Gimme My Money!

The clock is counting down ever faster, and we’re nearing the end of my continuing effort to win the half-million-dollar prize CNBC is giving away in its stock-picking challenge. I'm following the advice my Foolish colleague Bill Barker laid out a few weeks ago for a 10-step strategy to win the two-month-long game, and I've got till July 18 to pull this off.

We all basically agree that Bill's plan is a risky approach to investing -- highly concentrated portfolios of very small-cap stocks poised to announce earnings, in order to capitalize on their volatility -- so we wouldn't necessarily want to invest this way in real life. However, for a game giving away some big bucks, it's worth a try, and I figured I'd emulate Bill's ideas as closely as I could.

Don't try this at home
As I originally noted, I screened for the smallest-cap companies permissible ($500 million or more) with stocks trading below $10 a share and showing relatively high levels of short interest. Bill suggested delving into biotechs, since they often show the greatest price fluctuations, but I opted to find companies where they lay.

So how am I doing? Ugh. The bloodletting continues this week, as all five of my virtual portfolios have now moved into the red. I’m sporting an average return of minus 12%, ranging from a 2.4% loss in Portfolio 1 to a loss of more than 28% in Portfolio 3 (which was dragged down by its lethal combination of financial and housing-related companies). This week, I'll revisit Portfolio No. 2, which has fallen to a 14% loss (slightly different than the stock returns in the chart below, because it includes some cash holdings). That’s far below the 4% loss it recorded just a few weeks ago.

These still aren't the worst returns, but at around No. 699,000 or so on the list, I'd say chances are slim that I'll be catching the leader who has doubled their portfolio's value.

The big screen
The fortunes for Lions Gate Entertainment have turned since we last looked, though not nearly enough to pick this portfolio up out of the gutter. Much has been made of Marvel Entertainment (NYSE:MVL) exploding on the big screen with its self-financed movies, like Iron Man and The Incredible Hulk -- a strategy that is fraught with danger, but so far successful because of the depth of characters the company has to pull from.

Lions Gate, on the other hand, finds itself in a different place. It is no longer dependent on a Saw or Tyler Perry franchise, or on individual hits like 3:10 to Yuma and Fahrenheit 9/11, to materially change its fortunes. Not only is it producing films, it’s also tackling TV shows and using collaborations with other studios to its advantage. The upside might not be quite as high, but considering that most movies are a hit-or-miss proposition anyway, the downside risk has been greatly minimized as well.

Investors like CAPS player andyrew510 think Lions Gate's stock is being held back because the company is misunderstood:

First, LGF's film slate last year was the largest and most significant in its history. When a movie company ramps up their slate, it is all but inevitable that they will have negative EPS. The reason for this is that for some bizarre reason, movie studios are forced to expense their P A IMMEDIATELY, despite the fact that revenue from the movie comes over a time measured in years not quarters. 6 of the largest grossing movies in LGF's history have been released over the past 10 months, and revenue from these pics will be seen for YEARS. First in DVD sales/rentals, then in VOD, then in first run pay-cable, then second run cable, then other runs throughout the future. LGF still sells close to 100,000 copies of dirty dancing per year!

Read the full analysis of what this CAPS player calls "the most misunderstood company on the planet" by clicking here. Misunderstood or not, can Lions Gate get out of the gate to vault this portfolio higher over the next three weeks?

Movin' on up
A lot can happen in a week's time. Check back next week to see which of my portfolios may yet catapult me to the lead.

Previous portfolio updates:

• The 10-step plan
• We hatch our plot to capture the gold!
• Week 2's lowdown on the portfolio down below
• Week 3 and a look at the top of the heap
• Week 4 slips into a little red number
• Week 5's subprime effort
• Week 6 gets disconnected