Second Timing Test Results : (
Ian McEwan's novel Enduring Love opens with a gripping description of a tragic ballooning accident: a sudden gust of wind lifts a balloon up sharply as a bystander, trying in vain to hang on, plummets to his death. With only a bit of exaggeration, that's what it felt like trying to time G&K purchases this past week.
Loyal threadsters will recall that last weekend I announced a second MoSSTeBoFs test: Message 11756881 . The idea was to take advantage of normal volatility to get a discounted price on some G&K purchases I had already decided to make. I entered GTC limit buy orders on four popular G&K stocks (QCOM, JDSU, GMST, and CSCO) while committing myself to change the limit orders to market orders if they hadn't hit by the end of the week. After one day I modified the test by substituting SEBL for QCOM (see Message 11775356 ). Here are the results, followed by a brief discussion.
Stock 1: QCOM
At the start of the test, Friday's close, QCOM was at 222 3/4. I set at limit order at 217 1/4, only 2.5% lower. When it didn't hit Monday, I realized the danger of missing out on a post-earnings run and changed it to a market order overnight. I ended up buying in at 229 at Tuesday's open (although it actually hit the teens later in the day). QCOM closed the week at 294 3/8.
Stock 2: JDSU
At the start of the test JDSU was at 166 7/8. I set a limit order of 154 1/2, 7.5% lower. Since JDSU had run up hugely in recent days, I thought I could take advantage of a pullback. Right. The limit never hit, and I bought in Friday afternoon at 195 1/3. JDSU closed the week at 197.
Stock 3: GMST
At the start of the test GMST was at 86 7/8. I set a limit order of 84 3/4, 2.5% lower. The limit never hit, and I bought in Friday afternoon at 86 13/16. GMST closed the week at 85 9/16.
Stock 4: CSCO
At the start of the test CSCO was at 74. I set a limit order of 68 1/2, 7.5% lower. The limit never hit, and I bought in Friday afternoon at 72 3/4. CSCO closed the week at 73 7/16.
Stock 5: SEBL
When I decided to add it to the test (Monday night), SEBL was at 117 11/16. I set a limit order of 111 3/4, 5% lower. The limit never hit, and I bought in Friday afternoon at 128. SEBL closed the week at 128 1/4.
Lessons
1. It is very risky to time buy-ins of G&K stocks, because the stocks go up further and more quickly than they go down. Unlike last time, during this test not a single limit hit, and only one stock (CSCO) was ultimately bought even modestly lower than the initial market price. Another (GMST) was bought at roughly the same price, while the remaining three (QCOM, JDSU, and SEBL) were bought much higher. Had I not broken the rules and jumped the gun on the QCOM purchase, I would have had to pay a 32% premium to get in on Friday. (In reality, my nearly 2% premium matched my nearly 2% gain on CSCO.) I had to pay almost 10% more for SEBL at the end of the week, and over 17% more for JDSU. The results of this test wiped out almost all the gains of the last test.
2. Do not try this kind of test when big news is expected (e.g. earnings). For the reasons why, see Message 11783043 .
tekboy@IwillnottrytotimethemarketIwillnottrytotimethemarketIwillnottrytotimethemarket.com |
