"Some of my BEST gains and WORST losses have come on buying more shares averaging down."
That's a true statement for me as well. In general, I'd guess most of my gains come as a result of averaging down. If I recall right, that's similar to what Bill Miller said for himself in the interview article here recently.
I've got formulaic approaches to investing which get me into a variety of stocks where I believe the models apply. Adding to, or subtracting from a position, that though is where there's more judgment or art involved.
Generally I like to determine a priori if I will add to a stock if it declines or if I will add to it if it should rise. Sometimes I don't make these decisions in advance. I rarely though just plunk down a bunch of money at one time: I like to enter in stages, if I'm going to make a substantial buy.
A key for you is "... to let your winners run and reinvest more dollars on pull backs", and I have found that to work sometimes too. (--Everything works sometimes and that is the problem -gg-).
One issue for stocks that decline is how long a person should hold them, or should add to them. Bill Miller says he'll continue to add as the stock drops (assuming he believes in his thesis for the company) as long as the stock continues to trade. I believe Ben Graham's holding period for cigar butts was two years. For me, for reversion-to-mean or turnarounds, I want to see some stock improvement within three years (assuming my patience will last that long). For company wide cultural changes, I don't expect completion for about seven years.
Anyway for WON I've been in for at least 2 years, SALM 2 1/2 years, but the drop has been so severe that I guess a gain (if it occurs) from current prices over the next 12 months won't be enough for me to break even on my bets.
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Fwiw:
Some recently mentioned stocks I will add to if they fall:
AXP
ERF
ACAS
UNH
AEO
Some stocks I will likely add to if they rise:
EDVMF.pk
AZECF.pk
COFUF.pk
LUK
Some stocks I am considering adding to on their recent pull backs:
MHP
LCAPA
CSG
Some stocks I have that have dropped recently and that I have no idea yet what I will do:
UST
ABER
GCT
GGC |
