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As the market continues to reach all-time levels, mainstream media is beginning to set their sights on day trading. Business Insider recently published an article about Dave Portnoy, Barstool Sports founder, on shifting from sports gambling to day trading. With his equal-weight portfolio of Spirit Airlines Incorporated ($SAVE), Delta Airlines ($DAL), Norwegian Cruise Line Holdings ($NCLH), and Carnival Corporation ($CCL), he has been able to achieve returns of up to 155.65% in early June. With his focus on the airliner and cruise ship industries, he takes on a lot of risk due to the possibility of them becoming insolvent amidst the pandemic. Portnoy has been able to beat the market returns through his “Pagatherium Therom”; however, his investment philosophy is by no means rational.
As a conventional piece of wisdom, Sir Isaac Newton once said that “If I have seen further, it’s by standing on the shoulders of giants”. Newton’s statement refers to learning from current knowledge and then developing your own philosophies. The issue with Portnoy is that his investing strategies rely heavily on luck rather than principles. In just his first week as a day-trader, Portnoy was nearly down $200,000 after putting $3 million dollars into his E-trade account (Flanagan). He was then down $647,000 within the first couple of weeks, which infers that he has high-risk tolerance.
Due to Portnoy’s lack of understanding of the different investment philosophies (value, fundamentals, growth, socially-responsible, and technical forms of investing), he is merely shooting in the dark. Instead of building off of the past wisdom of prominent investors, he is going on an obscure journey of his own. Portnoy emphasizes that Warren Buffett is "washed-up" and takes no time to learn from any of his successful strategies.
Final Note
Individuals like Benjamin Graham and Warren Buffett have always warned about the dangers of speculative trading as day-traders rely heavily on other investors to bid the price up. By understanding the dominant investment philosophies, it provides individuals a glimpse of how the stock market operates and how to decipher through difficult decisions. Being open to new ideas and implementing them into our pre-existing models allows for potential breakthroughs with investing. This can be seen through Warren Buffet’s journey as he moved on and adapted Benjamin Graham’s views on value investing.
A balance of different schools of thought will always be the best way to decipher the stock market. Portnoy is merely looking at the stock market as a way to buy lottery tickets instead of owning a partial share of a company. Adopting strategies like this may pan out during short periods of time, but is not a sustainable form of investing in the long-run. Portnoy currently holds a powerful role among retail investors and his stock trading approaches merely stir novice investors in the wrong direction.
Sources:
Flanagan, Graham: https://www.businessinsider.com/barstool-sports-founder-dave-portnoy-tries-day-trading-and-loses-2020-4
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