days, less good on the good days, kind of middle of the road, that’s the market for you. That kind of makes sense from what the truth of the matter is when it comes to investing. Wow. After all these numbers, Josh, I think I need a break.
[12:27] – Dad Joke of the Week
Josh Robb:
Yes. I have a dad joke for you that incorporates one of your loves as well as the winter.
Austin Wilson:
Oh.
Josh Robb:
Austin can do motorcycle stunts in the snow.
Austin Wilson:
I can?
Josh Robb:
It’s wheel-y cool.
Austin Wilson:
It’s wheel-y cool.
Josh Robb:
That’s what I got.
Austin Wilson:
I actually just got some heated hand grips for Christmas, for my motorcycle, which means I can ride in blizzards now, except for I won’t.
Josh Robb:
You have a little windshield wiper for your helmet.
Austin Wilson:
It really is going to extend my riding season.
Josh Robb:
The fall is when-
Austin Wilson:
Yeah. A few weeks later and a few weeks earlier, it doesn’t make me ride in the snow, which is good, but I can have a really good time. Wheelies are fun.
[13:14] – Stock Performance
Josh Robb:
Yes. There you go. If we look back, Austin, you’re studying for level two of the CFA. There’s fun formulas and all those calculations. Relatively speaking, we were pretty close on the downside. I was 4.3, 4.8, equal weight is four, and then the upside was five and a half, three, and then two. From an active standpoint, our alpha varies.
Austin Wilson:
True.
Josh Robb:
I had some significant alpha when you look at the end result of out-performance.
Austin Wilson:
True.
Josh Robb:
Then you had under performance. Then you have negative alpha, and alpha is just the difference between what you get and what the market or the benchmark is.
Austin Wilson:
Exactly. Yep.
Josh Robb:
Again, when you look at a short time period, and this is coming back to, when we talked with our clients about how we invest, and it said, “Well, why didn’t you get rid of that manager? They didn’t do well this year.”
Our answer always is, “Well, we’re pretty patient when it comes to firing, because we do a lot of research on the front end, and hopefully this is true for anybody out there doing their own investing is, you want to make sure you know the people, the process, the price you’re paying into and the fundamentals, everything within there that I like what they’re doing. We’ll be okay if at some points in time, they do not do as well as the benchmark.”
Austin Wilson:
Yeah.
Josh Robb:
If you are constantly trading out and chasing that top manager, history has shown most top managers underperform in the following years, because again, if they’re long-term holders, they’re probably had a good run, kind of what Austin experienced with his. If we took a full time year period, his portfolio is probably a whole lot better than mine because of the run up tech had prior to the June 25th start date.
Austin Wilson:
Yeah. It probably would have done really well historically, but again, this it’s those short term periods that it could have continued. For all we would have known, which would have been crazy also. This year was a specific example of uncertainty, but I think that every year is really a period of uncertainty. You really just need to buy good companies that are ran well that have good fundamentals and are growing and that you understand and trust the business.
Josh Robb:
Yep. Then if you’re using mutual funds or ETFs, you buy into a process that you agree with that how they’re choosing the holdings, whatever, however, that is that you agree with that. Then you stick with it, because again, over the long run, if you choose the right managers, they will give you what you need from a performance standpoint. Then asset allocation, again comes back to, I got to be invested in a way that I can tolerate that. I got to be able to sit through that 5% up, four and a half percent drop, so that in the long run, I finished up 40%. If I would have panicked when it dropped 4% in one day, I would’ve missed out on that full total return.
Austin Wilson:
That’s something that we need to keep in the back of our minds, is that, again, this is 10 stocks, a diversified portfolio. According to most research, says you need around 30 to be diversified to take the single name risk, not out of the equation, but to lessen it enough that you can sleep at night. The ups and downs, the ups would have been less high for you, had you been in 30 names. The downs probably for both of us would have been less high as well, had we been more broadly diversified, but this is an example of just, hey, what can two guys who talk about finances, see what happens in six months? We don’t invest our own money for six month time periods.
Josh Robb:
No.
Austin Wilson:
Six months time periods kind of really put a lot of noise in the picture. We’re trying to avoid that in the real world. This exercise, I think it proved a lot of cool things. First of all, that we can have fun rubbing it in each other’s faces who’s winning every day, mostly Josh.
Josh Robb:
Well, so it comes back to that research. One of the ones I didn’t mention, I chose Noah, which has No Holdings and the ticker is N-O-A-H, which my oldest son’s name is Noah, which is why I chose it. I knew nothing about this company. I had to actually Google them to figure out who they were, once I found out they had a ticker like that. They’re a Chinese financial advising, large conglomerate company. I don’t even really know. It was up 72%.
Austin Wilson:
Yep.
Josh Robb:
Zero research on that.
Austin Wilson:
You wouldn’t have bought that with your own money.
Josh Robb:
I only picked it because of the ticker. That is not how you invest money.
Austin Wilson:
Exactly.
Josh Robb:
This was, again, because it was fake money, I could afford to lose all $100,000 of this fake money and I would be fine.
Austin Wilson:
Exactly.
Josh Robb:
I just wanted to point out, you can get lucky.
Austin Wilson:
Yeah.
Josh Robb:
That helped my performance a lot, 72% up during that six month period.
Austin Wilson:
On a 10 stock portfolio.
Josh Robb:
On a 10 stock portfolio, that was big. I picked it just because of the ticker, no research involved. No thought process beside that. Then I picked Cooper companies, which they did well. They were up like 27%, which is better than the benchmark. Again, they make glasses. Now, I’ve seen this company. I actually knew who they were, but I picked it because at that point in time, three of my kids were getting glasses. I was just thinking to myself, man glasses industry, my family alone is just pumping some money into that. Again, it just was a random thing. I picked that Jeep because I liked the Jeep. It just, you can get lucky. I guess what I’m pointing out there is I just make guesses.
Austin Wilson:
Absolutely. The interesting thing is, so if you were to look specifically, let’s look at consumer discretionary. You had Fiat Chrysler. I had Amazon. In five years, what stocks going to do better? You don’t know, but where things were when we started was a lot more favorable for something like Fiat Chrysler, having been beaten down for this short term period that we were looking, where Amazon has done really, really well, where I believe, my personal opinion. Don’t put any money on this, but I believe that Amazon probably has better growth than a Fiat Chrysler in the next longer-term period, but it had done a great run up to that point.
Josh Robb:
If you look backwards five years…
Austin Wilson:
It had done great. It’s just a matter of time horizon. It really impacts everything. Josh, we’re going to do this again next year. By the way, you won the donuts. I’m bringing you some donuts.
Josh Robb:
All right.
Austin Wilson:
Which I might have to sneak one.
Josh Robb:
We’re sharing them.
[19:20] – Conclusion
Austin Wilson:
Okay. That’s good. We’re going to have some donuts to celebrate Josh’s win on this, but yeah, we’re going to do this again next year, probably around the same period. Listen in around the end of June. We will again, probably do similar rules, same draft and same holding period. Around the end of December, we’ll wrap it up again and do this. We’ll just try and keep this going every year. If you guys have any thoughts or ideas or comments, feel free to shout them out and give us an email we’d love to hear from you at hello, with the invested dads.com. Josh, how can people help us to grow this podcast?
Josh Robb:
Yeah. We’re heading into 2021. If you have any topics, you’d love us to talk about, maybe something came up this year with everything that happened with COVID that you just have some questions on, shoot us an email. We’d love to talk about the topics that you have. Make sure you like this, share this with anybody who was interested in our stock trap. If they didn’t realize we were doing our wrap-up, share it with them. Then again, if you want, we would love to connect with you and get to know you. If you were doing your own stock trap along with us and you kicked both of our butts, let us know.
Austin Wilson:
For sure.
Josh Robb:
That would be great. We’re always interested to talk with you. Hello at the Invested Dad is a way to reach out to us.
Austin Wilson:
Yeah. Always check out our free gift to you. It’s a brief list of eight principles of timeless investing. These are overarching investment themes meant to keep you on track to meet your long-term goals. It’s free. It’s on our website so check that out. Otherwise, until A, next week, but B next doc draft, signing off, the invested dads, Josh and Austin.
Josh Robb:
Happy New Year.
Austin Wilson:
Happy New Year.
Outro:
Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future, doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast. Guests are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only, and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
