To: Baton who wrote (20407 ) 2/13/2000 4:45:00 PM From: DlphcOracl Respond to
Baton: Thanks for your kind words. Not everyone will agree with my perspective, but that is why these threads exist -- for individual investors to learn from each other, picking and choosing from the various approaches to investing, learning from each other's mistakes. I couldn't agree more with your comment about staying too long with losers -- again, William Oneill of IBD has a rule that has helped me immeasurably: he states that one should sell a stock if it declines 8% after one initiates a position in it. I have modified that slightly; I wait until 10% and may ignore this rule entirely if I happen to catch the NASDAQ in a 3-5 day downdraft which pulls everything down. Otherwise, he is correct; if a stock drops 10% after I start a position, more often than not the next 10%-20% is further down rather than up. I don't ask or care why. Maybe the moon is not in phase with Venus or my investing triple-point rhythms are out of favor -- I just don't care. I get out quickly, pick another stock on my watch list, and try again. My greatest error last year (and I had a phenomenal year, thanks to insight from threads like Rande Is' and its members) was overtrading, being too cute, constantly trying to catch every winner. The problem in this environment is not that there is a dearth of great stocks and investment ideas; the problem is that there are too many of them. One must accept that: (1) many of these ideas require patience to develop and will not go up 100% in 2-3 months; (2) one cannot own everyone great stock. Rather, settle on a few (10-15 is my target, overweighting my best ideas), hold them long-term to avoid giving Uncle Sam 20%-40% on every profitable idea, and sell ONLY when: (1) there is a clear-cut reason to dump one of your holdings, or (2) there is a COMPELLING idea or investment opportunity that you need to free up cash for. Example: Legato Systems (LGTO) at $25-$27 dollars earlier this month was a no-brainer, a quality company with strong management, in a red-hot sector (information storage and management) that was oversold because investors heard the words "earnings restatement" without bothering to find out why and what that meant. It will be an easy double by end of April and a probable triple if one holds for 12 months. My post was NOT meant to disparage American Spirit or his approach to buying low, but only to be more selective in buying beaten-down stocks, particularly in investigating and understand why they are down. More often than not, they are down for good reasons and are to be avoided -- a few like LGTO, SNDK (Taiwan earthquake scare regarding chip production), GBLX/MFNX (total misunderstanding about their respective mergers & acquisitions) do slip through the cracks. THESE are the ones to pounce on.
