Thursday, August 17, 2006

Loser Strategy

There are still a few months (duh) before year end. But I wanted to pontificate a little bit about strategy for selling losers. For the good of my total portfolio, I'd like to sell about $10,000 of losses by year end to minimize taxes (I hates taxes). Sadly, at this time there are a number of combinations of my stocks that I could sell to get me to such a number.

How should I go about selecting a combination? Here are some various options as I see it:

  1. Sell by date of purchase. So the losers I have held the longest get sold.
  2. Sell if no longer on any MFI list. That way I am selling stocks that JG no longer likes.
  3. Sell based upon my own preferences.
  4. Sell the minimum # of losses = sell the biggest losers.

If I followed those guidelines today I would sell:

  1. ELX, MSTR, HW & DLX
  2. ELX and ORCT - would have to find others.
  3. IVII, ELX, HW & DLX
  4. HW, OVTI, & PTSC

I have to admit that I was surprised that so many of my losers are still on the list. I suppose as they drop by so much, that the earnings yield increases. This will raise another conundrum down the road. After holding a loser for 12 months... should I sell it even if it still on the list? If I hold it, do I hold for another 12 months or am I a free agent at that time and can sell as I see fit? Not exactly black and white, this MFI investing.

End of the day is here. Another not-so-good-day (NSGD) for my MFI portfolio. While the major indices and the IWV closed up a bit, I was down 0.3%. It was my Oil & Gas stocks (FTO - down 6.6% & PTEN - down 2.4%) that did the damage. HW and EZEN were my best stocks, though I can see no reason except some bargain shopping.

It is surprising, despite my MFI portfolio being down that I have managed to eke out a 7.8% gain so far in 2006. That has probably kept me from panicking over the poor MFI performance. I haven't done the math, but it is fair to state that my non-MFI portfolio is substantially out-performing the indices. I have a new manuever in my non-MFI portfolio. I am buying and selling some MFI stocks that I feel have been beaten down too much. This is just in my IRA account and I do not count as MFI moves. But I have studied these stocks and their patterns in such depth that I feel I know when they are a buy (as I have called correctly several times here). This week I bought TGIS ($9.21), PTSC ($0.80) and PONR ($24.40). Purely ST moves.

Strategy Lab Thoughts

Every now and then I like to sneak a peek at the MSN Strategy Lab (Summary) to see what the "experts" are doing. For the record, I am a big fan of Vivian Lewis and subscribe to her International Newsletter.

  1. I am appalled at the sloppiness of the record keeping. This is a contest that the whole world can watch. Yet MSN admits that some stocks bought by VL can't be tracked by their system. Then I noted today that Ken Kam's portfolio includes OXY, which split today, yet they show him down 50% because they didn't adjust for the split.
  2. I like the approach of Jamie Dlogosch, except for some reason he always picks SIRI. I suppose at some point it does have to go up... but I don't see the economics of satellite radio.
  3. Thomas Ko makes me laugh. He buys outrageous stocks and has done quite well. He doesn't have a reputation to protect as he is a "amatuer", though it seems people track his moves. I should disclose that I have bought his PFACP... haven't done so well yet, but I like the story.
  4. Ken Kam won the last round (essentially by having ERS be a 4 bagger in under six months, since then it has gone all the way back... timing is everything) and now he is in the rear (even with OXY mistake fixed). He runs a mutual fund, which I looked at briefly. I think I saw where Morningstar gave it a single star... I quickly moved on.
  5. The funniest part of this round is a bit of back and forth between Vivian and Ken on Teva vs Elan. KK loves ELN, while Vivian has owned TEVA since she was about 5 years old. Go Vivian! (Again, her newsletter is wonderful if you want to dip a toe in international waters not going the mutual fund or ETF route).

No comments: