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

To: Paul Senior who wrote (19520)	8/10/2004 8:30:13 AM
From: Steve168	Respond to of 78618

Paul, I don't use that IBD's number 5 "cut loss" rule either, I think more people ending up losing money that way. I do occasionally cut loss but never that systematic 8% cut loss.

To: Paul Senior who wrote (19520)	8/10/2004 8:37:07 AM
From: Dale Baker	Read Replies (1) \| Respond to of 78618

When the general market climate turns sour, it's almost inevitable that some value plays will end up underwater for a while. The current period reminds me a lot of late 2002 and early 2003. I am still building positions in MESA, CCBL, HURC and WSTL deep underwater. But they share come common traits - profits, good cash flow, manageable balance sheets, etc. I agree with not letting Mr. Market scare you out of good stocks at bad prices. Some people overweight their underwater plays and let the stress scare them out. Allocation is part of a successful strategy.

To: Paul Senior who wrote (19520)	8/10/2004 4:24:34 PM
From: Stewart Whitman	Read Replies (2) \| Respond to of 78618

"Cut every loss when it’s 8% below your cost..." I wonder if they've ever statistically tested this with historical information. I've also seen people talk about 10% or 15%, etc., but I've never seen anyone actually give any objective reason for the numbers.

To: Paul Senior who wrote (19520)	8/10/2004 5:47:32 PM
From: Jurgis Bekepuris	Respond to of 78618

Quick update on UTMD. (Related to sell/buy on loss? :))) Stock plunged 33% today on FDA lawsuit to stop company selling its devices because of "ignored repeated warnings from FDA regarding company's manufacturing standards". Company claims that FDA's complaints are unjust, that FDA refuses to talk with the company, etc. Much more detailed account of both sides of the argument are in articles and press releases. finance.yahoo.com IMHO, there is some personal fight between UTMD and FDA. Unfortunately, it led to this lawsuit. It is impossible to tell how this lawsuit will be resolved. Although I think that UTMD is well managed good company, the current price is a bit high for purchases. I will continue holding my current position for now and reevaluate adding/selling as information becomes available and as price changes. Jurgis

To: Paul Senior who wrote (19520)	8/11/2004 3:01:30 PM
From: MCsweet	Read Replies (1) \| Respond to of 78618

Cutting losses rule A cutting loss rule seems to me to be in opposition to the basic principles of value investing. However, it might make some sense for growth and momentum stocks, which are much more dependent on investor sentiment and earnings trends. So I could see where it would make sense for some investors , but not for others. I, of course, don't follow this rule. MC

To: Paul Senior who wrote (19520)	8/12/2004 9:34:10 PM
From: jeffbas	Read Replies (1) \| Respond to of 78618

"Cut every loss when it is 8% below your cost. Make no exceptions so you can always avoid huge, damaging losses. Never average down in price." I could not disagree more IF YOU REALLY KNOW YOUR COMPANY. That requires a concentrated investment strategy (to know each company well), which is not possible for many people. The reason for my view is very simple. Ask yourself (1) do stock prices vary wildly around a much less volatile fundamental trend line, (2) do fundamentals vary wildly around a much less volatile stock price line, (3) are both relatively stable, and (4) are both quite volatile. Those are the only choices. I have no difficulty choosing (1). That means that if you have a very good understanding of the fundamentals you are in position to make a good assessment of when a stock has become "mispriced". That is when you can make real money. The opposite conclusion, that when the price has dropped a bunch it means the fundamentals have as well (and you sell) is in my opinion a much poorer odds strategy.