3SOF

Well for me I have already shifted my strategy. From short term to now medium to long term investor. I have almost the same reasons and one more. I dont have time to flip and flop. I am very pleased that David is thinking about that. And the allocation of 10% would certainly help.

Goodluck and Applaud David.

I totally agree that

1. We can reduce the number of stocks in the portfolio to 10 from 15;

2. Identify good stocks similiar to VPHM, NTRI, TIE, FORD, AOB, SINA, SOHU, IMOS etc.  in their early stage (price in $2-$3) and just break-out -

   Those stocks have the feature that they are either from lossing money to earning money, or they are earning money but unnoticed by the public so price is very low such as AOB, FORD, IMOS.

   The best time to identify those companies is during their quarterly earning release. This takes time but is worth the effort.

   SINA, SOHU, NTES gained from $1 -> $45 in one year because they turned from buring money to making money.

   FORD was $2 stock even it was making money in 2003 - 2004. Then it break-out in late  2004.

   I also found out that the best time to take position is not at their first break-out. Instead, wait for their pull back. In most cases after their first break-out, they will have a pull back because investors had doubt whether the good earning was one time thing or it couldl continue. You can look at SINA, SOHU, FORD, AOB, FNSR historical charts.

   So we should focus on low priced stocks.

   Take FORD as an example, the company was making money in 2003-2004 but the stock traded flat. Every time, they announced earnings, the stock breaks out then pulled back. Things changed in later 2004.

The followings are FORD financial and its weekly chart from 2003 to 2005:

Here is the chart for SOHU in 2002: After its first profitable quarter, its price broke out then pulled back. It traded in a rage for few months then broke out again and never went back.

Here is the chart for FNSR:

May be it is still in its early stage.

Earning reason is coming. It is good time to find out good companies to invest long term.

May be, everone of us can contribute one or two candidates and let DAVID figured out whether to put it on the portfolio.

But no matter how good, I will stick with 7% stop-loss rule.

That is, the entry point is still quite important.

If we can identify 10 good companies in their early stage of development, we will be very successful by year-end even may be only 2-3 stocks eventually made 10-bags.

Shawfund,

Great idea.  Thank you for sharing your knowledge and insight.  I vote for NFLD.  It is currently trading at the bottom of it's range and is at support.  The company should complete Phase III trials for it's blood substitute Polyheme early next quarter.

I scaned December 30, 2005 data, only two stocks gained more than 1,000% last year
and only 30 stocks gained >200% (average volume > 100,000) among 8,000 stocks.

Among them, the stocks we may be quite familiar with are:

   GGR, VPHM, NTRI, TIE, NDAQ, DESC, HANS, DCEL, BOOM, GAP, MYOG, BTUI, ...

That is, if we buy-and-hold stocks to invst for long term - one year, the chance is very small that it will gain 200% by the year-end (0.375%).

  See the table below

I totally agree with Shawfund, if we go for the long term-strategy.. we want to pick stocks to invest in their early stage, just like what happened to AOB, VPHM, GGR, NTRI, BOOM (all started @ $1-$2 level) 

*** I bought BOOM @ 6.25 last NOV. 2004.. if i just held onto it i could have made 1500% by now *** we need that long-term strategy NOW!! i'm also tired searching stocks.

By the way BOOM is my second trade first is MXO made good money from it... then i spotted this OTCBB & PINK & that year i'm losing about $6,000.

Take a good look @ NTRI & HANS, these are the kind of chart & LONG-TERM trade we want... prices just staying above the 13 DAY EMA....VERY BULLISH!!

I've learned alot from this board, and still learning. Great people and minds here! I've learned alot about technical analysis and how to interpit buy and sell points (still need to learn more). Its not hard to find  a stock that is going up, But When to sell is the problem.
David called the sell point on this stock once but I held (my bad).
I was ready to panic and sell but he called the exact point to re-buy.
so I bought more. (page 13). Technicals are great, but when you can back them up with fundementals, you can sleep a lot better. If David  picks a stock and the fundementals look good, thats the one I'll buy.
If the plan looks good I'll hold (check cncn bought at .14 sold half at .36) Thanks David, I liked your plan. I think VPHM still has alot of upside. I think the main reason it is down is because they are afraid of a generic version of vanocin. Even if one is approved it could take up to five more years. Followed this for quite awhile. Was probably my first post here.
http://www.3stocksonfire.org/trading/index.php?topic=139.0
bought at 3.25 sold at 21.90, Looks like a good time to buy back. Any ideas on potential upside?

Hi Dave,

Your new strategy sounds quite a bit like Braden Glett's "Stock Market Stratagem". I believe that it's the best market-related book that I've read ( and I've read quite a view!). It's a relatively-quick read and I highly recommend it to you. It's instilled a discipline into my investing strategy that I sorely lacked and has worked wonders on my portfolio.

Applaud shawfund. You are hitting the right cord. Finding big winners early and sticking with them is something which may take much more effort and time. By reducing the no. of holdings on 3SOF or even starting a new portfolio on 3SOF if David can afford the time. Or making 5 stocks as real long term buy and hold and 10 stocks with the current strategy. This would help in finding the true 'the kind that I want'.

Aside from VPHM, the current 3SF portfolio has GIGM, DIET, and perhaps ANGN looking like a long term hold.


-Valueseeker

Some great discussion on this thread and all very informative, excellent.
For some time now, I have been mulling over moving to longer term holdings and trying to identify and stay with bigger winners. A thread to discuss longer termer was started here http://www.3stocksonfire.org/trading/index.php?topic=4267.0
My conclusions which are not set in stone yet are that I should:
Trade bigger positions (but maintain good money management, exactly what will depend on number of holdings and risk tolerance factors, but still cut losses quickly)
•   Have fewer holdings (5 to 10 max)
•   Make fewer trades (but be prepared to be stopped out and re-enter again later should correct conditions re-occur )
•   Trade 52 week high / all time high stocks (By definition these are strong stocks which have on-going momentum and that many traders  believe to be unable to continue upwards, in fact they become short targets which conversely helps fuel the momentum)
•   Pay heed to shares outstanding (say less than 30 million)
•   Pay heed to insider and institution hold percentages (insider holds should be strong, institutional not too high say less than 30%)
•   100K or so average daily vol (to ensure decent liquidity)
•   Quarterly earnings increasing (Shawfund is right to identify this as a key parameter to finding new stars about to launch)
•   Fledgling or hot industry (not always necessary, but good for added fuel)
•   Add to strong positions on pullbacks to support (this is not in every case needed, but why try to find new candidates when with good money management you can add on the way up). This brings in to question the diversification of portfolio debate i.e. am I at more risk with bigger positions and fewer holdings. Both sides to this debate are valid, I am beginning to believe that holding and having deeper knowledge on a smaller number of stocks is safer than a broader number where I have limited or no knowledge of the company)

Once some candidates are identified and fit the right criteria, set buy stops to enter when they breakout per identified conditions (e.g. to new 52 week/all time highs with increasing vol) Rather than buy them because they were identified the night before.

The above is not ground breaking new information, it is a known methodology that is being used right now by many traders. The aim to find a) stocks with ongoing momentum (and to buy as they continue up) and b) stocks starting to gain momentum (and to buy earlier in the move, this being a lot harder and more prone to failure than a)

I used some of the above conditions to identify and enter HANS a few days ago. http://www.3stocksonfire.org/trading/index.php?topic=4290.0 HANS was less than $5 2years ago, today its $104 and still rising on strong momentum. Not long ago I would have shied away from buying an $80 stock which had already given multiple bags, now I am seeing this is exactly what I should be buying.

I am not saying I have a magic formula or guaranteed system. I am still piecing together my approach. I am trying to move the risk reward ratio further to my advantage.

Besides HANS which I hold too, I think VLO too falls in the same category with even more attractive valuation. And ELN [I am long on it] though an underdog and well below 52week highs, is filling the big gap. 

Thanks for your posts and strategic considerations  I wrote my opinion on this subject on The Spirit of 3 Stocks on Fire.

Considering VPHM, although I love the stock, I feel I still don't know enough about their business model (or its industry) to consider it a long term pick. I find biotech and pharma stocks particularly hard to value and understand. I'm not familiar with the biotech and pharma industry.

But looking at the numbers on a comparative basis, VPHM seems to be still trading at deep discount when compared with its sector averages.

For now I'll just say that I'll continue holding VPHM and I'll investigate further to know if I can call it a Long Term on Fire Stock.