Saturday, May 13, 2006

Playboy Asset Management

Who makes the best asset managers? The people with the best assets, of course! Maybe that is why Amy Sue Cooper, a 23-year-old nursing student and 2005 Playboy Cybergirl of the Year, hast the distinction of beating all 9,771 Morningstar-related mutual funds in the US, according to Barrons (Review and Preview, May 1).

Along with nine other Playboy Playmates, she is competing the in Trading Markets/Playboy 2006 stock-picking contest. Through the end of April, she was up 47% year-to-date vs. Frontier Micro-Cap's (FEFPX) 33% return. Since then, her portfolio has further rocketed ahead to an eye-poping 64%!!

Just for the record, she's outperforming your humble writer over this period, as well. See Amy's picks and her reasons for them here. Her big pick is Pacific Ethanol (PEIX), which is up 288% since January 1, due to the government's continued support of ethanol subsidies. (She is studying at Nebraska, so I guess a Cornhusker should know).

Obviously, I posted this because of its entertainment value. But there is also a strategy lesson here. What her portfolio demonstrates is the power focus, a subject on which I have written before. Three of her five positions are down, but one tremendous pick lifts her performance far above the crowd. Mutual funds cannot concentrate their portfolios this way, by law they must hold a much larger number of securities, so even if they did spot a great opportunity like PEIX, it would be diluted, because it wouldn't be more than a small percentage of the portfolio.

The contest raises money for charity, but the best thing about it is that is proves that Playboy really is about the articles, after all.


  1. How many stocks do you think someone should hold for a power focus?

    Also, you've told me Colgate-Palmolive and Bank of America are some of your holdings, what are your other ones?

    - Michael Patzer

  2. Buffett suggests that you should be prepared to put 10% of your money into a good investment, which suggests around 10, and Phil Fisher suggested that more than 15 stocks was too many.

    I have also read that most of the benefit of diversification can be achieved with as few as five stocks, so I think 5-15 is about right. Given the relatively small asset base I am working (less than $1 million), I hold six positions, CL, BAC, LU, TRLG, PRCGX, and cash. I also hold various funds in my 401(k) .

    I want to discuss my individual positions and my rationale for each starting today.