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Strategies & Market Trends : 50% Gains Investing

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To: Ray Rueb who wrote (30927)	8/29/2002 3:45:13 AM
From: Dale Baker	Read Replies (1) of 118717

Wow, I should be flattered you took the trouble to review the whole portfolio. I have no doubt many of the charts are shaky; but you take the trader's perspective while I operate as a multi-month horizon portfolio manager. Options - my positions in most of these were very, very small after I learned last year that making larger bets in options doesn't work for me. You can see in my Updates that the % of the portfolio in options has been 2% or less for a long time. They are small speculative bets, that's all. In a bad-tempered bear market like this, the general market momentum will move most small cap charts. Hence the "cresting waveform" you find in so many charts at the moment. But short-term trends like that aren't enough to convince me to sell a stock if I have it pegged as a long-term value play. Look at a stock like ACGL - there is a compelling and not well-known fundamental story there that I expect to move the stock to $40 once the market firms up. The recent chart is encouraging since it is no longer swishing around with the overall momentum. MAXF and (to a lesser extent) COGI are similar plays for value. The cigar butts TWTC, RSTN and OCPI are mostly cash-on-hand bets that they will pop 50-100% on the first shred of decent news. PGO was my worst blowup of the year; I hold the shares now because they are priced for BK and I think a BK is less likely than an asset sale that will produce a 50-100% pop like the other cigar butts. Believe me, I have learned the past few years that my approach beats the indexes by a mile but won't keep up with the active traders who stay mostly in cash or move to net short if short-term sentiment leans that way. It's just not my style; everyone sticks with what they know best. For me it's stockpicking rather than market-timing. When I look at my top holdings and wonder how they are doing against common benchmarks I get finance.yahoo.com,^gspc,^ixic&a=v&p=s&t=3m&l=on&z=m&q=l, which isn't bad. Thanks for the input at such a wretched hour.

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