Thursday, May 28, 2009

Why Picking The American Idol Is Similar To Stock Picking



I kept telling friends that Adam Lambert was not a shoo-in, even though I think he is the most deserving and talented performer this year. In the earlier rounds, I had little doubt that Adam Lambert would win by a proverbial mile. Then the photos came out which had Adam kissing other men... hmmm. He still managed to brush it off and led most of the way. When it came down to the last 4, I thought this was strange. Gokey and Allen were from the same background, and when the girl was voted out, I thought Adam might not be the winner. When Gokey was eliminated, they announced that out of 65 million votes cast, Allen and Lambert were less than a million votes apart. Then the final winner would be whomever managed to attract the Gokey votes.

Adam Lambert is from California, his background is in touring companies of Broadway shows. While he's been coy about his sexuality, he projects an androgynous image, especially in terms of the heavy make-up he constantly wears. The photos did not help. One thing did help was that most girls thought Adam should be the Edward vampire character in the Twilight series - its a chore to explain to you, go get your girlfriend to explain to you why so many girls are crazy over Edward the vampire.

Allen is middle America, squeaky clean, married. And he's done international missionary work for his church. Gokey is a church musical director. Clearly the majority of his supporters were going to fall in behind Allen. Still, its likely that Adam Lambert will have a much brighter future.

Just because everyone says its a buy, might not be so straight forward. Stock picking involves having that added edge, it rewards those who put in that extra effort. Just like if you read more into the elimination before the finals and the votes break down, and then read into the nuances and factors surrounding each contestant, stock picking is knowing the stock / industry / investors behaviour well. I put emphasis on the last part - at the end of the day, whether you are buying or selling, its not whether you want to buy or sell, its whether you should be buying or selling. Its predicting where you are in the gulf of trading activity, where are you in the midst of a momentum run, are you near the end run when you are establishing a position or the beginning.

Picking AI winner is much like stock picking because you need to look beyond the surface. So, yes, many people thought Adam was the most talented, much like all research houses issuing buy calls on a stock - if everyone had a buy and is long, who is selling? If everyone is long, who will be there to take the long out? Allen was not such a good stock but its pricing offered value and good upside. Not much long positions, so any buying would result in good upside. Sometimes you don't have to pick the best stock, but pick the stock with the better upside.

8 comments:

RAD said...

Dear Dali
Do you have any views on Pelikan?
Is it good for long-term holding?

Regards

Salvatore_Dali said...

yes, i like pelikan very much... if u look at most stocks on klse their markets is Malaysia... whereas Pelikan's mkt reach is almost global... i like their biz model... their comprehensive display and assembled a great variety of relevant quality premium products at their stand... the stand/unit can be an indpendent store, part of a mall, part of a retailer, etc...

Jimmy Tham said...

Dali,

What about your view on SPX approaching its 200 day MA? Are you a believer in TA?

Cheers

Salvatore_Dali said...

i m ok with technicals, not a strong believer... i would never buy or sell purely on technicals ... i might as well chart bacarrat banker-player-draw charts to bet..

RAD said...

Dear Dali
Thank you very much for your invaluable opinion
The stock has been bashed down from RM5.5 at its peak to about RM1.00 currently. At one time it was trading around RM0.60. Kind of regret did not buy some shares then

If you do not mind can you provide several other examples of companies with quality management, good business model but the shares have been bashed down horribly?

A lot of companies share prices have been humbled and a lot of companies have seen their prices rise meteorically in the past few weeks.

But I am looking for good quality companies that will provide maximum value for investment in the next 3-5 years

What I define by maximum value are:
- current entry price is attractive, and;
- the gap between previously attained peak price and current price is sufficiently large for us to profit handsomely over the medium to long term

Are there more such stocks around, but they must belong to companies with good quality management and business model?

Regards
S. Radhakrishnan

Arn said...

Replace with American Idol with Champions League, ...

Replace Adam Lambert with "sir" Alex Ferguson,...

Replace Kris Allen with Pep Guardiola...

And you got yourself a whole 'nuther article :)

Salvatore_Dali said...

Arn,

I dont think thats true. MU did not play that well. As a die hard MU fan, I have to say that Barca was phenomenal this year, even better than last year in the Spanish League. MU was lucky to beat Barca last year in the semis. Even though the polls would suggest MU being the favourite, that has nothing to do with a rational assessment but rather that MU just have so many more fans globally, period, forever, whether they perform or not.

Lastly, I was not that disappointed with MU losing, Barca was just too good. I doubt MU would have been able to match it even if it played to its best ability (this year's).

tohff7 said...

remind me of Keynes's beauty contest remark