My batting average

[billyjoe]

Someone did research a couple years ago showing that a 30% success rate in stock picking like a 300 batting average can be very rewarding. Mr. Market would laugh at 30%.

---------billy

[Deaddog]

My only reasonable answer is, "I don't know". I never go back and check. I do know that the total market value of my account goes up and up.

What is it that you don’t know?
Do you have a cash reserve? Check your account balance. Divide the cash by the total account value and you will have the percentage of cash on hand.

Where does the cash come from when an opportunity presents itself? It has to come from somewhere unless you rely on the Cash Fairy the way I rely on the Laundry Fairy.

What percentage of your portfolio is allocated to each stock? Again take the value of each stock and divide it by the total account value to give the percentage of each position.

As far as overall portfolio returns. Take the account value at the beginning of the year. Divide it into the account value at the end of the year, subtract 1 from the answer and you have your percentage return for the year.

You would think an MBA from Wharton would be able to figure that out.

And really none of the above really matters; I don’t care what the numbers are. I’m looking for a method to model my portfolio management after.

Looking at the MR Market trades since I joined the this forum,
Assuming a cash reserve so that 14 stocks could be purchased in equal amounts;
There are currently 9 positions open. Cash reserve would be 36%
Overall return since Dec 1 2010 is 3.82%
If you invested in 65% of your account in SPY your return would have been 6.38%

So here the dog begging for a bone. With your future picks, how about letting us know what percentage of your account you are committing to that position.

[billyjoe]

Deaddog,
Do you work for the IRS or what? Maybe Mr. Market doesn't care as long as his account grows. I think he knows how to figure the % allocated to each stock. He's too busy enjoying his meats and cheeses.

-------------billy

[Deaddog]

Deaddog,
Do you work for the IRS or what? Maybe Mr. Market doesn't care as long as his account grows. I think he knows how to figure the % allocated to each stock. He's too busy enjoying his meats and cheeses.

-------------billy

Hey Billy:
Nope not even the CRA (Canadian Revenue Agency).
I’m attempting to become a better investor. I think portfolio management is almost as important as stock picking. I’m trying to get a straight answer and keep getting vague responses.

I know I’m wearing out my welcome by questioning His Hugeness and it’s really none of my business how Mr Market manages his portfolio. But I find it hard to fathom that he would not know how he manages his portfolio.

Telling his followers what percentage each stock takes up in his portfolio doesn’t seem like a big thing to me. It’s not like asking how many dollars he has invested in each. If I was an IRS agent what good would that info do me?

When I ask a simple question and get the run around I wonder why. Curiosity killed the cat and us dogs love to chase cats.

You've been following a lot longer than I have. When and how does Mr Market cull his losers? Does he spend a few days eating inferior meat and cheese?

[Karel]

I had in mind to reply sooner but some things intervened. They always do.

I am not His HUGEness himself, but I have some educated guesses that, I hope, will make sense to most people following $$$Mr. Market$$$ and I have my own practice.

$$$Mr. Market$$$ comes across as a very laidback investor. He probably does not care about sizing his positions. He is also rather disinterested in timing and most other technical aspects of stocks, which would point in the same direction. He probably starts with equal amounts, but things get in a mess real quick after that, when for instance one position rolls over three times with the other positions not reaching the target yet. That position is now half as big again as the other ones. What to do with the 4th pick? Dump all that money into it or lay a bit apart to help one of the other positions along when they need a new pick? If you are compulsive about equally sized positions, you might look for a way of balancing the positions. (I do that myself with a cash reserve. Say the reserve is supposed to be two positions; then you add the proceeds from your winner and invest 1/3rd of the reserve. Other strategies are possible.) If you don't care, you just dump the proceeds fromn the sale in the next stock, as things will even out eventually.

$$$Mr. Market$$$'s position sizes might get muddled even more when he adds more money. I don't have that problem...

Of course nobody stops you sizing your positions. In sizing you might consider that stops don't work for $$$Mr. Market$$$'s method, so you might consider your whole position to be at risk. If you want to risk 3% (or more, or less) of your portfolio per position, then that is your position size. Or you could size your position in another way, but methods that rely on stops are out, I would say.

Regards,

Karel

[mrmarket]

What is it that you don’t know?
Do you have a cash reserve? Check your account balance. Divide the cash by the total account value and you will have the percentage of cash on hand.

Where does the cash come from when an opportunity presents itself? It has to come from somewhere unless you rely on the Cash Fairy the way I rely on the Laundry Fairy.

What percentage of your portfolio is allocated to each stock? Again take the value of each stock and divide it by the total account value to give the percentage of each position.

As far as overall portfolio returns. Take the account value at the beginning of the year. Divide it into the account value at the end of the year, subtract 1 from the answer and you have your percentage return for the year.

You would think an MBA from Wharton would be able to figure that out.

And really none of the above really matters; I don’t care what the numbers are. I’m looking for a method to model my portfolio management after.

Looking at the MR Market trades since I joined the this forum,
Assuming a cash reserve so that 14 stocks could be purchased in equal amounts;
There are currently 9 positions open. Cash reserve would be 36%
Overall return since Dec 1 2010 is 3.82%
If you invested in 65% of your account in SPY your return would have been 6.38%

So here the dog begging for a bone. With your future picks, how about letting us know what percentage of your account you are committing to that position.

I guess I'm not that anal. I never thought it was that important to track such things.

[mrmarket]

I had in mind to reply sooner but some things intervened. They always do.

I am not His HUGEness himself, but I have some educated guesses that, I hope, will make sense to most people following $$$Mr. Market$$$ and I have my own practice.

$$$Mr. Market$$$ comes across as a very laidback investor. He probably does not care about sizing his positions. He is also rather disinterested in timing and most other technical aspects of stocks, which would point in the same direction. He probably starts with equal amounts, but things get in a mess real quick after that, when for instance one position rolls over three times with the other positions not reaching the target yet. That position is now half as big again as the other ones. What to do with the 4th pick? Dump all that money into it or lay a bit apart to help one of the other positions along when they need a new pick? If you are compulsive about equally sized positions, you might look for a way of balancing the positions. (I do that myself with a cash reserve. Say the reserve is supposed to be two positions; then you add the proceeds from your winner and invest 1/3rd of the reserve. Other strategies are possible.) If you don't care, you just dump the proceeds fromn the sale in the next stock, as things will even out eventually.

$$$Mr. Market$$$'s position sizes might get muddled even more when he adds more money. I don't have that problem...

Of course nobody stops you sizing your positions. In sizing you might consider that stops don't work for $$$Mr. Market$$$'s method, so you might consider your whole position to be at risk. If you want to risk 3% (or more, or less) of your portfolio per position, then that is your position size. Or you could size your position in another way, but methods that rely on stops are out, I would say.

Regards,

Karel

What he said.

[Deaddog]

I guess I'm not that anal. I never thought it was that important to track such things.

And yet you track winners in a row and annualized gain. Strange!!! Especially from a MBA who knows that the number of winners or the annualized gain of any one stock mean nothing if the overall performance of the portfolio is sub par.

Mr Market you have without doubt a great, no enormous, no HUGE ability as a stock picker. Whether you are able to translate that ability into market beating performance remains to be seen.

[edward]

Deaddog,
Like you, I consider annual gain to be my most important yardstick. To me, it's about the overall picture and I'm not afraid to move money around or take a loss if it can be put to better use. Time is money. At the beginning of this thread, I brought the subject up to try to spur some conversation with no luck. I'm now sitting at 119% on a rolling twelve month basis as of Friday. How about you and others? Am I doing well or just so-so in this group?

[Deaddog]

Deaddog,
Like you, I consider annual gain to be my most important yardstick. To me, it's about the overall picture and I'm not afraid to move money around or take a loss if it can be put to better use. Time is money. At the beginning of this thread, I brought the subject up to try to spur some conversation with no luck. I'm now sitting at 119% on a rolling twelve month basis as of Friday. How about you and others? Am I doing well or just so-so in this group?

I think that type of return is Fantastic!!!

I aim for 20% after expenses (Commissions, data feeds, trading programs, etc.) which I am quite satisfied with.

As posted I’m up 7% in the last 4 months so 20% is realistic.

Why not post your trades, I’m always looking to learn something.
DD

[billyjoe]

Deaddog,
There's no arguement about Mr.Market's stock picking ability. Create your own hybrid system. Stocks from the Huge one. Position sizing from another site, stops from another. Isn't that kind of what we all do to some extent anyway?

----------billy

[smaskell]

119% ???

I'm now sitting at 119% on a rolling twelve month basis as of Friday. How about you and others? Am I doing well or just so-so in this group?

Wow. 119%? I would consider that pretty amazing. Doubling your money in less than one year? Is that typical for you? I try to work for 4-5% per month which ends up 54-71% annual and I thought I was overly aggressive. I read your reply to Deaddog about the types of stocks you're using. Since this thread has evolved into a quasi position sizing thread, I have to ask; how much of your account is active at a time? How many positions are you typically holding? Do you utilize margin? Inquiring minds want to know!

thx
Scott

[Karel]

Deaddog asked me to move some posts from him and Edward about Canadian Small Caps to a new thread. Here it is: Canadian Small Caps.

Regards,

Karel

[edward]

Wow. 119%? I would consider that pretty amazing. Doubling your money in less than one year? Is that typical for you? I try to work for 4-5% per month which ends up 54-71% annual and I thought I was overly aggressive. I read your reply to Deaddog about the types of stocks you're using. Since this thread has evolved into a quasi position sizing thread, I have to ask; how much of your account is active at a time? How many positions are you typically holding? Do you utilize margin? Inquiring minds want to know!

thx
Scott

I got serious about investing in the market in the spring of '09 which was a great time to really get into it. Got fully invested by the end of that summer and have been playing with the same money ever since. I usually am holding about a dozen stocks and am basically always fully invested. About half of my stocks will be resources, the other half tend to be sectors that are showing good momentum. I keep it simple; no margin, options, calls, puts, etc, etc. I buy based on my research of the fundamentals, technicals, opinions of some of my favourite websites and chatter on discussion boards. I am lucky that my work allows me to pay attention to these things all day long. If a buy isn't working, I cut and run, if it is working, I hang around for the ride.

[smaskell]

...I usually am holding about a dozen stocks and am basically always fully invested...If a buy isn't working, I cut and run, if it is working, I hang around for the ride.

Thanks for the candor. One more question. How long are you typically holding a stock? Or, what are your "It is working/ it isn't working" criteria?

Scott