Obviously a lot of traction of the outperformance of the [2025 WSB picks](https://www.reddit.com/r/wallstreetbets/comments/1puy95u/how_did_wsbs_stock_picks_of_2025_perform/). I wanted to do a slightly more thorough analysis to see if there was any real alpha here.
**TLDR:** *evidence of excess returns, but the performance is best explained by a highly aggressive, factor-loaded portfolio in a strong market environment*
To evaluate alpha, I used standard asset-pricing models, including CAPM and the Fama-French four-factor model (market, size, value, and momentum). These models help distinguish returns driven by skill from returns driven by exposure to known risk factors such as growth, momentum, or small-cap bias.
The portfolio was an equal weighted basket of the 10 picks:
* AMD
* GOOG
* HOOD
* META
* MSTR
* PLTR
* RDDT
* RKLB
* TSLA
* WMT
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(*Note: this analysis is through Nov 28, since Fama-French hasnt published daily returns for December*)
**Descriptive Stats:**
* **Portfolio Return**: 61.2%
* **SPY Return**: 17.9%
* **Portfolio Outperformance**: 43.3%
* **Portfolio Vol**: 44.5%
* **SPY Vol**: 20.2%
* **Portfolio Sharpe | Sortino**: 1.85 | 2.82
* **SPY Sharpe | Sortino**: 0.86 | 1.29
***Interpretation:*** *significant outperformance, with significantly more volatility*
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**CAPM Regression**
* **Adj. R-Squared**: 0.718
* **Market beta**: 1.88
***Interpretation:*** *The portfolio had an extremely high beta. I.e. if the market goes up, all else equal you expect the portfolio to go up 1.88x the market. If it goes down, same thing in reverse*
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**Fama-French Four Factor Regression**
* **Mkt-Rf**: 1.59 *(very high market risk)*
* **SMB**: 0.64 (small cap weighted)
* **HML**: -0.73 *(strong growth bias)*
* **MOM**: 0.51 *(significant momentum exposure)*
***Interpretation:*** *Confirms that the portfolio was significantly weighted towards "levered" growth names*
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**Conclusions:** nothing novel here, WSB tilts towards higher risk, momentum names. If the same exercise is done in 2026, you should expect outperformance if the market goes up and underperformance if the market goes down.
*Sources/Methods: Fama-French Library, yFinance, Python*
*Happy to answer any questions or provide code if people are interested in running it themselves*