New Watchlist: Why Risk/Reward Beats Raw Upside

A smarter way to invest with my stock picks: live scores, daily refreshes, and real-time margin of safety built in.

Some of you have noticed: I don’t just throw the highest-upside stocks into the portfolio. I care more about the best risk/reward setups.

A few of you have asked how I calculate R:R. I won’t drown you in technicalities (but you can get an idea here), but here’s the quick version:

Expected Value (EV) = Upside × Upside Probability + Downside × Downside Probability

From there, I adjust for relative valuation vs. peers and convert it all into a score out of 100. I use that relative valuation piece as a real-time gauge of margin of safety. But keep in mind, 75% of the weight is still on R:R itself.

That means the score changes when:

• I update the upside/downside share prices or scenario probabilities (the “Last Update” column shows the most recent refresh).

• Peer valuations shift (my sheet updates this automatically every day).

Important: I don’t exit a position just because R:R changes. It’s a flag for me to review the thesis, and only if I see a better R:R setup do I rotate.

I primarily included this list to provide you with one more opportunity to invest using my picks. There are three ways:

1. Replicate my portfolio (recommended): Focus more on the names than the exact weights.

2. Stick to newsletter picks since launch: Each has a deep dive, so you know the thesis. Just check the “status” column for which are still open.

3. Pick and choose from the stock watchlist: More DIY, but you’ll need to manage your own exits and diversification.

   The disadvantages are:

   1. Your performance will diverge from the portfolio performance.

   2. If the stock is not in my portfolio, you may be confused about when to exit.

   3. Data may not be updated on the day you include the position in your portfolio.

   The advantage would be that you can manage diversification according to your risk tolerance. Currently, the portfolio has 36 positions, but you can decide to go as high as 50 (I don’t recommend higher than that) or as low as 12 (I don’t recommend any lower than that as well).

Paid members can access the full watchlist, complete with live R:R scores, targets, and updates.