On Wall Street, grizzled pundits decry amateur investors. They must really loathe giving air time to 17-year-old Rachel Fox, an actress best known for her troubled teen role in Desperate Housewives.
But there she is, live from Los Angeles talking about the trades she blogs about between takes on her website. Fox is employing her acting proceeds on the market -- and doing quite well, thank you very much.
source: Rachel Fox on right foxonstocks.com
Most interesting is her imaginary MyGenLoves index which if it isn't already an ETF, maybe should be.
I know what girls like; I know what guys want
Fox lists 21 stocks whose products her peer group drink, eat, use, and crave. And her index had outperformed the S&P 500 with a 23.4% gain to 15.6% for the S&P 500 as of September. When she was sixteen her overall portfolio outperformed the S&P earning her a 30.4% gain compared to the S&P's 13% rise.
The index is predictably weighted toward entertainment, retail, fast casual and gadget tech. She explains,
"Why is "what's cool" SO important? Don't forget the fact that it's projected that the approximately 30+ million teens across the U.S. will spend between $200 billion – $300 billion.The MyGenLoves index is calculated based on the stock price of 20 companies that are currently hot in the eyes of kids in my generation. We take those 20 companies, track their stock price every day, and weight and calculate an index number each day."
Her best performers
Her five best picks over the last year, save Chipotle Mexican Grill, are all entertainment or social media related. Here are the winners in best performance:
1. Netflix (NASDAQ:NFLX) was her big winner, up 313.19% the last year. What a comeback story for this streaming service and now a content creator! Netflix's success with original content Orange is the New Black and Game of Thrones along with a well-documented trend toward binge viewing has helped the stock surge. Note: its trailing earnings multiple is now 298.88.
2. Pandora Media (NYSE:P), the music streaming service, came in a strong second, up 254.97%. The name is highly speculative, operating at a loss, and threatened by iTunes and Spotify.
3. Chipotle Mexican Grill (NYSE:CMG) rose 92.42% this last year. The momentum name had lost steam last year but cranking out food with integrity is paying off for shareholders now. Compared to Netflix, Chipotle is practically cheap at a trailing earnings multiple of 53.37.
4. Lions Gate Entertainment (NYSE:LGF-A) the TV and movie production company, surged 83.52% on strong showings for its Hunger Games franchise. Of her best picks, Lions Gate is the most affordable at a 19.42 trailing earnings multiple.
5. Finally, Facebook (NASDAQ:FB) the social media giant with 1 billion plus users, rose 74.55% in the last year.Most of that gain came after their second quarter report which gave shareholders confidence the company can monetize mobile. Facebook now has a trailing earnings multiple of 119.12.
Her worst picks
No surprise, four of the five worst picks, all down for the year, are in apparel or accessories retail.
1. Abercrombie & Fitch (NYSE:ANF), the teen retailer, was the worst performer in the index, down 27.83%. The company reported net sales were down in 12% in the third quarter and guided lower for the full year. Controversy has dogged the stock all year and as for CEO Michael Jefferies, don't get me started, as the highest paid CEO to average worker salary with the worst stock performance. Still it now trades at an 11.56 trailing earnings multiple.
2. Urban Outfitters (NASDAQ:URBN), another retailer but mainly for twentysomethings, is down 6.75% for the year. This is the most puzzling as the company really seemed to be in the groove earlier in the year. Their disappointing second quarter 2014 results (sales rose only 5.2% compared to earlier guidance of 9%) and lowered full year guidance slammed the stock 14%. It is now trading at a 19.25 trailing earnings multiple.
3. Coach (NYSE:COH), the accessories maker, is down 0.66%. This one is not so surprising as rival Michael Kors Holdings has sewn up the accessories market and is up 58.3%. Coach has a reasonable multiple at 15.53 and a yield of 2.4% that still attracts value investors.
4. LVMH Moet Hennessey (NASDAQOTH:LVMUY), the luxury goods retailer and high-end end alcohol company, is down 0.44%. Again, the Louis Vuitton apparel and accessory division is pressured by Michael Kors. However, it is a five star CAPS rated stock with a 1.6% yield.
5. Apple (Nasdaq:AAPL) is the best of the worst, up 4.63% on the year. Other names in the MyGen Loves index like Google and Microsoft have both outperformed Apple, up 54.71% and 41.69% respectively. The long-awaited China Mobile agreement just inked may be what moves Apple higher. It still has a low trailing earnings multiple of 14.25 and a 2.2% yield.
ADD trading with a teen
Understand Fox's investing, er, day trading, strategy is high risk-high reward. She shorts, she flips, she made 338 trades in 2012. Although she admires Warren Buffett, only two names on her MyGenLoves index are Buffett-worthy names: Microsoft and Walt Disney Company.
Most of the winning picks for her index have high trailing earnings multiples and no yield. Pandora Media has a negative P/E ratio of 94 with serious concerns over its moat with a threat from free Spotify. Some, like Coach, have headwinds in the form of stronger competitors or worrisome management like Abercrombie & Fitch. Interestingly, none of her best picks offers a dividend but four of the five worst picks do, including Abercrombie & Fitch at 2.3%.
The final act
While you probably shouldn't trade in and out of good companies or speculate in volatile names like Pandora, Fox has a point that her generation does have buying power and decided favorites. At the very least, she offers investors a different perspective on some of the stocks you may be considering for your portfolio. Go ahead: Take peek at what the kids are buying -- and buying into -- these days.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Apple, Chipotle Mexican Grill, Coach, Facebook, Netflix, Pandora Media, and Urban Outfitters. The Motley Fool owns shares of Apple, Chipotle Mexican Grill, Coach, Facebook, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.