DHI ==> The $$$MR. MARKET$$$ Veterans Day Pick

[mrmarket]

Nice try ladies....before you fumble this some more, let me answer it one more time:

I buy a stock because it is moving up in price very fast relative to its valuation. Since I only hold for a predetermined 15% gain, I really don't need to get into a stock early. I only want to hold it while it is moving up fast.

Many of you like to report, post haste, that a stock continues to go up after I have sold it. What you forget to remind yourself is that the NEW stock that I bought (with the compounded profits from my old stock) is moving up FASTER than the old stock that I just sold.

So even though the old stock continues to go up 100% more after I have sold it, I never feel I have left money on the table since I'm on a brand new fresh and faster horse....


got it??? then tell me that you understand....

[The Kid]

Huge One, I understand, although, with all due respect, I do not necessarily agree. Just for arguements sake, let's say DHI reported today that they had made an astronomical $15.00 a share in earnings last quarter, and had made that announcement in the middle of the trading day. Would you still sell at 15% when you see the thing skyrocketing? Are you SURE that your new horse is a better galloper than the recent one?

[Karel]

... Would you still sell at 15% when you see the thing skyrocketing? Are you SURE that your new horse is a better galloper than the recent one?

Hey Kid, what's the deal about being sure? Neither could you be sure about the opposite. With perfect hindsight, you will be sure which stock went faster. But that is no deal. (Unless you prefer hindsight over real money.) For me, the next pick doesn't need to be faster than the stock I sold. As long as these picks make a HUGE annualized profit on average, I am not complaining (see picture on the left). If you can do better, good for you, and please show us in real time.

MrMarket sells at 15% because 15% is a nice compromise between greed and ambition on the one hand, and caution on the other hand, for the stocks his model turns up (with a confirmed run-up). It will work for the great majority of those stocks, under almost every condition. Even when the conditions are extremely negative, you have a fair chance of beating the market, as MrMarket did in 2001-2002. Which leads me to the conclusion:

MrMarket is HUGE !!

Regards,

Karel

[The Kid]

Karel,

(I'm still laughing.) Please, no need to be so defensive of your hero. (Still laughing.) Trust me, I, like you, appreciate the Huge One's selections, his advice, this fine website...........otherwise I would not be here.

It was a simple question for him. Between the after-hours trading and before morning bell I just figured we could have a nice little discussion. I didn't realize you went around carrying his jockstrap, or in this case, his stale meats and cheeses. (Laughing again)

I realize that the main reason for his approach is discipline, plain and simple. If he were to allow even one stock to go above his target price, then who is to say he doesn't eventually allow another. Then, he could say, well since I made X amount more than fifteen percent on the last trade, he might settle for less than fifteen percent on another. Before you know it, the 15% is out the window as a rule and chaos and guessing reigns. I understand all of that. That is probably why, with discipline, he stays to 15% as a strict rule.

But I would have appreciated hearing him say that, and not a surrogate. I much prefer the words of the king to the jester.

I do not look at any of this as a contest, nor a pissing match. I, and I would think most of the members, are here for one reason -- to make money. Take the money out of the equation, and I think this would be a lonely website (although I do love the writing style of the Huge One, I am not a reader of blogs.) But please, rest assured, I mean no disrespect to you, him, nor this website. As you can see, I like to write and I like to trade. Did I come to the wrong website?

No offense, Karel, and thanks for my morning laugh.

[talkingrobe]

The last 12 stocks sold

I had noticed that out of the last 12 stocks Mr.Market sold:
4 still had some run in them
3 are walking very slow
5 are running backwards

It doesn't sound like a good idea to hang on to them longer. I would go for the faster horse...

I have made about 20% on the last 4 trades. That is because I didn't get a chance to buy at the same time as Mr.Market. I still sold at his target or close to it.

Mr. Market is great!

[Cyberacorn]

Quiz

What's better? A stock that gains 50% in 2 months or buying five different stocks over two months and realizing 10% gains each (after comm) and re-investing the gains in the next stock purchase. My math may not be great, but option one yields a 50% return and option two yields a 61% return.

I like the strategy Mr. Market uses. BTW, for those that are curious, using the 15% threshold will double your money every five trades.

Cheers,
CyberAcorn (holding DHI, LEND, and OHB among others)

[jonnieocean]

Holding onto homebuilders

From my standpoint, homebuilders is one of the healthiest industries out there that I can understand. Remember the Buffett motto. Buy stocks that you can understand and know what they are in business for.
I know Ernie sells at around 15% gain but some stocks are just worth holding onto for a longer time. After a 15% gain, I would hold onto DHI and watch it everyday. If it drops 7%or more off of its high, get out of it. LAst Friday early in the day I sold all my homebuilding stocks after a more than good run up in that industry. They were dropping on heavy volume which means the "big boys" were shedding them. I saved myself several thousand dollars by selling early in the day instead of waiting for the markets close. I am back into homebuilders as of Tuesday and will maintain a close vigil for any selling on heavy volume. I believe this is called momentum trading. If you involve yourself in this type of trading, then it becomes a part time job and as such requires at least an hour or two each day the same as a part time job would.
Ernie makes damn fine picks but do your own research as well on any stocks you plan to trade.
Best regards,
Jon

[stenzrob]

Karel,

(I'm still laughing.) Please, no need to be so defensive of your hero. (Still laughing.) Trust me, I, like you, appreciate the Huge One's selections, his advice, this fine website...........otherwise I would not be here.

It was a simple question for him. Between the after-hours trading and before morning bell I just figured we could have a nice little discussion. I didn't realize you went around carrying his jockstrap, or in this case, his stale meats and cheeses. (Laughing again)

I realize that the main reason for his approach is discipline, plain and simple. If he were to allow even one stock to go above his target price, then who is to say he doesn't eventually allow another. Then, he could say, well since I made X amount more than fifteen percent on the last trade, he might settle for less than fifteen percent on another. Before you know it, the 15% is out the window as a rule and chaos and guessing reigns. I understand all of that. That is probably why, with discipline, he stays to 15% as a strict rule.

But I would have appreciated hearing him say that, and not a surrogate. I much prefer the words of the king to the jester.

I do not look at any of this as a contest, nor a pissing match. I, and I would think most of the members, are here for one reason -- to make money. Take the money out of the equation, and I think this would be a lonely website (although I do love the writing style of the Huge One, I am not a reader of blogs.) But please, rest assured, I mean no disrespect to you, him, nor this website. As you can see, I like to write and I like to trade. Did I come to the wrong website?

No offense, Karel, and thanks for my morning laugh.

No offense ?!
"Carrying his jockstrap ... stale meats and cheeses" ?
"prefer the words of the king to the jester" ?
Ernie's e-mail address is available; if you only wanted an answer to your questions, you could simply ask. My impression is that this is a "pissing match" for you. I, for one, found this post of yours to be in particularly poor taste.

[hysderek]

Re: DHI ==> The $$$MR. MARKET$$$ Veterans Day Pick

Intresting to compare these charts. or maybe not have a look.

http://finance.yahoo.com/q/bc?t=1y&s=PTF&l=on&z=m&q=l&c=dhi

[carribean_mike]

I have decided to spilt my portfolio into four components.

1) various ad-hoc buy/sell strategies
2) Gold stocks
3) Mr. Market stocks
4) Stenz stocks

YTD Gold has been best performer. Gold is in a bull market - I just buy and hold.

Mr. Market picks are second. The primary reason is his 15% sell rule. Although I haven't consistently followed it - it continues to save my butt, since knowing when to sell is so much harder than buying.

[mrmarket]

Stenz...

"The Kid" = Bec1

Do the math and ignore the trolls.

[stenzrob]

I have decided to spilt my portfolio into four components.

1) various ad-hoc buy/sell strategies
2) Gold stocks
3) Mr. Market stocks
4) Stenz stocks

I am deeply honored to be included right up there somewhere just under "ad hoc".

[MEA_1956]

Re: Huge is as Huge does

The only thing huger than Huge is the HUGE revenues stated by DHI!!

Huge One, do you ever consider staying for more than a 15% profit, if, for instance, you see great quarterly results like Horton has just posted and the company reaches your 15% mark in a few days or a week?[/b]

Can someone else please answer this question for the Kid? I just want to see if any of you have learned anything from me.

Yes Earnie, and thank you. when he posts don't listen.===> MEA

[JARM]

DHI stock is up 138% over the last 12 months, yet its P/E is still a humble 11. It’s R^2 correlation coefficient, over the same period, is a rock solid 0.89 which indicates price momentum that has been incredibly steady.

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Could someone please explain the "R^2 correlation coefficient" for me and how it is determined? Thanks in advance.

[mrmarket]

DHI stock is up 138% over the last 12 months, yet its P/E is still a humble 11. It’s R^2 correlation coefficient, over the same period, is a rock solid 0.89 which indicates price momentum that has been incredibly steady.

-------

Could someone please explain the "R^2 correlation coefficient" for me and how it is determined? Thanks in advance.

JARM

R^2 is a measure of the closeness of fit of a range of data to a straight line. Stocks with high correlation coefficients have prices that are moving up in a straight line. My theory is that the inertia of this price momentum is least likely to deviate over 4 to 6 weeks.