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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: akoni-1 who wrote (36164)12/7/2000 11:26:31 PM
From: tekboy  Read Replies (2) of 54805
 
Buy = PEG is less than or equal to 1.2 (a 20% premium)
Hold = PEG is greater than 1.2 and less than or equal to 3.2
Trim = PEG is greater than 3.2
Liquidate = A negative change in fundamentals

Interesting. Please update us over time as to how this strategy works out.

I must say that after figuring out the basics of the game, and stealing company-specific insights from the mavens, the most interesting and challenging financial topic I've grappled with since I started is portfolio management.

One can make a strong case for buying a broad index fund and forgetting about it, or for buying a well-selected group of high-growth companies and holding them until the fundamentals change. Both these strategies have proven track records and are a great way to long-term wealth, but they have their drawbacks too (the first is boring and prohibits above-average returns, and the second leaves one open to giant declines on pullbacks). More active management would seem to hold out the prospect of both exciting returns on the upside and protection on the downside, but every study shows that in fact active management usually yields lower aggregate returns over time.

Still, for psychological stability if nothing else, I find myself increasingly intrigued by the mechanical adjustment mechanisms some people use--like the one above, or Eric L.'s annual portfolio rebalancing. It seems like these should work to squeeze some extra profits out of all the volatility. But does anyone know if there is real evidence to show that they do in fact, lead to superior returns in the end?

tekboy/Ares@alwayslearning.com
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