Fundamental analysis: part 2

I knew a banking analyst in school and he would spend all day, every day for years, researching the Cdn banks. He would buy CIBC during the up swings in the markets and delta hedge on the down days by shorting BMO. This is the level at which we should know the stock in order to beat the pros. Now, as individual investors can study a sector or two because we have some interest or affinity in that topic and possibly beat the analyst and markets. I've felt that way about some tech and retail since I work in that area, and I suspect Des, you feel that way about energy. But to think that we can choose a stock in every sector is laughable at best and possibly delusional! :)

Since we are not day traders, we start from a macro thesis and work our way down to sectors and possibly stocks. But if we do not have the knowledge to delta hedge a given stock, we have no business buying it; the pros will eat us for lunch! It's gambling, it's not investing. During a bull market, it is very easy to confuse a stock's beta with alpha, thinking you were clever enough to beat the sector/market (trust me, I've been there); a bear market exposes an investor's true alpha. I feel I have let down my guard as the "risk manager" of the group so I pledge to be more vigilant going forward. From now on, any stock suggestion will have to address "what is the alpha risk, and what is a delta hedge?". This should be the minimal hurdle if one has truly done their fundy analysis.

QQQQ update: I see it lagged XLK today because CELG took down the biotech sector which is 20% of index. I actually like the biotech exposure, since we are starting to see big pharma buying out biotechs trying to find some growth as their pipeline dry up. So I'll reaffirm QQQQ, until further declines :)