CBI expoded upwards 14% today post good earnings and not as sour an outlook as many had expected. I am happy as it had been a real laggard in my August 2015 MFI tranche. Now it is just a slowpoke (still down 18%). I am kicking myself for not buying it in my February tranche. They were on the short list, and have popped 38% since then.
That illustrates that in MFI, you should not totally ignore a stock that has done poorly for you. Buying it in an new tranche is often exactly the best thing to do. We have been having a little debate in the comment section and emails about what to do when a stock is down.
I am going to try and run a study this weekend, where I see how my tracking portfolios would have done if you had implemented various strategies after buying a stock. I am thinking of the following:
If the stocks drops 20% from initial buy price, how would you do if you sold it at that point?
Then try that for 30% and 40%.
Finally reverse and implement the rule that if a stock drops by those amounts, you buy a new tranche (so more shares).
Before I run that, any opinions out there in the peanut gallery? Will you be better off to cap your loss on any specific security? Or are you better off to buy more on a material drop? I will be able to test as I do capture the 52 week low on all my tracking stocks when I close the portfolio.