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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (45889)	12/8/2011 6:08:29 PM
From: E_K_S	Read Replies (1) of 78478

Position Buying - When to Average Up vs When to Average Down My plan for AGL is to build a core position. It's my 2nd largest NG utility holding at this point, MDU is my first. My last Buy on AGL was 12/07/2010 @ $35.40 right after the announcement of the NI merger. I had other buys in 5/2009 at $28.54/share. So now you continue to add to AGL at $40.00/share which I see is at the higher end of valuation (at least from my take). The Forward PE of 12 and a 4.4% dividend are still attractive as a value buy. I see $45/share as fair value and at the top of the fair value range. So today's buy is perhaps at a 12.5% discount to the fair value range. How do you determine then to average up? Do you begin to peel off shares when the PE approaches 15 (that is what I figure the peers sell for) and/or the dividend yield falls below 4%? When I follow your Buys and sells you do a very good job of buying at or near lows. I just have a hard time averaging up my buys but I guess this is a good thing in the long run as it means the stock is moving higher. In the case of MDU, I have been acquiring shares in the $17-$19 range and selling my higher cost shares at the $22.00 level. As long as the company stays in this range, I am able to build a core position and even average down my cost. Eventually, I see MDU breaking out (similar to AGL). I see both companies building value but I have a hard time building a large core position especially as the stock moves higher in price. I guess the best strategy is to buy enough lots staggered at different price levels (say every 10% price level as long as it remains in the "value" range). On market surges, sell and/or hold highest priced lots and on significant down days add shares. On any negative significant company events, sell and move on. Is this the way you set it especially if your goal is to turn the portfolio every 36 months? InPlay: AGL Resources and Nicor (GAS) received approval of their merger from the Illinois Commerce Commission; this is the final approval required to close the transaction EKS

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