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Strategies & Market Trends : A.I.M Users Group Bulletin Board

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To: Jack Jagernauth who wrote (14319)	1/14/2001 11:55:27 AM
From: labestul	Read Replies (1) of 18928

Hi Jack, This post is in response to your question: Why is that it seems okay for AIMers to consider exiting a loser at the 'bottom' and not consider exiting a winner at the 'top'? Firstly, let me say that I think that Keith's response was excellent. His point about the difference between investment vehicles and speculative vehicles is not only profound but subtle. So subtle in fact that we all have probably been guilty of confusing the two at least occasionally from time to time. In any event my subsequent comments deal with investment type vehicles only and not with speculative ones. In my opinion your question based on a false assumption. It is true, I think, that AIMers do not consider exiting a winner at the top. It is however equally true that AIMers do not consider exiting a loser at the bottom. If this were true, as your question implies, this would indicate a fundamental logical inconsistency. I believe that AIM requires us to stick with a stock even if it is a loser. It is only a loser in the sense that its price per share has decreased significantly. Even if the price never rises very high again we have not lost anything really. As long as the stock remains sufficiently volatile and fundamentally sound we can and, I think, should continue AIMing it. We should however stop AIMing a stock if its volatility characteristics ever change to those of a poor AIM candidate. Another time that we should exit a stock is if its fundamentals weaken to such a point that we no longer deem it to be an appropriate risk. A decline in the stock's price can be an indication that its fundamentals have weakened. Thus it might appear that one exits a stock because it is a loser. However the real reason should be that its fundamentals have changed! The fact that it is a loser is purely a coincidence. In theory one should also exit a winner if its fundamentals have changed. In practice however an opportunity to do so would seldom arise because the market would react to this decline in fundamentals producing a loser. Just my two cents worth ... three cents Canadian ;-) Barry

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