I am going to respond to each item in your post after I apologize for the delay. I was doing the old parent field trip thingie with a bunch of 5th graders and got behind on stuff.
Andrew: Many of the visitors here are long term investors. Do you keep any shares in your account for at least the one year capital gain holding period or do you trade them only on a positional basis?
I am a long term investors in many stocks and even the ones that are positionally traded do not reflect all the core holdings or entire holdings of any stocks. I do not talk of INTC, DELL, MSFT, SO and a few others since they are "in for a penny, in for a pound". I own a core holding for each of the Top Tier stocks and BIG BET stocks I speak about.
However, as long as the market remains as volatile as it is, I have taken a greater role in Positional investing. I am fundamentally trying not to use the word day trading because I do hold stocks over night, and I do hold them for weeks or months at a time. This is not a
traditional day trader. Positional Investing is something I have done for the past few years, mostly due to the semiconductor downturn, market herd mentality, and degree of volatility in these stocks.
Now, to briefly look at long term and short term investing, we are just talking about long term and short term capital gains, to be perfectly honest. So let's review some of the worst case scenarios.
More than 5 years = 18%
More than 1 year = 20%
Less than a year =38% (top tax bracket)
State Taxes (vary from state to state with some tax free)
Let me use the #1 semiconductor equipment stock, AMAT, for an example. If I could make 10% a month on AMAT playing its volatility between $50 and $60, this is what would happen, if executed correctly. I would make, on 1000 shares, $5K per month or $60K if it were not compounded.
However, compounded, I would be making 100 shares profit per month, at a minimum.
1000 = month (1)
1100 = month (2)
1210 = (3), 1330 (4), 1463 (5), 1610 (6), 1770 (7), 1950 (8),
2140 (9), 2350 (10), 2590 (11), 2840 (12).
So lets just say 2800 shares would result at the end of the year. this takes into account occasionally larger swings and some months it does not advance. It also discounts letting profits run until an LLT is triggered for more gains. At the end of the year, you have 2800 shares valued at $55 (net profit zero for the year on a long term hold if AMAT did nothing else but dance around the 50-60 mark for the year).
40% (round numbers) of 2800 is 1120. leaving just under 1700 shares remaining after taxes for short term gains. Therefore, at the end of the year, I am up 78% NET of taxes.
This is how it is supposed to work in an ideal world and we use this as the absolute top end limit. From this point, we then back off for wrong timing as happened on Thursday for 3 stocks that were on "autopilot" with tight LLTs, or as we miss a cycle. However, when we let profits run, as we have many times, we see 10% becoming 20-40% which offsets some of the timing issues. SFAM is a great example when you look at Friday's numbers relative to historical pricing this year.
Anyway, positional investing is a new strategy for me (<3 years) which I am instructing readers on and helping to choose the proper stocks. We took CYCH from $12 to close to $24 in a relatively short period of time and then played one or two additional cycles amongst a private email group. As long as there is sufficient volatility in the market, why not benefit from it instead of stagnating. As long as there is volatility there are ample profits to be made. As we approach the recovery phase of this sector, we will have to be more careful, and provide more lattitude for these stocks. Reader know that the BIG BET was a very large investment proposition. The only reason some of the triggers caused exits were that they were exceptionally tight going into a statistical situational philosophy which actually occurred again and partially due to a "once in a blue moon" parental school function<GG>.
However, the 3 main LLT triggers, AMAT, KLAC and NVLS were partially rectified early Friday morning. Both KLAC and AMAT were re-acquired while NVLS is in a wait and see mode. Each was bought back at a low enough price at the open to have been worth a few quick percentage points, even though it was a slight mistake. What we do is not 100% perfect and we suffer the consequences. We are not fully positioned in AEIS and it is now a missed opportunity of more than 25%.
Taking profits when presented, a philosophy we drive home continuously, has paid off more times than regretting our actions. We believe that a part of the portfolio needs to be positionally invested to grow the portfolio in the manner we have outlined. When you reach a certain threshold of share that you feel is more than you really want to own, you divest into another investment idea or you buy some conservative safe have stocks OR even create a core holding of stocks for the long term.
Secondly, don't you think that there is a larger cycle to play in the capex sector here at this time as opposed to putting up loss limits and risk being stopped out prematurely prior to AMAT's earnings announcement and an expiration run?
A large resounding YES is my answer here. That is why I immediately got back into AMAT and KLAC. Positional Investing is entering a very tenuous phase right now because we believe the capex sector is about to explode. We are getting close to my 2 year old projections for the recovery. The only things stifling this sector are herd mentality, uninformed fund and money managers that are not old enough nor informed enough to understand this sector, and an underlying ability of institutions to manipulate the prices of these stocks to their own benefit. Most of the time a stock has a large drop, it is some young fund manager dumping the stock fast and being taken to the cleaners by the market makers. Going forward, knowing the institutional ownership of the stocks you invest in, will be a critical part of your investment strategy.
I should tell people here that one does not have to be an active trader to benefit from Andrew's letter. The information on the markets (semi sector included) and the technical information could be reason enough to subscribe. Figure out best how to use the information presented for your investment profile.
True, and thanks - I am trying to appeal to both types of investors. Unless specifically called out as a "trade" or such, every stock we cover is a long term investment that will pay off down the road. We hardly ever talk about a stock that is a rush to profits and then a fast exit. This is stock promotion, spam, pump and dump, or a host of other things we do not get into. Less than 2 years ago we spoke on Stock SWAP (another thread I am conversant on) about DY (Dycom Industries) at close to $10. It is now in the high to mid 40s. Late last year we spoke of WAVX at below $5 (one of the times we speak of sub $5 stocks) and ran it to a phenomenal mid to high 20s and still hold some shares even though it has fallen to $20. When you see what they will provide, you will see they are still in their infancy and could actually do better. (This is not a solicitation but rather an idea.) The point is that the positional investor has probably traded this stocks 2-3 times over the past 6-7 months, while the long term investor is still holding with close to a 4X profit.
BUT make sure you know a stock (company) before you trade it or invest in it for that matter. Read up on it and study its actions so you will act with personal confidence and use Andrew's newsletter as a place to check your conclusions.
I could not have said it better. I am not trying to convince anyone to buy any stock we talk about in the newsletter. Rather, it is to provide you with some technical (23 years) background on some of these stocks to help you make a more informed decision. If we talk about a stock, you know it is worth investing in. If you have a question, we try to answer it. And above all, when we see a significant news release, we give it the visibility it deserves.
Finally, Andrew trades internet stocks in the letter. They are way too volatile and over valued in my opinion to trade without being a button monkey all day. CAUTION is advised in this sector. You may be close to or in the GAMBLING zone with these stocks.
True again. I do trade these stocks occasionally only because it is driven up and down with pure greed and herd mentality. More and more, investors are being sucked and suckered into the internet stocks and being told they deserve a place in your portfolio. As far as we are concerned, you put as much in this sector as you are willing to lose in Las Vegas. We did look at these internet IPO stocks with a different perspective. We never chased an IPO into its opening. We waited and got into a core group at the appropriate time, let them run, and then got out before many of the collapses. The best run was probably in BCST, VERT or UBID (off the top of our heads)while AMTD was the best of breed. AMTD was not aggressively covered in the newsletter, though. It was mentioned at the beginning and at the exit only because it looked to be way over priced.
The exit occurred at 20X entry price (split included) at $180 or less than a year and was re-purchased a few weeks ago back at close to $90. This brings us full circle relative to positional trading. In hindsight, no one would disagree about selling something for short term gains at $180 and then buying it back at $90, only to see it rise to over $120. We own the same amount of shares but put the rest to work elsewhere, most of which was into TOP TIER stocks. And of course, this more than makes up for not selling CYCH at $23 when we had the chance and not getting into AEIS at $22, when we had the chance.
Hopefully, this clarifies a few things and gives your readers some insights into RadarView. We do not consider ourselves in any way shape or form like any newsletter or internet investment source you can find. We find, more and more, that our readers get a 1-3 day jumpstart on the retail investor and close to one trading day jumpstart on the institutions. While the 7 figure high profile semiconductor analysts are preparing their blurbs for institutional clients, so are we. When they send it out to theses clients, our readers have similar of better information in their hands to read (more comprehensive)and are making decisions while the institutions and funds are making up their minds. But above all, our readers have a huge advantage over a majority of the day traders and retail investors, especially the retail investors. In our opinion, it is only AFTER the analysts share this information with their high profile clients, does it filter down to the retail brokers and then to the retail clients. Furthermore, when the retail brokers are buying, we are usually selling into the strength they are creating and then buy back when they have driven the prices lower as their retail sales back off. you know the drill, the brokers are reading from a script sometimes, which reflects inventories also.<GG>
Either way, we are focused on the tech sector and we thing we give the reader a jump on the competition. Most certainly this was the case with FORE and SFAM and a host of others.
Thank you for putting up with this response and I do have one other item to relate. True to my word, I have not made any other offers in SI for the newsletter. However, a reader here made an inquiry and a comment via private mail which has generated additional subscription offers for a quarterly and 6 month rate. These terms are listed in the complimentary issue for anyone who requests it. Thanks for the idea.
Andrew |
