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

To: Paul Senior who wrote (28431)	10/6/2007 12:24:05 PM
From: Madharry	Read Replies (1) \| Respond to of 78711

i guess when you own 1000 stocks 100 more stubs doesnt make a lot of difference. I find that i end up selling stocks in my portfolio when i cant remember much about them anymore. do you have significant programming skills? I guess I did a calculation and what I now own of lev represents free shares earned so im now playing with house money there. btw mfcaf is moving up again they released a 12/31/06 statement which leads me to believe this is truly a classic spinoff as described in the greenblatt book though shares are getting pretty hard to come by without boosting the price way up.

To: Paul Senior who wrote (28431)	10/6/2007 12:41:06 PM
From: E_K_S	Read Replies (1) \| Respond to of 78711

Stubs and portfolio tax planning - I build a position up over time and when I sell I try to pair down that position over time too. My main goal is to generate long term capital gains so after one year I will evaluate the position for sale and construct a strategy that will minimize my tax hit. I sell enough shares to recover my original investment (ie seed money). I then try to manage my gains so they offset any short term losses or "average down" positions I need to establish in my portfolio. I will recognize my long term capital gains and spread the sales through out the year as the "over valued" opportunity presents its self. Stub positions are nice to have in the portfolio as they provide a way for me to spread my gain over to the next year which books a long term capital gain for the portfolio. I can now start with a small positive portfolio long term capital gain for the next tax year right out of the gate. Because I hold many stocks with a very low cost basis, I can harvest my capital gains to minimize my total portfolio tax liability. My dividend income is substantial enough to cover my monthly cash flow needs so I tend to keep dividend paying equities that have a very low cost basis in the portfolio rather than selling them out. This strategy has allowed me to pay a maximum Federal tax rate between 15% and 20% while keeping my unrecognized gains in the portfolio. Many investors do not manage their portfolio to take advantage of the lower marginal tax rates that capital asset accounting provides. I match my trades to obtain the lowest cost basis and hold good performing positions for years collecting a steady stream of dividend income. Stub and cigar-butt positions do help me accomplish this. I have found that more than 60% of the time, my stub positions have maintained their value or increased substantially by the time I finally close out the position. When certain positions increase substantially or the portfolio becomes over weighted in a particular sector, I will trim positions, rebalance my holdings and build up my cash reserves. I will be more liberal with my tax loss selling or establishing a larger "average down" position so as to off set any windfall short term capital gains I might have. Paul, you raise a very good point on the deployment of the new funds gained from a sale. Many investors feel they must reinvest their proceeds immediately after their sale. I find that bad investment decisions are made when one feels they must get this new money deployed back into the market. I keep a cash reserve account (ie Vanguard GNMA)where I park all extra cash proceeds that I want to redeploy back into the market. A new "BUY" is a separate decision for me and is not tied to any sale I make unless it is an equivalent asset exchange. I may only make 5-6 new "Buy" positions a year which can be up to three or four separate purchases over several months. I try to only initiate the new buy when the value opportunity presents its self. It has taken me many years to learn and implement this type of portfolio management strategy. You must be a disciplined investor and try to keep emotions out of the decision making process. No "All Out" into cash or "All In" investing. EKS