Van Meerten's picks

My overall strategy was not to hit for the fence, just try to beat the S&P 500, have positive returns and conserve principal if all else fails. I always learn from my own mistakes but from now on I'm going to also learn from others successes.

My long stock screener worked pretty well. I thought since this was to be a stock picking contest I'd go for broke, stay long and if things got bad transition back to cash. I didn't intend to go to cash, I thought that my only choice was to go to cash if my sell signs triggered and I couldn't find something to buy. I guess that was a good strategy but I made two major errors: 1 - I ignored several sell signs and 2- I failed to profit from what was working for others.

Several times during the competition I had sell signals. For me the sell signal is when a stock starts trading below it's 50 day moving average. In several blogs I said I seldom see a reason to hold a stock when it trades below it's 50 day moving average. My own words come back to bite me - big time! I listened to others. When my coal stocks dropped 20% I read to find out why and found it was because of a drop in the spot price of 10%. I Googled my coal holdings and found lots of bad advice to hang on and wait for a rebound in those stocks. I even convinced myself there would be a dead cat bounce. All the big guys and many of the part-time bloggers like me said coal was the best long range alternative energy play - I forgot this was a short term contest. I held them and lost some of the profits I made. They are all up over the purchase price but far off their highs.

Secondly, Ron Prichard was telling us how Vad was making some money shorting stocks, Jamie Dlugosch kept us informed that some of the most popular stocks were the ProShare Ultra Short ETFs and more than 25% of the stocks were trading below their 20 & 50 day moving averages. All the signs were there to short the market but I failed to explore how to short the market in a long portfolio and my pride for stock picking wouldn't let me explore Short ETFs other than my LONG positions in Oil.

So today I screened the top ETFs for the performance over the last month. Boy was I stupid! Out of the top 25 performing ETFs 24 are either Ultra Short, Short or Inverse ETFs and they have made from a low of plus 22% all the way up to a whopping gain of 67%. I may not have lost money but I sure missed some great opportunity cost plays.

Have I learned or will I still past up golden opportunities to make even more? I don't have a new strategy, let's just call it a refined new and improved strategy. (kind of like new and improved Tide)

NEW & IMPROVED STRATEGY:
Overall: Still don't try to hit for the fence, beat the S&P 500, look for positive returns, conserve principal but be open to short opportunities:
1 - Continue to use present screener to find long stock plays.
2 - Strictly adhere to my sell signal signs RELIGIOUSLY!
3 - Always be aware of what's happening on the short side of the market.
4 - On new purchases and replacements of stocks sold by individual sell triggers; if 55% of the market is trading above its 20 & 50 day moving averages go long; when 55% of the market is trading below its 20 & 50 day moving averages look for short opportunites and when the market is in the middle 10% wait till the market commits itself to replace anything.

Don't scrap what has worked for you but always be open to ways to improve on your performance. Let's all get rich together, buy wireless broadband access laptops, meet at a Tiki bar in the Keys and swap trading stories while sipping a cold one.

Comments: View Comments |  Monday July 7, 2008