Final grade for RiskHedge Live

Final grade for RiskHedge Live

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Stephen’s note: Today, Executive Editor Chris Reilly is back with Justin Spittler to discuss RiskHedge Live’s beta test performance in 2023.

Read on to see Justin’s final Report Card grade...

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Chris Reilly: Justin, today we’ll share the final results of your RiskHedge Live beta test.

To catch readers up, we launched your RiskHedge Live private trading room last June. A small group of beta testers paid to join the community and to get your top trades in real time. During this beta phase (June–December), we tracked every trade.

Let’s talk about your total return—and how it stacked up against the main benchmarks. Then I’ll give you an official grade.

First, in the interest of objectivity, let’s go over some calls you got wrong last year.

Justin Spittler: Sure. To me, getting things “wrong” is all part of the process. Peter Brandt, a legend and one of the greatest living traders, says, “I hate to be the bearer of bad news, but taking losses is the primary job description of a market speculator.”

It’s a genius observation because he’s absolutely right. The longer I trade professionally, the more I realize the big wins pretty much take care of themselves. Finding trades that gain 100%, 200%, or more is the easy part.

I know it’s not sexy, and I know I’m repelling some folks by repeatedly talking about managing stagnant or losing trades. But the truth is, you are going to have plenty of trades that don’t play out as expected. Manage them well, and you’ve done the hardest part.

Chris: Example?

Justin: My whole track record is an example. Looking at the beta test period, 18 of my recommendations—or one-third of them—produced returns between -6% and +6%. These were duds. But that’s okay! We made a little bit of money on them overall.

A novice will look at this and conclude I wasted one-third of my time. Untrue. It’s by taking swings and managing risks that we find the huge winners.

If you want a specific trade as an example… look at Transocean LTD (RIG), which we touched on Friday. It was my absolute worst trade during the year. However, every recommendation I make comes with position-sizing guidance. In short, the riskier the trade, the smaller the position.

We only took our smallest position—which I call a "starter position”—in Transocean. So even that trade did little damage to our capital.

Cameco (CCJ), the uranium stock, also comes to mind. We happily rode the uranium bull market to nice profits last year. But I trimmed this position a little too early. In hindsight, that was the wrong move.

Chris: Here’s a screenshot of exactly what you said in the RiskHedge Live trading room about it:

To summarize, you said "probably was wrong to trim a bit on CCJ. We still have a 3/4 position. The ability to quickly change your mind when new conditions present themselves is crucial to trading."

Justin: See? Traders can’t be perfectionists. And we ended up walking away with a nice profit. We sold CCJ on Thursday for a 21% gain after it sliced through all its key moving averages.

Chris: Alright. It’s time. Let’s look at the final results.

RiskHedge Live posted a total return of 89% during the beta test period (June–December 2023).

That easily beat the total 2023 returns for the S&P 500 (24%), the Dow (14%), and the Nasdaq (43%).

2023 was a good year for markets overall. But your recommendations surpassed pretty much every benchmark, which is extra impressive considering markets struggled during the first few months of RiskHedge Live (July–October).

If there’s an area for improvement, it’s the win rate we discussed on Friday.

You achieved a 56% win rate, which is good, but not quite excellent. The 89% average return, however, is superb, and a real accomplishment. Altogether, you’ve earned an A.

Justin: Thanks. I think our ability to trade anything really set us apart last year. We made good money in uranium. And in crypto, including several bitcoin mining ETFs that are as easy to buy as any stock.

The ability to quickly pivot and participate in the strongest areas of the market, I think, is our greatest edge inside RiskHedge Live. Most investors have “styles.” Value investors hunt for bargains; they’re not going to buy a crypto. Tech investors aren’t going to touch uranium stocks.

Rather than being beholden to a style or sector, we go where the opportunity is.

Chris: Where’s the opportunity now?

Justin: Markets are still hot lately. But I wouldn’t be surprised if we get a pullback soon, for two reasons.

  1. Markets have run up fast since November 1, squeezing nearly two years' worth of average gains in just over three months. And as Ryan Detrick at Carson Group tweeted, "The S&P 500 is up 14 of the past 15 weeks and up more than 20% the past 15 weeks. In the history of the stock market that has never happened before."
  1. February has historically been the second-worst month for stocks going back to 1950.

A pullback would be healthy and normal here. But in the meantime, I’m following price action as always and leaving the “predictions” to everyone else.

Chris: Any sector you like in particular right now?

Justin: Solar is starting to look interesting and may have bottomed.

The Invesco Solar ETF (TAN) is now back to its pre-COVID highs, and that level is holding so far. Also, Nextracker (NXT)—a recent solar IPO—has been performing quite well. It's rallied 92% since it went public last February.

Enphase (ENPH)—the largest solar stock—rallied 11% on Wednesday after missing on sales and lowering guidance.

Bottoms often occur when stocks stop falling on bad news. I have no solar exposure currently. And it could be months before TAN begins a new uptrend. But this is a hated industry worth watching.

Chris: Thanks, Justin.

For readers interested in following along with RiskHedge Live and getting Justin’s up-to-the-minute trade ideas, now is the best time to join.

We’ve opened the doors to Justin’s private trade room for a special price, $400 off for a full year (or $100 off for three months). Details here.

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