Q............
Hi Tom,
Curious why you sold at 35+, since JBL seems perched for a major break out? I understand AIM basics, but wouldn't selling at 40+ be preferable? This is not criticism, if you recommended "jump" I'd ask "how high".
Are you monitoring Yahoo JBL? very giddy place these days.
JP
A..............
Hi John,
A reasonable question! I'm using a full 10% SAFE (resistance to buying and selling) on both the buy and sell side of my JBL AIM account. My last buy was for about a 25% addition to my holding at $23+, so AIM was just asking me to repay the cash to the reserves. In this case, I sold about 8% of the shares back to the market.
Call this an "inventory adjustment" as I still have more dollars in the stock now than before I had my last buying spree. Of interest here is that my initial position was started at $35-3/4 and the price I just got for those shares is $35-1/4. However, because AIM "averaged down" my holding, I'm back in the black overall. ( I don't remember by how much off hand)
I'm looking forward to further sales. AIM never has you sell out of a position in a rising market. It will maintain a dollar value at risk very steadily throughout the rise. So, if you were willing to risk $10,000 in JBL when the price was $23, you'd still have about $10,000 at risk when the price reached $46, or $92 for that matter! It's just that you'd have fewer shares and a small mountain of cash.
This single feature of AIM is a primary reason I adopted AIM over a decade ago. I seemed to be good at identifying good growth stocks back then, but short term trading had me missing much of the potential of the company's stock. In my pre-AIM days, if I had a short term gain of 40%, I'd probably have liquidated my position. Then if the stock continued to climb, I was hunting for a way to get back in. Not so with AIM.
Your risk envelope with AIM is determined by your initial position in a stock plus a portion of each subsequent purchase that AIM directs. It's a relatively constant figure. AIM won't let your risk double even though the price has. This is one of the benefits or shortcomings of AIM, depending upon your point of view!
I've added one more feature to AIM, that's an expansion of the risk envelope when there's already plenty of cash on hand. The term for this is a "vealie", so named by one of our AIMers! Let's assume you already have a 50% cash reserve for your favorite stock and that you feel comfortable with that. The next time AIM says to SELL, instead of executing the order, you add half the value of the order to the risk envelope (called Portfolio Control). This negates the sell order and raises the next buy target price simultaneously. This single change to AIM "by the book" has been of great benefit to my overall performance on stocks and funds.
In summary, I'm as solidly bullish on JBL as I was before, I'm just making adjustments to my "Equity Warehouse" business. I'll still have plenty of shares to sell in the $40s or higher.
Best regards, Tom
PS: I pretty much stick to SI. If somebody copies something from Yahoo over to SI, I read it, but time constraints keep me from exploring over there. |
