Newsletter
June 23, 2007
The Value of Persistence
Market & Sector Review
Monthly Performance Review
Largest Changes In Raw Numbers (21 Days)
This Week's Economic Reports
There will be no newsletter next week. To celebrate my birthday, my wife is taking me to an as yet undisclosed location for a get away weekend. It's a wonderful gift to have a wife as special as mine. The time freed up from writing will be used to continue working on major changes to the Prudent Trader site that you will hopefully see shortly. Birthday wishes are not necessary.
The Value of Persistence
This Week By: Vic Johnson
"Great is the heartfelt joy when, after innumerable and apparently unsuccessful attempts, some ingrained fault of character is at last cast out to trouble its erstwhile victim and the world no more." - The Mastery of Destiny
James Allen is sharing with us the reward (heartfelt joy) for finally overcoming a personal character deficit. However, what he's really sharing with us is the value of persistence.
If I had to pick one character trait that I think is a "must have" in order to be successful in any endeavor, it would be persistence. In fact, it seems to be the one trait that is the dominant trait in every single, super-successful individual I know. I believe it to be the one trait that any ordinary person can use to become extraordinary ("extra-ordinary"). Napoleon Hill, who wrote "Think and Grow Rich," devoted an entire chapter to Persistence and said that the only thing that was different about Henry Ford and Thomas Edison was their persistence.
I've long since forgotten where I read it, but I've never forgotten the story of the tribe in Africa that confounded all of the anthropologists. It seems that this tribe had for centuries enjoyed a 100% success rate with its rain dance. In comparing this tribe to other tribes who did rain dances but who didn't always experience success, the experts couldn't find anything that differentiated the one tribe. They performed the same rituals, praying the same incantations to the same gods, in the same costumes. Like all the tribes, they sometimes danced for days, even weeks on end. Finally, an astute observer noticed something very telling. The successful tribe did one thing -- and only one thing -- different than the other tribes. It ALWAYS danced UNTIL it rained!
If your head is hanging low today as mine has done on many a day, I hope you'll find the encouragement to know that you really only need to do one thing at this point --- PERSIST. And that means taking just one step in the right direction --- even a half step in the right direction. Yes, maybe you need to review your plan or change your plan or maybe you even need to create a plan in the first place :-) But the one way you can ensure -- absolutely ensure -- that you will meet with success, is to "dance until it rains!"
Market & Sector Review
Monthly Performance Review
No matter how you develop a watch list of stocks for potential purchase or sale, it's a very good idea to track all the stocks in your watch lists for performance and risk. It is only in this manner that you can over time determine the screen or the criteria that best suits your investment or trading objectives. Whether your selection criteria involves technical indicators or fundamental criteria or a combination of both, does not matter. Keep track of how all that fit that particular criteria perform over time, whether your time frame is one day or two years. This will help you narrow your focus to those screens that seem to meet your criteria best over time.
In mid-April I began publishing watch lists of stocks that fit criteria of some of the great investors and traders. If you look back at recent newsletter (available in the Newsletter Archives) you can read about some of them. The watch lists are broken into three categories; those fitting Growth Stock Screens; Growth plus Value Screens; and Value Screens. This month two new screens have been added into a Specialty and Other category. While one month's worth of data is certainly way too small to really analyze performance I thought it would be an interesting exercise. While this is a mere one month look back I will continue to do so for each month and for each list each month. In this way we can all become more experienced in what fits our particular investment criteria the best and what does not.
Over all categories there were 229 issues divided into the three categories previously mentioned. Of the 229, 142 advanced over our one month look back while 87 did not. Are those 87 ready now? During that time frame here is what some of the major averages did, a benchmark so to speak.
If we average the gains and losses for all 229 issues we come up with an average return of 3.71%, higher than all the averages posted above. The largest gain was RDNT (RadNet Inc.) + 50.91%; the largest loss (TSL) Trina Solar Ltd. down 20.93% over the same time period. Both stocks, the largest gain and the largest loss came from the growth stocks and growth plus value screens, you would however, expect these stocks to be more volatile, if you trade stocks such as these, you need to account for the increase in volatility.
Now let's break up our analysis by screen category and take another look at the one month results. In the growth stock category there appeared 106 issues of which 79 (74.5%) were profitable to some extent. If you were to buy all the issues your return at the end of our test period would be 5.32% with the largest gain equal to 37.7% going to (DIGE) Digene Corporation and the largest loss 0f 20.93% going to the above mentioned TSL.
In the Growth plus Value section there were 54 stocks listed of which 28 (51.85%) were profitable over the one month test. If you were to buy each and every issue on the publish date your return for the month would have been 3.65% certainly respectable and certainly better than any of the averages so far. RDNT mentioned above is in this category and therefore is the largest gain. The largest loss comes from (TESS) Tessco Technologies Inc at minus 20.9%.
The final category is value stocks. By definition these stocks need much more time to develop into something. This is where you technical analysis abilities come into play; spotting the correct setup upon which to enter. You would expect these stocks to be tamer and not necessarily perform in lock step with the averages since almost by definition they are out of favor at the moment. In our value section there were 69 issues of which 37 or approximately 53% were positive over our short test period, just not to the extent of the other categories. The average gain was 1.3% well under the other categories and only slightly ahead of the DOW and the S & P. As you might expect the extremes were less as well, the largest gain going to (RWC) RELM Wireless Corporation (+19.9%) and the largest loss goes to (AXR) Amrep Corp of (-19.8%), this is of course in the out of favor real estate sector.
To review:
Regardless of your methodology for picking stocks or trading the markets make it a practice to put that methodology under constant review. It will lead to a better knowledge and investing ability as time goes on. The differing categories are there for a reason. Everyone has different objective, finances, risk tolerances, and so on. Some are suitable for growth some are not. You know yourself better than anyone else, or you should. Just because one category outperforms another over a short period of time does not mean it will continue to outperform. Next month we will take another look at both our new list (of which there are many carryovers) as well as this months data one more month out.
Could you have outperformed these categories? Could you have selected the winners and avoided the losers? At the appropriate time to maximize your gains from these lists? I think most of you could, many just seem to underestimate themselves. Don't underestimate!
To review all the stocks and perhaps do additional sorting by sector and /or industry group Performance Data Try sorting by Sectors or Industry Groups, can you notice a trend?
Largest Changes In Raw Numbers (21 Days)
[ Reserved for supporting members, now posted in members area ]
This Week's Economic Reports
Have A Great Week!
Bill
Disclaimer: Trading in securities, of any type, may not be suitable for all individuals. The contents of this newsletter are not a solicitation to buy or sell securities. The opinions expressed are solely that of the author. You must do your own research, contact your own financial advisor for suitability of any investments. Data gathered is from sources believed to be reliable, but NO guarantee as to their accuracy is made.
|
|
