The above quote, I believe, came from ole Ben Franklin. What it means is if you start small and stay with it – whether it be accumulating money or accumulating muscle or skill – you eventually will have a lot of whatever it is you want.
On August the 4th I decided to seriously look at what some refer to as “Bottom Fishing” as an investment scheme. What this means is that as we get an up market (and we have been in one since about mid-July or even the end of June) you buy the worst stocks you can find in hopes that they will explode quickly to the upside.
I started this scheme using a stock scan popular on VectorVest. This is known as the S&P 500/RT. It looks for S&P 500 stocks that are the worst based on Relative Timing. In other words, stocks you should not buy as long-term buy and hold positions. Once I invested in the worst 10 stocks I could find (approximately $2,000 in each stock) I immediately set what I call Profit/Loss Lockers. I used a bracket order on each holding to sell the holding if and when the stock gained 25% or if and when it lost 10% … and the 10% is on a trailing basis. This means that it will trail the price of the stock up but not back down.
Today is August 18th so I have been running this program for a total of 14 days. I had the first stock sell out automatically a few minutes after the market opened, and you can see that here:
Carnival Cruise Lines actually was up about 15% recently, but apparently fell back down today and I got sold out at the 10% trailing stop loss. This allowed me to exit this stock with a much smaller gain than I would have if I’d sold it on August 16th at it’s high of $11.38. By falling to $10.23 it fell 10% from that high so I got sold out. However, considering I’d paid $9.80 per share – I was still able to capture a small gain and move on.
I have included a chart below so that you can see the date I bought it, the date it hit it’s one month high and all the price action for the past one month.
I decided I would replace this stock with one from the S&P 600/RT (Small Cap Scan) rather than the S&P 500 (Large Cap Scan).
For approximately the same $2,000 I was able to purchase 391 shares of Oil States International (OIS) for roughly $5.12 per share. Now I have my Profit/Loss Locker on this set at the 25% gain/10% trailing loss for this stock as well. You can see the transactions here:
You can see my profit locker here. Notice I paid $5.12 per share and the bid is already $5.16 per share which is the price the trailing stop loss is based on:
As of this writing this is how the portfolio currently looks:
If you add up the gains you will see that I am up almost $2,000 over all which means that on average, considering an investment of $20,000 originally, I’m up about 10% in the past 14 days. On an annualized basis – and assuming I can keep adding a little a little to get a lot – that would be an annualized return on investment of about 260% or so. Of course, there is no guarantee that any of this will work out this way – but it’s worth a shot and a lot of fun.
I may keep you posted from time to time as I work through this. I will always try to keep at least 10 stocks in this portfolio at all times. My goal is to average a win ratio of 60% to 70% (in other words 6 to 7 stocks making money out of each 10) and earn a respectable 25% to 50% per year overall on the portfolio.