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Strategies & Market Trends : Gorilla and King Portfolio candidates - Moderated -- Ignore unavailable to you. Want to Upgrade?

To: Apollo who wrote (479)	12/8/2003 3:12:10 PM
From: tinkershaw	Respond to of 2955

Present portfolio allocation: ARMHY 53% (growth) QCOM 41% CREE 6% Plan to diversify as I go. I have good cash flow each month and that is why I'm not concerned with being so concentrated. I further diversify each month, whether in other stocks, cash, or investment in house. Biggest mistake was not understanding what is actually the underlying value of a stock. One cannot see a bubble from a pit without actually understanding what a stock certificate actually represents. Remedy mistake by not holding a stock that I cannot justify its valuation and not buy a stock unless I am comfortable that it is clearly undervalued given my expected future for the stock. Also, to understand the difference between playing a stock in the market and investing. Since I seem to be good at playing with stocks, I'll do that as well if I get time, but won't kid myself with thinking this is long-term investing. Other big lesson is to take more time, be more patient, have more conviction in what I know is a great investment, and to not fool myself and pressure myself into investing money into lessor quality investments just because everything else is too expensive. Sometimes there just are not any stocks that you should invest in at the time. Remain discipline, follow methodologies, many of such which are described in TFM, and be patient. Money is precious, invest it wisely and prudently. Also include tax consequences as a factor in investing decisions but do not make them the primary element in choosing not to sell stock. Finally, stocks are not life. I was never more unhappy then when my stock portfolio peaked and I was obsessed with it. Enjoy the process or let someone else handle this essential element of life for you. Exit strategy: I don't think we will have another bubble crash like the last time. Should we reach those bubble highs again I will ride it for a bit, laugh at the opportunity we have just been given again, and then just go cash for awhile. I can't predict the fall, and going short in an excessive bull market is a killer. However, I might play with some shorts on the way down as I get more comfortable with it. But don't be afraid to go cash or bonds. Stocks are not always the place to be. Some of the largest fortunes in this country were made by people who went cash as euphoria peaked and only invested years later after the ashes settled. Thus my strategy, sell what I cannot justify valuation wise. Otherwise, hold my Gorillas until long-term indications indicate a sell, hold Royalty lightly, until the Tornado ends or other fundamentals fade, same rule with valuation, and don't be afraid to go cash. Tinker

To: Apollo who wrote (479)	12/8/2003 7:38:46 PM
From: Mathemagician	Read Replies (1) \| Respond to of 2955

I haven’t formulated an exit strategy, but I am toying with the idea of setting 20% stop loss on all holdings. Opinions on this strategy are most welcome. I have done a good bit of research into exactly this question and I have a few thoughts you might find useful. One is that I have found that the results are better if I let market action dictate the exit, rather than setting a fixed dollar amount or retracement. For example, choose a significant support/resistance level and decide to sell if the market penetrates this level. Another example is to choose a retracement that is not a fixed percentage but is related to the volatility of the market, like 5 ATRs or 20%Beta or something. The other is that you might consider varying the size of your investment so that the same percentage of your investing capital is risked on each trade. This ensures that all the trades are of the same size in an appropriate sense. Here's how to do this: 1. Decide what percentage of your total trading capital you are willing to risk on each trade. (I suggest reading Ralph Vince's Portfolio Management Formulas to learn about Optimal F, the "optimal" fraction of capital to risk on each trade. In practice, Optimal F should serve as a maximum rather than a target. You must be careful to never exceed Optimal F as exceeding it can turn a positive expectation into a losing situation.) Usually, 2% or so of trading capital is appropriate if you intend to carry about 10 positions. 2. Calculate the dollar amount that this percentage represents. 3. Figure out where your entry and stop loss will be. Calculate the number of dollars per share that you are willing to lose. 4. Divide the dollar amount to be risked (from step 2) by the number of points to be risked (from step 3). This will give you the number of shares. Example: Step 1. Trading capital=$100,000 Percent risked per trade=2% Step 2. Dollars risked per trade=$100,0002%=$2,000 Step 3. Suppose Entry=50.00 and Exit=40.00 Dollars per share risked=50.00-40.00=10.00 Step 4. Number of Shares=Dollars risked per trade/Dollars per share risked=$2,000/10.00=200 shares. This method allows you to maintain a constant level of risk and should help reduce the volatility in your portfolio. Obviously anyone considering implementing this method should be sure that they completely understand its strengths and weaknesses first. <font face=wingdings>e</font>