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The end of first year



July 17, 2007 – Comments (4)

Today marks the end of my first year on the stock market.  And what a year it has been.  I think I broke every business advice investment rule they give you, and it worked for me.

 It seems most things I found had a good upward trend very quickly and I broke that "let you winners" ride rule all the time.  I sold and took the profits. The way I looked at is if a stock goes up say 10% in two weeks, well, anualized it comes to 1.1^26-1=1092%, so I'd sell.  So, that isn't really called investing, except that I did do research before I bought my stocks...

I kept a tracking portfolio of my early stocks, with my exit price, and that portfolio is up about 35% in say 9 months.  Some might argue that that is strong evidence that staying with stocks you've researched works, and I'd certainly agree.

And, some of picks after did very well.  Eastern Platinum was a pick of mine last fall.  I got it at $1.06.  The A warrants were 30c.  Today Eastern Platinum is  $2.53 and those A warrants are $1.08, so 139% on the shares and 260% on the warrants, but I didn't hold them.  I took about 50% on each in about 3 months.  50% in 3 months is 406% annualized.

Northern Orion was another pick and I went for the warrants on that one because they were in the money and had little premium.  So, my $2.16 warrants are now $4.24, but I sold those at about 50% as well.

Eastern was a pick before I started blogging, but I wrote about Northern Orion early, at that $2.16 price, as I wrote about Roca at $1.40 which is now at $3.47, and Quadra at $9 and it is now at $17, and Blue Note at 46c and it is at 70c.

I consider those my strong picks because I wrote about them when I first found them, and in some cases I wrote about them more than once.

My biggest loser was Versatile, and that one a fellow teacher was raving about.  In retrospect, it is interesting to me how we trust people around us and we do not do the same due diligence.  I call it my biggest loser, but I only lost about 5% on it.  It is my biggest loser because I didn't check it out properly and when I did, well, what a dog. 

And the evidence of stock manipulation on that one is digusting.  For a couple weeks every day ended with a $250-300 purchase of shares to meet the ask bid, and often this thinly traded stock also had these same small purchases after a sell to the bid.  So, odds were if you peeked in, you would have the impression that it was trading at the ask price, when the bid price was typically 10-15% less.

Call me crazy, but I tested this manipulation, I set up the lowest ask price and then I did a small sell to the bid.  I tried it three times and each time there was a small purchase of my ask shares.  Then I just dumped my shares to be outta there and I've continued to watch the stock manipulation.  I was also ready to dump because this manipulation had made me concerned so I torn into the financials and I really didn't like what I found.  And the lesson was do not trust your collegues, and let your guard down when considering a stock.

Anyway, end of my first year and how well did my system work?  Well, I'm up 170%.  It worked very well for me, far beyond anything I ever expected, but you could also say I worked more than full-time screening stocks.  I've probably looked at 1000 or more stocks over the past year.  It simply isn't a method that would work if you weren't constantly assessing stocks.  One could probably tell I didn't like some I looked at by the comments I made on them.

So, the Dow is up 29.9% from when I started, and that means I beat the Dow by 471%.

The S&P is up 25.5% so I beat it by 569%.  The TSX went down and then went up, straight up, 42.3% from its low last fall.  I used it low figure in my calculation and so I beat that by 304%.  I beat the Nasdaq by 583%.

So, my goal for my second year is to perhaps have more passive investing.

4 Comments – Post Your Own

#1) On July 17, 2007 at 8:24 AM, iamamartin (96.64) wrote:

Your right to remember it's not the same as investing, and please don't forget that everyone is a genuis in a Bull Market. BTW I'm completely jealous at those returns. Congrats.

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#2) On July 17, 2007 at 11:51 AM, dwot (29.11) wrote:

Well, I see it as a combination strategy.  I spent a lot of time researching the stocks I bought, and when I started my intention was to find what I thought were good stocks and invest for the long term.  But, I kept finding what I thought were a lot of good stocks and when I contrasted to what I was holding, well, for some just seemed taking 10 or 20% and putting the money in this new stock that seem better relative value would create a better return.

 I saw no merit in looking for a top.  The math says that there is a declining rate of return as the price increases.  I don't look at the price I paid as the base price to evaluate the rate of return, but rather what is is worth now.  What it is worth now is what I can put into a different stock, so evaluation needs to be done on what each stock is worth now.

I handled losers in two ways, I did the "falling knife" thing frequently.  I was mostly confident in my math so if a stock that I thought was under priced and I bought it and it went down more, I often bought more, something "they" continually warn against.  Other times I just decided to cut my losses.  I never saw that any stock "owed" me, ie. I paid $5 and now it is $4.50 so it owes me $5 before I sell.  If I thought I had done something wrong in my assessment, or news changed my assessment, or another stock I had found would do better, I just cut my losses.

I also practically never added to a winning position.  I figured if it is winning, you lock in profits by taking some off the table, you don't add to your risk by buying more.  If it wasn't worth that level of investment at the lower price, why would it be worth more investment at a higher price?

But, this strategy takes an enormous amount of work.  It isn't just letting your money grow for you.  I've been an absolute workaholic with little balance.

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#3) On July 17, 2007 at 12:19 PM, billddrummer (38.18) wrote:

Congratulations on your gains!  I see that it is possible to gain well in excess of the market if you invest time and energy in research.  I have a few questions for you:

Do you stay with thinly traded stocks at low bid/ask prices, or do you look at larger companies?

 How much time do you estimate you spend on your research in a typical week?

Do you have any specific parameters you set when you decide to get out of a position?

I need to grow my portfolio very quickly, because I'm starting over at 54 years old.  Any assistance is greatly appreciated, because I don't have a 25 year investment timeline.

Congrats again, and Fool On!

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#4) On July 17, 2007 at 2:48 PM, dwot (29.11) wrote:

Right now I'm re-evaluating the market.  I think there is evidence that much of the world is in a credit bubble and history has shown that credit bubbles never end well.

My thoughts lately are more on how does one preserve capital as opposed to how does one grow capital.

I've been in some very thinly traded stocks and with the concerns I have about preserving capital I think I will tend to avoid them in the following year.

I found I liked small cap start-up mining companies because they tended to be not recognized by the market and I have a skill set that made it easy for me to analyse them.

Some of what I did simply wasn't research, but I think most of my activities were teaching me things to be on the lookout for as I've gone along.

I spent a lot of time not just researching specific stocks, but also around the market as a whole.

The market is up a lot right now, 25-30%.  Personally, I'm not seeing the same value in stocks that I was seeing and it has me exercising far more caution. 

I have no confidence what-so-ever that I could repeat this kind of performance and I think we are heading into a market that may soon correct.  I think I want to be ready for a correction and that is something I need to think about.

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