The Acquirer’s Multiple $45,000 – Deep Value Stock Portfolio – Real Money Game

Johnny HopkinsTAM Deep Value Stock Portfolio20 Comments

What is “The Acquirer’s Multiple $45,000 – Deep Value Stock Portfolio – Real Money Game”?

The Acquirer’s Multiple $45,000 – Deep Value Stock Portfolio – Real Money Game is a Deep Value Stock Portfolio Game using Real Money!

Huh!

Well, I’ve just discovered someone that’s prepared to put their entire superannuation savings valued at $60,000 Australian Dollars (AUD) (US$45,000) into The Acquirer’s Multiple Portfolio over the next 12 months, and ongoing.

Who?

Well me of course! Here I am! The one under Tobias Carlisle.

Why?

Cause I eat my own cooking! Why would I ask you to trust me with your hard earned savings using The Deep Value Stock Screener here at The Acquirer’s Multiple, if I wasn’t prepared to invest my own savings into this investing strategy. Not just my savings, but my entire superannuation savings.

That’s right! I’m 53 years old and all I have to show for it is AUD$60,000 (US$45,000).

I really believe in what we’re trying to do here. That is, help investors to maximize their returns following this rules based mechanical investing strategy using the The Deep Value Stock Screener provided on this website.

How will it work?

Simple! Every month I’ll convert AUD$5,000 into US Dollars at whatever the exchange rate is on the day and buy the top two stocks, that I don’t already own, provided by The All Investable Screener.

Why use The All Investable Screener?

In case you didn’t know, we have three screens here at The Acquirer’s Multiple. The Large Cap 1000 Screener, The Small & Micro Cap Screener, and The All Investable Screener.

Backtests show that over the full sixteen-and-a-half year period, the All Investable Screener generated the highest total return of 5,705 percent, or a CAGR of 25.9 percent per year. The Small and Micro Cap Screener generated the second highest total return of 3,283 percent, or a compound growth rate (CAGR) of 22.0 percent per year. The Large Cap 1000 generated the lowest total return of 1,940 percent, or 18.4 percent per year compound.

You can read more about the three screens here.

The screens here have been developed out of the comprehensive research conducted by our Founder, Tobias Carlisle, who wrote about his research in his Amazon best-seller Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, which describes companies with a low rank based on The Acquirer’s Multiple® that may be undervalued, and good targets for acquisition, i.e. Making them great opportunities as undervalued deep value stock picks.

So what’s the plan?

The first part of the plan is to put together the portfolio which I will scale into as follows:

  • Month One I’ll buy 2 stocks
  • Month Two I’ll buy 3 stocks
  • Month Three I’ll buy 2 stocks
  • Month Four I’ll buy 3 stocks
  • Month Five I’ll buy 2 stocks
  • Month Six I’ll buy 3 stocks
  • Month Seven I’ll buy 2 stocks
  • Month Eight I’ll buy 3 stocks
  • Month Nine I’ll buy 2 stocks
  • Month Ten I’ll buy 3 stocks
  • Month Eleven I’ll buy 2 stocks
  • Month Twelve I’ll buy 3 stocks

That’s 30 stocks in 12 months.

NOTE! Scaling in is where a lot of investors become unstuck!

Investors give up too quickly before their portfolio is full allocated.

Let’s use an example. Let’s say you bought just two individual stocks in month one and you paid $50 each for both. Your ‘portfolio’ is worth $100. If one stock drops by 20% ($10 or 20% of $50), then some investors believe that their entire portfolio has dropped by 10% ($100 minus $10). This is true but watch what happens when you add more stocks.

Now, using the same example, let’s say you now own 30 individual stocks all worth $50 each. Your portfolio is now worth $1500. If one stock drops by 20%, same as above ($10 or 20% of $50) that means your entire portfolio would only have dropped by 0.6% ($1500 minus $10).

It’s important to remember that when you’re scaling into your portfolio, large falls or gains in one stock will have a bigger impact until you have built your entire portfolio. Only then will you fully maximize your portfolio’s performance and achieve optimal diversification.

After I’m fully allocated, I’ll hold all stocks for one year and one day to minimize my tax, then in Month Thirteen I’ll re-balance the two stocks I bought in Month One and so on…

Along the way I’ll provide full analysis on the two stocks I’ve purchased, updates on the portfolio’s performance, and you can ask me any questions you want on scaling in, portfolio weighting, when to sell, rebalancing etc.

Remember there’s just one rule when it comes to using any rules based mechanical investing strategy; Don’t try to change any of the rules or you will underperform!

Performance to Date

Month 1

Month 2

Month 3

Month 4

Check out my Live TAM portfolio here.

For more articles like this, check out our recent articles here.

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20 Comments on “The Acquirer’s Multiple $45,000 – Deep Value Stock Portfolio – Real Money Game”

  1. will you be choosing stocks from the screener or simply buying the cheapest? do you think choosing 24 instead of 30 would affect results by much?

  2. Hey James.

    1. I’ll be buying the two stocks that have the lowest Acquirer’s Multiple, that I don’t already own.

    2. I don’t think it makes a lot of difference whether you have 24 or 30 stocks.

    Holding more stocks leads to greater diversification, and lower volatility which I’m more comfortable with.

    Fewer stocks reduces the number of purchases, but leads to greater volatility, and magnifies the impact on the portfolio of an unexpected event.

  3. Thanks Aiden.

    I agree, BPI is great value! But I’ll just be buying the two stocks that have the lowest Acquirer’s Multiple, that I don’t already own.

  4. Hey Christian.

    That was me!

    I started a small portfolio called, Johnny’s Real-Life Acquirers Multiple Portfolio, back in December last year. It ran for four months. Then, I decided that would set up a self managed superannuation fund and invest all of my superannuation into the Acquirer’s Multiple portfolio. This process took significantly longer than expected. But I’m now ready to start again.

    From a practical point of view, it’s just too difficult to try to scale into that much smaller portfolio with the amount I want to invest now so, I’ve decided to start from scratch.

    I hope you follow the journey.

  5. Hi Johnny
    Any guess of how important the scaling in approach is to return generation? I think of running the screener once a year to perform all transactions. This is mainly for time reasons as I don’t see myself trading every month over the long run.
    Thanks,
    Claude

  6. Hey Claude.

    I’m not sure. I’m just following the strategy as outlined by Tobias as the best way to set up the portfolio.

    For me, I like to be a little more active with my portfolio, so scaling in allows me to do something once a month.

    I also think that because I’m converting Australian Dollars into US Dollars, monthly conversions help me smooth out some of the currency risk and market fluctuations. It takes out all of the emotion associated with trying to time both the currency market and the stock market.

  7. but please update here as well as I don’t have a subscription (yet) and I would like to follow whats going on with you Johnny.

    A fellow Aussie

  8. Hey Claude.

    Just a follow up on your query.

    It’s not clear that re-balancing more often is better. The more frequently you re-balance the slightly better your pre-expense, pre-tax returns become. But if expenses and tax are high, that will take a big bite out of your returns. It’s fine to re-balance quarterly or yearly.

  9. Pingback: (Month 4) - Up 19.63% - Deep Value Stock Portfolio | Deep Value Stock Screener - The Acquirer's Multiple®

  10. Pingback: (Month 3) - Up 22.62% - Deep Value Stock Portfolio (Now Live on TAM!) | Stock Screener - The Acquirer's Multiple®

  11. Hi Johnny, I am one of your new suscribers (I am enjoying the financial service). I have some questions (I have also published them in the Forum.

    A. What do you think about the TAM companies that NEVER had operative earnings? Don’t you think that there is a lower probability of an eventual acquisition? I know that Net Nets without past profitability are not good choices. Our case (TAM) could be similar, don’t it? (An example of that is the stock FVE).

    B. What do you think about TAM companies without normal sales? For example the classic PHARMA stocks, with no periodic and usual revenue? (An example of that is the stock OPHT).

    I trust your statistics, that ‘the lower TAM ratio the best return’, but may be we can add some ‘quality paterns’ (not talking about RETURNS, but ‘normal profitability’).

    I mean, if we have two stocks with a ratio lower than 3 … And one of them shows best past profitability and normal revenue, I think I could be better to select it. Do you agree?

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