Dennis,
You might also have missed that the Fidelity Select Sector is down 18.8% since July 7th.
I have no doubt that with the proper holding period (long) you will make money in this area. Those of us who already had investments in this area were burned by that head fake rally in March and are currently underwater. One of the reasons I started looking at AIM is it gave me a disciplined way of looking at placing money in (and taking it out) which might be superior to my 'single decision" methods. The one thing that the mess since March has taught me is "Just because its cheap, doesn't mean it can't get cheaper."
I did a short study of 9 out of the 10 selections that went into the Offshore Drilling Bits portfolio over the weekend and came away with exactly the same feeling that I had in March. These stocks are trading a multiyear lows according to the forward earnings estimates and if you select judiciously you should make a pile of money. So far, I LOST a pile of money.
If you have time, take a look at the Where to? section off the main screen at jump.to I try to talk a bit about using this methodology to look for "value", then use something else to time the entry levels. In the past I've used my gut, technical analysis, or voodoo (just kidding). AIM might be a better way, which is why I wanted to explore using it on this difficult sector (near term) that holds a great deal of potential longer term. Of particular interest is to see how it would stack up against a portfolio of stocks that were actively managed either by my co-host of the website, or by the Fidelity Select sector funds.
3 weeks into this experiment the results are less than rewarding although the valuations are compelling.
For instance one of the AIM'd selections just reported earnings today.
Reports 150% Improvement In Second Quarter 1998 Net Income
and this stock is trading at a forward p/e of 11.4.
''We continue to experience improvement in our mobile offshore drilling fleet due primarily to strong utilization and an improving average fleet dayrate. The average fleet dayrate among our floating rigs, the strategic focus of Transocean Offshore, will continue to rise through 1998 and into 1999, due to a portfolio of contracts in place. At present, 99% and 75% of mobile offshore drilling unit fleet time is committed during 1998 and 1999, respectively.''
When was the last time you saw a stock with a p/e of less than 21 on trailing twelve month earnings and 11.4 on forward 12 month earnings have eps growth like that reported above?
AIM made the first additional purchase of TransOcean Offshore on Friday at $38.614. Unfortunately unless things get a whole lot worse, the remaining cash will not be used. Next buy at a bit over $37.
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Dave
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