Congratulations on your success in the market. I agree with you that one should take into account how one feels comfortable when dealing in the stock market. I have also made a great deal of money in the market, not as much as you, doing it my way. Your 2 rules of limiting your losses and taking capital gains are very important. I do not trust management or any of the analysts either. I have stated this on many occasions where I believe the "big boys" control the market. That does not mean in my opinion one can't make money in the market. I think as you indicated, study the fundamentals of the stock you might like to invest in, but without listening to what management has to say. If one feels good about the economy and the product in general, maybe a good buy. In any case, the stock market beats going to Las Vegas and losing all your money on one roll of the dice. Remember one can always get out of the market at a lower price than what one bought in at so you still have some money left. Limiting your loss takes some discipline on the investor's part and it also may hurt the the ego. I have been there. My philosophy is never to get married to any stock. I am currently out of the market which may be good or bad? Good luck to all, Edmund
Sorry, My comments were not complete. Invest in a style which suits you. I'll admit I'm no genius who started with $10,000 and made a $1 million+ a yr. later like some guy did in LA. Yes, it's documented in Forbes or a cousin magazine about 2 yrs ago. Funny though, he got out just before the big crashes of 00'. He was a "trader". He amazed quite a few of the trading authors and big money people.
Anyway, CANSLIM worked in bull markets, not the current bear we're in. I'll never fall in love with a stock again. I'll read the charts, write some covered calls, and hold intermediately good companies. I'll never trust mgmt again. I'll look at fundamentals and "technicals" more than anything. After hearing everything that's unprecedented , well it bound to come with time.
This a the longest Bear Market after such a long Bull market.
Number 1 rule
"Limit your losses at all times".
Number 2 - "Capital appreciation"
Or Vice versa
"Invest in a style such as C.A.N.S.L.I.M, or stocks making new 52 week highs (especially if you're trader)."
After reading Oneill's book, and putting $$$$ into practicing the technique (along with briefly subscribing to a service which uses it as well), I personally don't endorse CANSLIM.
I like much simpler approaches. Contrarianism works, as does following the overall 100 or 200 dma trendline.
Know when to hold 'em, know when to fold 'em, etc. etc.
Yes, any answer is 'perhaps dangerously wrong', but I suggest that perhaps what I should have said was that my answer was mainly geared with the core group of board posters in mind. - People who have AXM for the large part long enough and at better prices than I do that they're still ahead of the game. Personally, I'm underwater here by a few thousand dollars right now. No biggee, except that, annoyingly, if I do decide to cash out at a loss, wash sale rules prevent me from using the loss on my taxes. I still feel (opinion here, obviously) based upon my own DD that the future fundamentals are still viable for this company, and that the stock is actually WORTH 12-13/shr even should they cut the dividend in half.
Whether the recent price problems are related to shorts, to hedge funds, to mutual funds, etc, I think that in this case the 'Market' is wrong...because I think that the prime mover(s)
behind the huge drop were a very few number of people, who may not even have moved out of AXM for ANYTHING to do with AXM itself. If it was 1 or even a couple mutual funds moving out, they may have shifted the focus or strategy of the fund or they may have needed to take profits here to make up for losses elsewhere.
No doubt, once the price was driven down as they divested, many individuals' stop losses kicked in too, but I still think there were a very few individuals behind the greatest movement.
Now it may take a while for smaller investors to regain enough confidence to take the stock back where I think it belongs, but that is certainly possible in my mind, even if a portion of this drop is related to an expected cut in dividend. I also think it is ingenuous to compare AXM specifically to two companies whose stock prices plummetted as a result of improper corporate behaviour, unless, again, you have some inside info that such misbehaviour is likely here.
I wasn't attempting to be cute, though I will admit to being a prone to rather sweeping generalizations. I'm not trying to sway sentiment, just making observations on my own opinions. We'll obviously know much more about whether I'm leaning in the right direction or not come Oct 28. And I'm not saying hold all stocks until you know why their charts look as they do. I'm saying I don't think anyone should panic sell based solely on the charts.
If you've already made money, great, sell, make a profit it you think the charts look ugly. If you've got a loss, and the ONLY reason you know to sell is the charts, I'm saying to take a long, hard assessment, and make your best estimate of WHY what has happened has. Then flip the coin and see if you'll sell and regret it or sell and be happy. I think you were the one quoting a fellow in a book, in which case I can't agree more with the point that was : Be consistent. Personally, I believe the time to take a loss is in the first 15% for most stocks. Do your diligence and decide if the drop is warranted or not. Then the question becomes just how much faith do you have in your diligence...do you believe in your research, or do you second guess yourself and sell on no news simply because some other holder or holders are divesting on no news? All my opinion of course, which is why I ride stocks that do rollercoasters. I held Verisign at $200/shr, road it down to $94/shr, road it back to $210/shr, road it down to $110/shr, and finally sold at ~ $236/shr a few yrs ago. I have AXM at $11.86, and, barring serious bad news to the contrary, it will hit $13/shr again within the next couple months. Admittedly, if I had more cash, I'd keep buying while we're further down. I trust the management at AXM, even if I do wish they issued press releases more often.
Glad to see others are analzying the charts as well. i've said all along that the chart is broken, thus offering no resistance to lower levels because of ...??
This possibly suggests mgmt will lower the dividend in the not so distant future, lower earnings....or none of those, who knows. As you well know, greatly run companies encounter false or true rumors but the damage is already done from the fear or big positions being sold for whatever reason. The result is more resistance to move upward. the upward technical pattern is broke. Invest in a style such as C.A.N.S.L.I.M, or stocks making new 52 week highs (especially if you're trader). Don't fall in love with a stock. it's your downfall and the number one cardinal sin. Mgmt and fundamentals do change over time, especially 30-40 yrs.
Thought provoking message. Thank you for posting it. You argue that the small investor (like us) is better off looking at price trends since fundamentals are known to insiders far earlier than to the general public. Its hard to argue against that position, especially in view of events over the last four months or so.
"WHY the [AXM] chart is behaving in a particular manner" - this can be an organic problem, or because of the peculiar thinking of analysts and general investors, or because of mass psychology trends (tulip bulb phenomenon in reverse), or ...
In the end ... maybe its all just a guess.
Thanks again, CJ
Interesting post, and your message from the quoted source may very well have referred to the likes of Coca Cola, MO, F, McDonald's, etc... while those businesses hit their "rough spots," I am certain they had their fair share of ugly charts at one time or another. Now here's the kicker: several people close to me own a combination of the above and have owned them for 20-40 years. While they probably know (I wouldn't bet on it, though) a good chart from a bad chart, my peers/friends/family who've owned these companies among others probably have no idea if the chart looks "technically broken." Lesson learned? The disciplined investor holds the cream of the crop for years and continues to buy deep into distressed markets. Now is the time to determine if AXM is la kreme. (I don't think anyone knows, but the fine yield IMHO offsets much of the risk carried with owning a speculative position)
There isn't a single business in this world immune from downtrends and lower profits at one time or another. However, determining the buy in during their low's will reap rewards handsomely.
Good luck and I damn hope you're wrong.
You can throw the charts out the window for the next year, probably. The market is going to go up and down like a yo-yo, and most of the individual stocks will trade in lockstep to the bouncing ball. I think we will just have to play it mostly by ear for awhile.
If this was a tech company I would agree with you. All REIT's dance to a different drummer and because they typically trade low volume they can react quickly to anyone looking to invest or divest a portfolio.
I've been in REIT's (both rental and MBS) for several years now. I threw the charts away when I finnaly realized the methodology here. To say the stock is broken is like saying a treasury or cd is broken.
Most of us will sit back and preserve our wealth while collecting div's. These babies always comeback and are gaining more favor now that the tech bubble busted.
Unlike a treasury (backed by the full faith and credit of the US) and unlike a CD (perhaps some or all of which is backed by the FDIC), AXM is an equity, albeit a REIT. Therefore, the stock price will move with fundamentals and technicals.
The present fear is a reduction in AXM's dividend due to a reduction in earnings. There are no guarantees and this stock can move lower (or, higher).
In my opinion, it is misleading to compare a REIT with a CD or a treasury because the risk factors are different.
As I stated before, I love AXM - the company -but I fear the stock movement in that the chart, like it or not, is an indication of the present state of risk vs. reward.
For example, if the equity market continues to post a reversal, REITs, like bonds, may lose favor because many investors will substitute their fear-based investments with high-growth, "greed"-based investments.
This, of course, is another risk we must consider with REIT's, no matter how stable the dividend. We may receive our quarterly dividends, but at what price if the overall market is returning >20% returns in other equities?
Last, and not least, let's say the dividend remains but one must sell the underlying security for whatever reason. What's that going to feel like if the market, and technical-based traders, have deflated the price?
Just my opinion ...