Mike,
I'm hurting quite a bit, but I am unable to compare to the market since I was not fully invested going into this year and have been regularly adding money to my stock account throughout the year. Was down 2.4% today. Deswell is by far my worst loser, and HIHOF - which I bailed from a month ago - was my 2nd biggest loser. I am currently down in every stock I currently hold except for ORCL, which is barely up. (I just started my stock account around Christmas, so I don't have any long term holdings yet.)
As far as margin of safety goes, I'm trying work relative strength into my stock picking. Recently read O'Shaugnessy's "What works on Wall Street" and he found that Relative strength combined with value investing seems to work pretty well. AAII as well as William O'Neil CANSLIM investors are also big proponent of buying stocks with good price performance. It does seem that there's something to momentum, even if it's only a measure of improving market sentiment for a stock.
Buying into Relative Strength, however, really prohibits us from doing things like averaging down, or buying beaten down stocks. Some of the stocks with value/growth characteristics I like which also have decent relative strength are SRI, DVD, BNE, and perhaps CXP. I don't own any of these yet because I've tended to buy value stocks that are in the dumps, but as I move out of these I am going to be more careful about buying the falling knife. I was tempted to buy NH just a few days ago, but kept telling myself that I've got to quit buying stocks that are in a downtrend and start listening to Mr. Market who is telling me something.
A margin of safety to me is starting to mean less about defense and buying a company at rock bottom prices, and meaning more about buying some offensive companies with a brighter future - with something to get excited about, even if that means paying for higher ratios than a typical value investor would prefer.
I'm finding that even solid value stocks, like Deswell, can find a way to go down 50% if sentiment is against them, so I'm becoming more willing to take a 50% hit in a more growth oriented companies with good prospects. (Not that Deswell is not growth oriented. It is IMO. I simply would've saved alot if I would've just not continually averaged down on this stock, which would've meant paying attention to poor RS.)
Well, I better quit now. Have been typing too long. If anyone has comments on Relative strength I would love to hear your views.
Shane |
