Sunday, February 5, 2012

Introduction

I came across the American Association of Individual Investors (AAII) Shadow Stocks portfolio in late 2011. This is a stock-picking method that focuses on smaller stocks with the potential to grow big. They call them "shadow stocks" because they're in the shadows of the stock market, and most investors don't pay attention to them. I was very interested in it, as they claim that it has an annual return of 18% over the past 10 years (vs 2.5% for the S&P 500). I read the rules of how they determine the stocks, and noticed that one of the rules was that no foreign stocks should be purchased.

Being Canadian, if I were to follow their rules to the letter, I cannot look at their stock picks at all, since by definition all of them will be foreign. I therefore decided to follow their rules and come up with my own list of shadow stocks for the Canadian market, which I will be tracking on this website.

I'll start in December 2012, with a hypothetical $10,000 invested in 10 stocks. I will update the performance on a monthly basis, and review the portfolio quarterly.