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Technology Stocks : Vitesse Semiconductor
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To: Bruce R. Schlake who wrote (724)7/14/1997 3:39:00 PM
From: Robert G. Harrell   of 4710
 
Bruce, I totally agree that choosing the sell point is much harder than choosing the buy point.

As a follow-up to our dialog about O'Shaughnessy's sell discipline, I went back to What Works on Wall Street. In his book he used various sets of assumptions for a 50 stock portfolio which was hypothetically bought with $10,000 on Dec.31, 1951 and rebalanced annually through 1994. He therefore keeps the stocks that run up and exceed his criteria until the end of the year and then they are replaced with stocks that fit the criteria. This is the same way the various DOW theory portfolios like DOW dogs, foolish 4, UV 2, etc., are managed. Likewise with the Motley Fools Value Line based Investing for Growth portfolio and its variants which are rebalanced monthly or quarterly.

Part of O'Shaughnessy's goal was to minimize risk while maximizing return so he looked at Sharp Ratios for each model studied. He also makes a pretty persuasive argument that models beat human judgement.

I've had recent bitter experience with this with my digital video stocks. I had great profits in CUBE and ESST only to lose them while I was on vacation in April. Greed overpowered my judgement and I didn't have a real model with a sell discipline to get me out at the right time. My judgement was wrong all the way down. I never dreamed they could/would fall so far so fast.

I hope I'm learning from these kinds of experiences. Fortunately,I did better with VTSS.

Good luck,
Bob
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