Hi, would very much welcome input on the above dilemma! I broadly follow the Ed Croft NAPS theories selecting top rank stocks from each sector and based upon this my portfolio sits pretty comfortably. Since investing Mid May, I have suffered a broad underperformance for the portfolio as a whole however appreciate this is a timing factor and do still believe strongly in the stock rank concept. My dilemma is more to do with certain stocks that have performed very badly, Griffin Mining, Camelia, Sanderson to name a few however in theory would still qualify for selection if I was investing today because still very highly ranked. ie in theory I should be bailing, but if I believe in the rankings then I should be holding?
Any input relating to this would be very much appreciated and thanks very much in advance.
Success in the stock market comes from cutting losses. My 1st Principle. Not everyone agrees.
Stock Ranks are based on Historic figures. Fact. They give you an indication of Past results but You have to do your homework on Future prospects.
You will never make money if you follow someone else or their method. Universal 2nd Principle.
We all find our role models, from Jessie Livermore via Minervini to Ed Croft and Paul Scott, but none will be around when you have to buy or sell.
No one except you knows how much you have, your cash flow, your family comitments, your age, your emotional tolerance, your psychological profile. Fact.
You develop your own method. 3rd Principle.
Whether you are a fundamental or technical investor or a combination, Write Down principles and rules that appeal to you and consult them every time you have a dilemma. My 4th Principle.
Principles, as Ray Dalio has taught us, are better than rules because they generate algorithms but rules sometimes contradict themselves. Examples on request.
Oh and by the way here are some facts and opinions on the stocks you mentionned.
SND (Sanderson) is a fine software co with SAAS model but its clients are in the retail sector. I have bought and sold several times over the past few years because it has a range between the low 70s and high 80s. It broke out in June on good results but is now back to earth. Mid 70s I shall buy.
Nobody understands Camellia CAM and you have to have lots of cash to buy any.
Risk/Reward is skewed against you.
That said it is another fine company. A colonial conglomerate with some very profitable lines and subsidiaries which I have held. Now and again there are trading opportunities.
GFM (Griffin mining) is too good to be true in my view and reminds me of all the Chinese listings.
On these last two, remember Ed does not do more than look at the statistics and diversify among sectors.
It is the point of the method-spread the risk, devote little research, limit financial comitment per share, review seldom but at fixed intervals.
You have to do the smell test and look under the bonnet if the position shows a loss..
As Will Rogers said: 'If the stock do n't go up, then do n't buy it.'
