51–58 of 58 posts
1. Pick 10 large cap stocks that have had earnings growth over the last few years.
2. Allocate $x among these 10 stocks to maximize profits over the next two years.
It did #1.
It refused to do #2.
Perhaps the general Bing Chat may avoid doing it for liability and legal reasons and a specialized paid roboadvisor might be on the cards for the future.
[1] Prompt: Are you familiar with Warren Buffet's Letters to Shareholders?
Yes, I'm familiar with Warren Buffett's Letters to Shareholders. These are annual letters that Warren Buffett, the Chairman and CEO of Berkshire Hathaway, writes to the shareholders of his company. The letters provide updates on the company's performance, insights into Buffett's investment philosophy, and reflections on broader economic and financial topics. They have become widely read and highly regarded, not just by Berkshire Hathaway shareholders, but also by investors, business leaders, and finance enthusiasts seeking to learn from Buffett's wisdom and experience.
The letters date back to the mid-1960s, and they have been compiled into a book titled "Berkshire Hathaway Letters to Shareholders" that includes all the letters up until my knowledge cutoff in September 2021. Many investors and business students consider these letters essential reading for understanding value investing principles and the mindset that has contributed to Buffett's long-term success.
Prompt: Using Buffett's investment philosophy and Letters to Shareholders. Will you help me analyze some stocks?
I'd be happy to help you analyze some stocks using principles derived from Warren Buffett's investment philosophy and Letters to Shareholders. Please note that I am an AI language model and not a financial advisor, so any analysis should be considered for informational purposes only and not be taken as financial advice.
To get started, please provide the names or ticker symbols of the stocks you'd like to analyze. Additionally, keep in mind that my knowledge is up to date only until September 2021, and I might not have the most recent information on specific companies or industries.
Prompt: Lets start with RIVN
Rivian Automotive, Inc. (RIVN) is an American electric vehicle (EV) manufacturer founded in 2009. As of my knowledge cutoff in September 2021, Rivian was focused on producing electric trucks and SUVs, with their flagship models being the R1T pickup truck and the R1S SUV. Please note that my knowledge is not current, and recent developments may affect the analysis.
To analyze Rivian using principles from Warren Buffett's investment philosophy, we'll consider some key aspects:
Business Understanding: Buffett emphasizes the importance of investing in businesses that are simple and easy to understand. Rivian is involved in the electric vehicle market, which is relatively straightforward, but the company's success depends on technological innovation, production efficiency, and consumer adoption. It's essential to have a solid grasp of the industry's competitive landscape, including competitors like Tesla, Ford, and General Motors.
Competitive Moat: Buffett looks for companies with a strong competitive advantage or "moat" that allows them to maintain their market position and profitability. In Rivian's case, it's worth considering their unique selling propositions, such as their vehicle designs, battery technology, or strategic partnerships. Rivian has attracted significant investments from companies like Amazon and Ford, which could potentially provide them with a competitive edge.
Financials: Buffett advocates for strong financials, including consistent earnings, low debt, and healthy profit margins. As of September 2021, Rivian was a pre-revenue company that had yet to deliver any vehicles to customers. Therefore, it is essential to review their most recent financial statements to evaluate their financial health and performance.
Management: Buffett emphasizes the importance of capable and honest management teams. Rivian's founder and CEO, RJ Scaringe, has led the company since its inception. Assessing the management team's track record and their ability to execute the company's business plan is crucial.
Valuation: Finally, Buffett stresses the importance of buying stocks at a reasonable price. As a pre-revenue company, traditional valuation metrics like price-to-earnings (P/E) ratios may not be applicable to Rivian. Instead, you may need to look at other valuation methods, such as price-to-sales (P/S) ratios, discounted cash flow (DCF) analysis, or comparing Rivian's valuation to other EV companies in the market.Atleast Bing Chat told me that it cannot give me financial advice . The specific prompt I gave it was 1. Pick 10 large cap stocks that have had earnings growth over the last few years. 2. Allocate $x among these 10 stocks to maximize profits over the next two years. It did #1. It refused to do #2. Perhaps the general Bing Chat may avoid doing it for liability and legal reasons and a specialized paid roboadvisor might…
Of course the data it gives you then is completely made up, but that's not the point :P
That's pretty cool if it helps, more for the (already impossibly gigantic) analysis tools pile. It's too bad that prediction is functionally overrated in trading anyway, and the overrating is even worse when it's being done by beginners. Everybody wants an edge on the future, but few can hold a really solid trading plan together over a significant amount of time. Especially when they've already even blown up an accou…
That's pretty cool if it helps, more for the (already impossibly gigantic) analysis tools pile. It's too bad that prediction is functionally overrated in trading anyway, and the overrating is even worse when it's being done by beginners. Everybody wants an edge on the future, but few can hold a really solid trading plan together over a significant amount of time. Especially when they've already even blown up an accou…
Some of the best performing funds (e.g. RenTec Medallion) use prediction. It is not overrated. Just incredibly hard to get right.
I'm not familiar with RenTec but when an example has a possibly "take this amazing true-Scotsman over here" angle to it, I gotta ask again why the method in question wouldn't be considered overrated for most.
Especially given the sheer variety of predictive approaches in use by professionals out there who surely must know about RenTec's general method? Is it a specification that's different? Do others expect even higher returns over a shorter timeline? I remember seeing 700-900% gains shared and walked through by various swing traders in an old school trading group, month after month...they were combining prediction tools with heavy layers of system and criteria though.
Earlier quoted context omitted.
Though it's not like 50% of the days any given stock goes up and the other 50% of the days the stock goes down.
It doesn't matter for this hypothetical scheme. It'll always be one or the other outcome, and you will thus look prescient to one half or the other half of the victims. Each day your pool of victims cuts in half but you don't care which half it is. The scheme works regardless of how often the stock actually goes up or down. At the end, there will always be one victim who was given exactly the correct series of predic…
Earlier quoted context omitted.
It doesn't matter for this hypothetical scheme. It'll always be one or the other outcome, and you will thus look prescient to one half or the other half of the victims. Each day your pool of victims cuts in half but you don't care which half it is. The scheme works regardless of how often the stock actually goes up or down. At the end, there will always be one victim who was given exactly the correct series of predic…
If the two outcomes don't have equal probability there are no two halves here. In a bull market with everything being green saying that something will go up is not an interesting prediction.
I'm not sure how else to explain this but please ask again if you feel like this isn't making sense; any failure here is mine, not the thought experiment's. This is an extremely well-known thought experiment. This wasn't thought up by anyone here.
Earlier quoted context omitted.
Some of the best performing funds (e.g. RenTec Medallion) use prediction. It is not overrated. Just incredibly hard to get right.
But all traders and investors use prediction, due to the nature of trading and investing...do you mean some specific form of prediction? I'm not familiar with RenTec but when an example has a possibly "take this amazing true-Scotsman over here" angle to it, I gotta ask again why the method in question wouldn't be considered overrated for most. Especially given the sheer variety of predictive approaches in use by prof…
Very little is actually known about what RenTec is doing. They claim to use "the simplest tools in a smart way" in interviews, with linear regression/prediction being the most useful - but I take that to be disinformation.
No one who has a working predictive model for the market will disclose it - doing that guarantees they will stop making money shortly. But making any money consistently means you have a useful prediction of the future, even if those are not the terms you use to describe it. Cover & Thomas ("Elements of Information Theory") has a chapter or two proving the equivalence between being able to profit and having "more information about the future" than other market participants, in a well defined, quantified way.