Use access key #2 to skip to page content.




October 23, 2008 – Comments (2) | RELATED TICKERS: GE , PBW , S

I saw all the little lucky charm symbols next to my name the other day.  This club, that club, Score 100, Score Leader, All-star (am I in a contract year?), all pretty cool stuff.  But I saw the little YES and wasn't sure what that was so I looked it up.  Apparently it implies that I'm always positive and somewhat connotates that I'm always bullish.  Well, if folks have read some of my 10 minute blog postings, they will know I'm not always bullish.  In fact, I got my ranking largely on the back of inverse ETFs, which given my decent score implies I've been bearish at the right time.  In any case, I've decided to never lose my YESman tag, so I'm going to stick with what I'm doing.  Nothing but green thumbs for this guy.  I think it's more Patriotic (not really but since everybody wants to be called more Patriotic than the next guy I'll grab on) and we're so close to bottoming why bother changing now.

Oh, there's a good topic.  The bottom.  Let's take a shot at that. 

The bottom will happen when it happens and it won't be where anybody but a few lucky folks forecast.  While I feel very confident in my accuracy that we are close to a bottom, I'm not very confident in my precision on picking exact bottoms and time frames.  If that's the case then how do we go about getting long? 

Well, here's my strategy.  It might not work for you, but it should for me since I kept a lot of powder dry the past couple years- I started getting out of the markets when the Dow was mid 12s so I missed the top by bit, but that sort of proves my point that we can be accurate without being precise.    

First, I have screened for a list of companies I'd like to own.  I have considerably tightened my process.  A few criteria if you like are sustainable growth rate over 25%, PEG under 1.33, margins above sector averages, free cash flow above 4%, low or no net debt (or assets at a deep discount offsetting debt for capital intensive businesses), pays a dividend or is buying shares back, ROE above 15% and a few others that are supersecret.  That should yield a list that includes companies like ABB, RIO, FCX, AXP, STLD, CX, MT...

Next, I have screened to find a few sectors or indexes that might be favored in a rebound starting sometime in the next year or two.  I won't go through the methodology since it's mostly subjective based on my opinion that emerging markets will once again drive growth and alternative energy will benefit under either Presidential candidate.  As such, I like PBW and just bought some, RJA and just bought some, RJI which is on deck and I'll buy once oil sniffs $60bbl and a few sectors which I'll keep to myself, but you can probably figure out looking at my Caps portfolio.

Now the secret.  I'm averaging in.  Ahh, you guessed that, well then ding ding ding ding ding!  You're a winner.  There is no secret here, it's common sense.  Don't try to guess, trade, forecast, Elliot Wave or in any other way divine the bottom, you are 99% likely to get it wrong.  Take a quarter of your money and put it in, then another, then another, then another.  Included in that do your rebalancing out of investments that have a less sunny future than some others.  

I know, that was anti-climatic, but isn't that what we want from our investments.

My rambling 10 minutes of distraction are over, peace out and hope you do well.

2 Comments – Post Your Own

#1) On October 28, 2008 at 3:32 PM, Troy2008 (88.62) wrote:

Kirky you're a nut, but that's ok with me. Wish we could prop up EXAS with this caps game...

Report this comment
#2) On October 29, 2008 at 10:23 AM, kirkydu (91.24) wrote:

The poop is in the chute so to speak.  EXAS will take off within a year or two and we'll see somewhere in the range of a 6 to 10 bagger from these low prices.  Having a non-invasive lab test for colon cancer really is huge.  The fact it took longer than expected and still has some marketing hurdles is par for the course though.  I never really understood why folks thought it would be a 1,2,3 and off to the races.  Getting into testing guidelines per American Cancer Society was big.  Not having FDA outright submarine EXAS is actually good.  Medicare will jump on board as soon as EXAS has an FDA approved kit, instead of just a homebrew.  The sky could really still be the limit.  Butt caution is of course warranted on anything like this- up to 5% of a portfolio makes sense. 

Report this comment

Featured Broker Partners