Six Months Ago, I publicly announced “the
Neckbeard Index 2.0”. It is beating 90% of
hedge funds
A real-world experiment on using market themes
to outperform the market
In May of this year, I did something that no
investor ever would.
I put myself out there.
I described, in detail, “the Neckbeard Index 2.0”, a portfolio of stocks inspired by
stereotypical Reddit neckbeards. These stocks
include:
-
NVIDIA
and
AMD
because neckbeards are stereotypically gamers
-
Domino’s Pizza
because these folks are overweight
-
Amazon
because they are far too lazy to pick up their
own groceries
-
Logitech
because they sell the equipment gamers need
for their PCs
-
Microsoft
because they own half of the software
engineering stack (such as GitHub and VSCode),
they own Xbox, and they own 49% of OpenAI
-
Robinhood
because that is Reddit’s favorite brokerage by
far
-
Take-Two Interactive Software, because they own the GTA franchise
-
Gamestop
because its popularity originated on Reddit
-
Obviously
Reddit
This list of stocks is not only beating the
market…
It is absolutely destroying it.
The performance of the Neckbeard Index
2.0
What is the Neckbeard Index 2.0?
The Neckbeard Index 2.0 is a satirical portfolio
inspired by a Reddit comment from 6 years ago.
The original comment describing the “Neckbeard
Index”
In this comment, the original user describes how
stocks like NVIDIA, Tesla, AMD, and Bitcoin
could outperform a fictitious “White Girl
Index”.
In my original article, I described how I was shocked that this
basket of stocks significantly outperformed the
broader market.
Keep in mind, this portfolio wasn’t just better
than the market — it dominated. In the past 6
years, it has earned a 700% gain, compared to
the broader market’s gain of 95%. That alone was
shocking.
The backtest performance of the Neckbeard
Index
So, as a fun experiment, and a way to showcase
the effects of relying on broader market themes
to guide your investing decisions, I announced
“the Neckbeard Index 2.0”.
This portfolio contains more updated stocks that
aligns with the Reddit neckbeard archetype. This
includes decisions such as:
-
Removing Bitcoin and Tesla due to sentiment
shifts across the platform
-
Adding GameStop and Reddit for obvious reasons
-
Keeping most of the other stocks the same
I added these portfolios to my free algorithmic
trading platform NexusTrade.
NexusTrade
is an automated investing platform designed to
help retail investors make better financial
decisions.
Adding GME and RDDT stocks turned out to be
great decisions. However, removing Bitcoin and
Tesla turned out to be poor ones. Hindsight is
20/20, and if I could go back in time, I
would’ve removed Domino’s Pizza and Logitech.
However, despite this, the updated Neckbeard
Index 2.0 is performing astonishingly well, with
returns leaving the S&P 500 in the dust – a
feat only accomplished by less than 10% of hedge
fund managers.
How did this portfolio do?
The performance of the Neckbeard Index 2.0 –
Up 24.2% for all time
On May 16th, 2024, I deployed this portfolio for
real-time paper-trading. For simplicity, I chose
extremely simple rules: Buy and Hold.
In addition, I added this strategy (and the
original Neckbeard Index) to the algorithmic
trading library on
NexusTrade.
Since launching this portfolio to the public, it
has gained a whopping 24.2% in the past 6
months.
In contrast, the broader market has gained half
of that, at only 12.9%.
The percent gain of the S&P500 in the same
timeframe – up 12.90%
These results suggest that the Neckbeard Index
is much more profitable than the broader market.
Let’s look at some of the stocks in this
portfolio.
Biggest Winners: Reddit leading the pack
All of the stocks that were purchased for the
Neckbeard Index 2.0
In an ironic twist of fate, the most profitable
stock in this entire portfolio is
Reddit, at an astounding 100% gain in the past few
months.
This is ironic because Reddit’s IPO was highly
controversial, with many users thinking the
stock would go directly to $0 shortly after.
Reddit did something that was almost unheard of
for an IPO; they offered shares to their users.
The prevailing wisdom was that this was a sign
that the IPO would be a complete and utter
failure. Obviously, this proved to be false, as
Reddit was able to capitalize on the AI
revolution by selling vast quanties of data to
companies like Google.
This allowed them to become profitable and
destroy analysts expectations
Other notable performers includes
Robinhood
and
NVIDIA, earning 64% and 58% respectively.
In contrast to the winners, which have either
had huge rallies earlier this year (such as
NVIDIA) or were controversial investments, some
of the losers are even more surprising.
AMD, Logitech, and Microsoft Lead the Losers
Fundamentally strong technology stocks like AMD
and Logitech are some of the portfolio’s biggest
losers, losing around 13% each in the past few
months.
Other stocks like Dominos’s Pizza (whose
performance mirrored Google for decades) and
Microsoft were also disappointing, with percent
gains that underperformed compared to the
broader market.
While counter-intuitive, I’m actually not
surprised.
In my previous articles, I described how I performed fundamental
analysis on large groups of stocks, and
concluded that past earnings metrics has little
correlation to future stock performance for most
US stocks, especially for stocks with a market
cap below $200 billion.
These results provide further evidence that a
stock’s fundamental past earnings are just one
part of a story, and that other factors, such as
broader market themes, investor sentiment, and
outperforming the consensus expectations may
play a much larger role in predicting future
stock price.
What can you learn from this?
The purpose of this article is
not to convince
you to purchase highly speculative, volatile
assets, and re-assuring you that you’re
guaranteed to make a profit.
The main purpose is to show how recognizing
broader market themes can lead to a sustainable
edge.
This article showcases it twice – with the
original Neckbeard Index and the newer Neckbeard
Index 2.0. These portfolios were highly
speculative investments that took advantage of
the rise of gaming, artificial intelligence, and
retail investing.
This article also shows that “fundamentals”
aren’t a secret weapon. In fact, in the
short-term, some of the best stocks
fundamentally in this portfolio performed the
worse, including FANNG stocks like Amazon and
Microsoft.
Creating a profitable investing strategy to
outperform the market is incredibly difficult,
but there are many avenues to doing so.
Recognizing market trends and doing
outside-the-box thinking are a recipe for
creating a portfolio better than all of your
friends.
If your goal is to become a better trader and
investor, NexusTrade is a free platform designed
specifically for you to make better financial
decisions. It has helped over 10,000 traders and
investors with their investing with its suite of
AI tools.
You can use it to backtest strategies, find new
stocks, and analyze your watchlist. There’s not
a better free platform available. Who knows,
maybe you can create your own index... One based
on data, facts, and broader market trends.
