My investment strategy: try to find one alpha

6/30/23 11:42AM

My current investment strategy is to try and find one and only one alpha in the stock market. The steps are the following:

Try to find one and only one market leader whose stock valuation is a significant portion of the total valuations on the stock exchange
Review the performance of its stock periodically
If the stock underperforms significantly against several other market leaders over an extended period of time, consider exiting the position and sitting on the sideline to look for another alpha with large capitalization

I understand that a popular strategy is to pick several leaders for a variety of markets and put them in a portfolio("picking the alphas"). But the one-alpha strategy might work sometime. I think Nortel Networks(Northern Telecom) grew to a significant portion of the Toronto Stock Exchange total capitalizations at one time and Samsung is a significant portion of the Korea Exchange.

At the moment, I have picked Apple and am thinking about consolidating my investment towards Apple. I think Apple has a signicant portion of the US stock exchange total capalizations. My understanding is that its stock performance is quite spectacular over the last 5 years. My hope is that the stock would appreciate on average 15% annually over the next 5 years. Apple is consumer-facing and has many existing customers and many potential future customers. I'm planning to review its stock performance every four months against the performance of 2 other alphas, Google(searching on the Web) and NVIDIA(hardware acceleration), if Apple under-performs both Google and NVIDIA by more than 20% over a period of 8 months, I would consider exiting Apple.

Happy Fourth of July and stay cool in the summer.

Feng Zhou

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