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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (16193)	1/18/2003 10:27:19 PM
From: 249443	Respond to of 78748

Personal Opinion of Stop Loss Usage: I greatly respect Paul Senior, TimbaBear, and so many others on this thread. With that disclaimer, I have to admit that I use stop losses (mentally vs. actually entered into the brokerage house). I am not an active trader, and recognize how a 75-90% loss on any one security can effect my overall portfolio results. I attempt, in my Ben Graham duplicaton efforts (try as I may!), to buy when there is a margin of safety. If I do this, then typically the stock doesn't have any sudden price declines. Based upon all of the due diligence I perform, I can always miss some important fact and/or unethical management team that has cooked the books (wcom, ene, eln, lhsp come to mind). In summary, if I am positive about a company's prospects and the stock is moving irrationally and I can't figure out why (i.e., Bass Brothers having a margin call on Disney after the 9/11 attack; Janus liquidating a holding; hedge fund liquidation), then I will cut my losses. I have no qualms about reentering a position if my exit was premature or purchasing out of the money calls to protect myself against a sudden reversal of price decline. But a mental stop loss has protected me many times -- to the point where I believe I lose objectivity if I don't sell. I must understand that other factors, unknown to me, are causing the price decline. I saw this occur with Comdisco prior to its bankruptcy filing. My approach would not be the case, or less important, if I held hundreds of stocks. But I typically hold a concentrated portfolio.