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Placebo
29-05-2007, 11:15 AM
In everyone's portfolio there is usually a `sleeper' or a share (or two or three!) that goes up only slightly, or sideways, or down [B)]... these can be culled but the question is often `when'?

I've seen Phaedrus' Porpoise theory where you cull out the worst performer every so often -- this would work to a degree.

The question I have is when you have your money parked somewhere, where it is not necessarily growing strongly but is not `under-performing', do you still consider it a potential sell and are you constantly looking for better performers.

In other words, is there an opportunity cost to holding a stock that may be being out-performed by others outside your portfolio at present (and you may consider that performance temporary and long-term your position is better).

whiteheron
29-05-2007, 05:07 PM
Placebo

I think that it depends on how you perceive the future potential of each stock
If I have a stock tha seems to be stuck and unlikely to move up in the near future and there are other stocks that I see as having strong short to medium term prospects then I will sell the stock that is sticking and make a move to what I consider to be a better bet --- as to keep the stock that is sticking and and unlikely to move is costing me the opportunity of (hopefully) purchasing a better stock

Nothing in the sharemarket is an exact science of course --- it is a matter of trying to have your money where you see it having the best chance of performing the best

I liken it to a horse race without a finishing post, where you have the chance of changing horses at any time for the cost of brokerage (buy and sell)
As a matter of interest I am not the slighest interested in horse racing !

Ricardo
29-05-2007, 05:55 PM
Placebo
Thinking about this one just reinforced for me how true it is that most of what makes a good trader is the mind stuff.

When the market is going sideways, being in that market has an opportunity cost of the banks interest rate on deposits, and its generally been no big deal for me. If I think that what I hold isn't going to go down, I don't worry about the opportunity cost of holding it.

If the shares I hold take a dive, I bail out if I hit my stops, and try not to dwell on it, since I can't get it right all the time.

The big change in how I view things comes when I had been contemplated buying a stock, but didn't because my funds were in another one. When the one I'd considered takes off, the opportunity cost of being in the lesser performer is made very clear. This really cheeses me off and upsets me more than taking a loss. The only comfort is I can consider myself "normal" as most traders apparently react the same way.

In theory, opportunity cost is always there, as the cost of the next best alternative. For me though, it only hits home for the times where my pick was right, but I didn't act.

Mick100
29-05-2007, 06:12 PM
If you have not got any stocks in your portfolio that are going sideways or down a bit then you are not diversified. You should always have a few stocks in your portfolio that your not too happy about holding.

My oilers have benn going sideways/down for 12 - 18 months now. I'v added to some of those positions recently.

If you want all your holdings in positive territory all the time you will be forever "chasing your tail"
,

Ricardo
29-05-2007, 06:33 PM
True enough Mick. If all your stocks are going up you may well not be diversified, as was my situation a few days ago when I was almost exclusively in Uranium and Nickel. The lack of diversification hit when they all downturned together.
However I can't agree I'd ever want a few stocks I wasn't happy about holding. Some I wish the market would hurry up and see the value that I see, but if I ever get unhappy with them, for me that means sell.
Now that we have CFD's in NZ I am looking at diversifying by holding a portion of my portfolio as short positions.

Mick100
29-05-2007, 06:55 PM
quote:Originally posted by Ricardo
[
However I can't agree I'd ever want a few stocks I wasn't happy about holding. .


Yes - poor choice of words there
Should have been - you should always have a few stocks in your portfolio that are putting in a below average performance - I'm not unhappy to hold such stocks if I think the long term outlook looks good.
.

Crypto Crude
29-05-2007, 07:38 PM
quote:whiteheron-I think that it depends on how you perceive the future potential of each stock
If I have a stock tha seems to be stuck and unlikely to move up in the near future and there are other stocks that I see as having strong short to medium term prospects then I will sell the stock that is sticking and make a move to what I consider to be a better bet --- as to keep the stock that is sticking and and unlikely to move is costing me the opportunity of (hopefully) purchasing a better stock

Nothing in the sharemarket is an exact science of course --- it is a matter of trying to have your money where you see it having the best chance of performing the best

Hey whiteheron....
My strategy is a little different to yours and everyone elses here....
You see, I donot have my main fund in the areas that offer me the best potential return...
My number 1 holding will offer me comparatively less returns than what I think I could get over the next month, but it has a higher degree of certanity over time...
So im trading off bigger returns elsewhere for more certainty...

I believe in the theory that if you see another stock out there, then you cut your worst performers first... and not to profit take off your best picks which is what most usually do...in doing this you create a portfolio of great stocks rather than being left with all your crap non performing picks... Its much harder to cut your losing stocks than to take profits off your winners...

I also believe that if you have a pick that you feel so confidently about, and your sure your onto a winner, then you park the lot on it... Warren Buffet believes in this and I do to....
Ive only ever parked the lot on it once...
NZO is currently a parking the lot on it stock, believe it or not... but im not going to..:)..
[8D]
.^sc

whiteheron
29-05-2007, 08:27 PM
Shrewd Crude

I dont think that our strategys are actually too different
Shares such as MCR OXR QGC and recently TZN I will hold for the long term regardless of short term price fluctuations as I consider them to be excellent long term holds
The shares I sell from time to time are those that looked promising when purchased but which have not and do not look like firing for some time, replacing them with what I consider to be shares with more promise

This strategy means that I end up holding winners whilst periodically weeding out losers (or those seen as holding little promise compared to others)

I do not sell those that are proven winners --- that only leads to holding the not so good and the rubbish

One should always be looking to improve ones portfolio

Mick100
29-05-2007, 09:37 PM
quote:Originally posted by Shrewd Crude

My number 1 holding will offer me comparatively less returns than what I think I could get over the next month, but it has a higher degree of certanity over time...
So im trading off bigger returns elsewhere for more certainty...




Excellent approach shrewd
Minimising risk (ie preserving capital) should be every investors number one priority - maximising returns comes second.
,

Mick100
29-05-2007, 09:54 PM
quote:Originally posted by Shrewd Crude


I also believe that if you have a pick that you feel so confidently about, and your sure your onto a winner, then you park the lot on it... Warren Buffet believes in this and I do to....



Warren's never invested in speculative oilers and miners as far as I know. The companies that warren "bets the farm on" have been around for a long time, and are usually involved in the production/distribution of consumer staples with trusted brand names. These companies can also raise their prices during inflationary periods. They arn't price takers like the oilers/miners.
I think if warren were investing in speccy companies, as you and I do, he would have a far more diversified portfolio.
.

shasta
29-05-2007, 10:22 PM
Shrewd/Mick & Others

Warren Buffet has two main rules.

1. DO NOT LOSE CAPITAL
2. Refer to #1!

Also, he is not in favour of dividends (& nor am i), & focusses more on the allocation of capital, ie what does the company do with it's cash to create more shareholder wealth?

My take on opportunity cost, is that i will sell the stock with the least short term potential, & reinvest in a better option, when i perceive the opportunity cost too big to miss out on.

I like holding around 5 stocks at one time (although i currently hold 7 stocks), & 1 or 2 of these will be sold at any time to buy something better.

I don't retain much cash & prefer to be close to fully invested.

Like Whiteheron, i hold stocks i wish to hang onto long term, but everything is for sale at a good price!

duncan macgregor
30-05-2007, 08:48 AM
Only three things count when playing the market regardless of what or how you go about it.
1, Strategy for buying good uptrending stocks.
2, Strategy when stocks go sideways or down.
3,Strategy if the market crashes.
My strategy for buying good uptrending stocks is supply and demand, in other words is the demand for a product or service on the increase or decrease. I select the company best suited to profit from that increased demand.
My strategy for a company wasting my investment time or going sideways for periods of time is a time line. I expect every investment to make 20% pa plus dividends if any, otherwise I am out.
[White Herons example]. MCR I bought on 3rd jan 2007 at $2-15 with a stop loss at $2 and a 20% time line from that point up. In other words, if the sp hit my stop loss level, or did not stay above my 20% time line expectation, then it would have been sold. Since MCR have increased almost 100% in five months i dropped my stop loss level, and 20% time line to 25pc below its highest price of a few days ago, to allow for market fluctuations. When the time comes in the distant future, when its time to sell as it must with all companies, even WARREN BUFFET ones [Coka COLA]my time line or stop loss will tell me.
If the market crashes it will start from overseas, and take a couple of days to sink in giving all the bargain average down investors plenty of time to buy me out. First thing every morning i look at the over seas market place, thats what i look out for.
Companies are a secondary consideration to rising sectors, the more companies you hold in your portfolio scattered over different sectors, the less your performance. We all must have a buy system, a hold system, and a sell system, failing that buy a monkey and dart board. Macdunk

Crypto Crude
30-05-2007, 09:58 AM
quote:duncan macgregor-My strategy for buying good uptrending stocks is supply and demand, in other words is the demand for a product or service on the increase or decrease. I select the company best suited to profit from that increased demand.

mackdadunk...
well oil fits this arguement to a T.... you should have alittle dabble...
I thought you would have had a go at my pick of dump the lot on NZO...:D
good to see you around, the NZOers are missing you mate...
[8D]
.^sc

duncan macgregor
30-05-2007, 11:22 AM
SHREWD CRUDE, You are much safer dumping the lot on a good in demand sector in a company with an increasing profit than scatter yourself about like eagle sh*t over the country side. You will never beat the market if you dont have a method to pick winners. The sell system is what risk you take, not how many companies that you have in your portfolio. This moment in time is the make or break with your NZO which has a good chance if they ever get their act into gear. Macdunk

winner69
04-06-2007, 08:06 PM
quote:Originally posted by duncan macgregor



[White Herons example]. MCR I bought on 3rd jan 2007 at $2-15 with a stop loss at $2 and a 20% time line from that point up. In other words, if the sp hit my stop loss level, or did not stay above my 20% time line expectation, then it would have been sold. Since MCR have increased almost 100% in five months i dropped my stop loss level, and 20% time line to 25pc below its highest price of a few days ago, to allow for market fluctuations. When the time comes in the distant future, when its time to sell as it must with all companies,

Mac ... I know you have mentioned the real numbers somewhere else but isn't 25% a pretty hefty 'stop loss' ...... at todays price of 442 thta says you are prepared to give back 110 .... almost half of your previous gains !!!!

I am using the ATR thingie Phaedrus uses as my stop loss - currently 2 X ATR is at 409 and the 3 X ATR is 391. In MCR case the 3 X ATR is a better fit ..... quite a loose stop loss really but as I am more a longer term holder fits well with me.

Just surprised you are willing to give so much back to the market .... compared to what the likes of Phaedrus would

duncan macgregor
05-06-2007, 09:09 AM
WINNER 69, When a share rises 100pc in five months you are playing with the markets money not your own. I Bought MCR at $2-15 sold half back at the first chinese correction placed half my portfolio or all of my trading account on SMM at $4-15 on the 5th of march and sold out at $5-94 on the 17th of april. I then bought back into MCR and the others in my hand SMY, AGM,IGO, Which all trended up allowing me to give them all a bit more rein to allow for the expected volatility. My trading account gets handled with a more hands on policy. The reason for the extreme low stop loss, and time line is, nickel is in very short supply, and increasing demand, with all nickel producing companies trending up until supply overtakes demand.
We are in for a few major market corrections with the chinese market I fully expect extreme volatility in the market in the near future. Macdunk

Phaedrus
05-06-2007, 11:47 AM
Duncan, I think your timeline "system" falls short on many counts.

(1) It is too arbitrary. Uptrends vary widely in their steepness. To use the same figure of 20% for all timelines, all markets, all stocks and all uptrends totally ignores this fact. In a Bull market a 20% target is way too conservative while in a Bear market it would be far too ambitious. One size does not fit all!

(2) The idea of a system is to remove the subjective component of buy/sell decisions. You are able to draw timelines from almost anywhere you choose and are free to vary this point at whim. I see no evidence of objectivity.

(3) You appear to totally ignore the underlying trend that you are trading. For example, when you bought MCR it had already been in a steady uptrend for quite a while with a confirmed trendline in place. Why replace this with a shallower line bearing no relation at all to the uptrend?

(4) The system as applied to your Buy was far too sensitive. Here we have a really good steady uptrend with an intact trendline and any number of unbroken trend indicators, yet your system managed to prematurely flick you out of this magnificent uptrend - at a loss!

(5) I fail to see the purpose of your second timeline. Current price action is well above a trendline that has been reconfirmed many times so why would you want to ignore this and replace it with another completely arbitrary shallower line? A line that starts where you say it starts and goes where you say it goes? A line that has nothing whatsoever to do with current or historical price action?

(6) The system as stated somehow manages to be too sensitive and too tight (when buying) yet too loose when selling, giving way too much profit back to the market before triggering a Sell and allowing an awful lot of leeway should MCR begin tracking sideways. It could quite conceivably take a year to trigger a Sell under those conditions - an entire year without gain. Consider the opportunity cost of that!

In short Dunc, I am of the opinion that the second (current) timeline is totally irrelevant - just as the first was!

http://h1.ripway.com/Phaedrus/MCR65001.gif

duncan macgregor
05-06-2007, 12:53 PM
quote:Originally posted by Phaedrus

Duncan, I think your timeline "system" falls short on many counts.

(1) It is too arbitrary. Uptrends vary widely in their steepness. To use the same figure of 20% for all timelines, all markets, all stocks and all uptrends totally ignores this fact. In a Bull market a 20% target is way too conservative while in a Bear market it would be far too ambitious. One size does not fit all!

(2) The idea of a system is to remove the subjective component of buy/sell decisions. You are able to draw timelines from almost anywhere you choose and are free to vary this point at whim. I see no evidence of objectivity.

(3) You appear to totally ignore the underlying trend that you are trading. For example, when you bought MCR it had already been in a steady uptrend for quite a while with a confirmed trendline in place. Why replace this with a shallower line bearing no relation at all to the uptrend?

(4) The system as applied to your Buy was far too sensitive. Here we have a really good steady uptrend with an intact trendline and any number of unbroken trend indicators, yet your system managed to prematurely flick you out of this magnificent uptrend - at a loss!

(5) I fail to see the purpose of your second timeline. Current price action is well above a trendline that has been reconfirmed many times so why would you want to ignore this and replace it with another completely arbitrary shallower line? A line that starts where you say it starts and goes where you say it goes? A line that has nothing whatsoever to do with current or historical price action?

(6) The system as stated somehow manages to be too sensitive and too tight (when buying) yet too loose when selling, giving way too much profit back to the market before triggering a Sell and allowing an awful lot of leeway should MCR begin tracking sideways. It could quite conceivably take a year to trigger a Sell under those conditions - an entire year without gain. Consider the opportunity cost of that!

In short Dunc, I am of the opinion that the second (current) timeline is totally irrelevant - just as the first was!

http://h1.ripway.com/Phaedrus/MCR65001.gif
PHAEDRUS, Let me explain the method of my madness in further detail using MCR which I bought on the 3rd of Jan 2007 at $2-15 with a stop loss of 5pc, and timeline at stop loss level. I have two completely sep accounts one investment, and one trading. During the chinese market correction I cashed up my trading account, which was half my total portfolio value and placed the lot on SMM at $4-15 on the third of march when the market scare was over. I sold SMM at $5-94 on the 17th of april. I then placed my trading account back to the four companies in my investment account on the 17th of april. I use a time line only to show me when a company is a waste of time and a stop loss when the sp drops to low but if I think that a major correction is imminment then I am out of it as fast as the I can. My stop loss, and time line dont count for very much on a share in steep trends like this, that is why i dropped the level which starts at 5% increases to 10% or even 15% in normal trending shares running at profit to 25%. If you look at SMM in hindesight with what I did it was reading the market that counted, not a treadline stop loss or time line. Reading the market comes first, after that treadlines timelines stop losses all come second as a precaution against a wrong call. My call right now is nickel in short supply, and high demand with all in profit producing companies on steep uptrends. When it all stops at the top I will be one of the first out looking for the next trending sector. Companies are only a secondary consideration to sector. I really dont think I could have improved what I did even with hindesight sold half my MCR in the last week of