Dr. Kris

Unfortunately, there are a number of assumptions and figures in your piece that are grossly inaccurate.

1. None of the 130+ sessions are sponsored. To state that “each breakout session requires a sponsor” is 100% inaccurate. The Institute creates and drives all of the sessions. Some sponsors have private, invitation-only sessions, but those are clearly noted on the program. And in some cases we work with sponsors who help us with panels that are clearly appropriate for this event.
2. You are correct that the Global Conference is the Institute’s main fundraising source. It provides much of the funding of our research throughout the year. But your estimated costs of how much we raise by this event are so ridiculously high as to be laughable (we wish your figures were true). To put it politely, you don’t know what you’re talking about.

Again, we appreciate your noting the Global Conference’s growing importance, but this posting is not an accurate representation of the conference, its operations or its financing.

I did mention at the end of the article that these types of risky stocks are best played with funds you can afford to lose, as you noted. Play as many as you want. If you buy a bunch of small biotechs, you do not have a diversified portfolio–you just have a large portfolio of potential losers. While the risk is now spread among many companies, that doesn’t necessarily mean that it’s any lower than by buying just one.

I can’t say whether it’s better to own the same dollar amount of a basket of risky bets rather than one blue chip such as Pfizer. Pfizer has lost stock value over the past 10 years but the loss has been somewhat mitigated by its dividend, something which speculative stocks don’t pay. (Also, if you had used a stop/loss you would have been out of Pfizer a long time ago.)

Let’s say you’re playing this scenario with ten stocks in your junk basket and by some lucky chance one of your ponies actually does turn into a beautiful colt. In that case, its stock is going to have to appreciate 1000% just to make up for the other nine losses (assuming an equal $ amount).

I have no idea what is the actual percentage of success for these types of speculative stocks (it would take a lot of research to find that out) and I’m not going to go on the record touting a basket of high-risk plays versus a low-risk one without knowing the actual numbers. My goal in writing this blog was to show how by wearing rose-colored glasses when looking at the market could be highly detrimental to one’s financial health.

Thanks again, Miles, for the great comment!

Dr. K

What if the investor owned 10 one-trick ponies—a ’stable’ of stocks? In essence, what’s accomplished is creating one diversified company with 10 divisions. In this case, you have dedicated and focused managements committed to their specialized high-potential product areas—but diversified in areas of business to mitigate risk.

For example, say someone has a $100,000 stock portfolio made up of normally about 10% in each holding. Well, I would argue that the owning ten 1% holdings, each in one-trick ponies, might be far better than owning just one stock of modest potential. In your example, would it be better to own 10 specialized tech nano-caps than 10% in Pfizer?

However, your admonition on one-trick ponies is generally true because those clinging, ga-ga holders tend to concentrate their investments on just one big bet—sort of risk squared.

I like one-trick ponies. One should expect that some will fall by the wayside, but some will earn staggering returns. One element necessary with a stable of one-trickers is an ability to hold stocks even after major gains have accrued. Having some rule like “taking out your cost” after a ___% return, helps you stay in. After all, sometimes a “pony” less than 58″ high at the withers tricks people and turns out to actually be a colt after all.