Small cap power: CIMT

[berloga]

Well, Yukiii sold his SILC at $15 on a breakout. He has not owned it ever since, as I understand. Will it get down to that level again in the near future? Unlikely. I did not sell at $25, simply due to the following reason:

I would have to buy lower for more than 6.66% of my capital to even out by the time the stock gets back up to $25, which would violate my money management rule. Therefore, following the rule, I'd make less money with more hair pulled, eventually.

[buddjas1]

Well, Yukiii sold his SILC at $15 on a breakout. He has not owned it ever since, as I understand. Will it get down to that level again in the near future? Unlikely. I did not sell at $25, simply due to the following reason:

I would have to buy lower for more than 6.66% of my capital to even out by the time the stock gets back up to $25, which would violate my money management rule. Therefore, following the rule, I'd make less money with more hair pulled, eventually.

I suppose, but that's because you choose to follow a money management "rule."  On the other hand, I could put all the SILC proceeds back into SILC today and have 15% more shares than I originally had.  (I decided not to buy back SILC, by the way, put it into IEAM.)  I made the right call, which may be tough for some to accept.

To each his/her own, I guess. 

[David Randolph]

I made the right call, which may be tough for some to accept.

Absolutely, you said "sell SILC at $25.5 or so", the stock is now trading at $22.66 after hitting a low of $20.69, so facts undoubtedly show you made the right call.

Let me applaud you for that, please keep up

[David Randolph]

It seems more or less clear now that weak hands sold on yesterday's technical breakdown to the 50% Fibonacci retracement support, and today the stock rallied.

I'm not interested in studying the following type of phenomenon, but watch how the stock perfectly defined a support line for 7 sessions in a row (support seemed to be around $3.5) and broke down below it on the 8th day, when all short term technical guys still holding the stock thought to themselves: "this is it, I have no reason to keep holding this stock, it broke support, let me sell and look for another stock to buy, one that is going up". Today, the short term technical trader looked at a 13% rally and is thinking: "nothing special, the bull trend was broken. I'll only get back into this stock when it breaks out to a new high above $4.72, I have no time to waste". He'll probably buyback the stock at $5 and with luck will sell it at $6 for a 20% profit over the next technical breakdown. Later he'll buy back higher again. A couple of years from now CIMT will be a $15 - $20 stock and the best case scenario is he got $3 or $4 out of its long term ascending move. He still feels good, because after all, he profited from the stock's rise. And he got himself some entertainment along the way playing other "fast moving stocks". What he did not make was a 5 or 6 fold long term profit, so necessary to achieve the superior long term performance he dreams of. End of the story.

Well, that was just a story, let's put our feet back on the floor and think a bit about CIMT. The company earned 7 cents EPS in Q4 2006. If it earns the same amount of profit over the four quarters of 2007, it will have EPS of $0.28. Now apply to that EPS the technical systems software industry average earnings multiple of 34.33 and get a $9.61 stock by the close of 2007, no growth needed.

I'll keep holding CIMT.

[wxmang]

Kudos for those of you who held CIMT!
Looks like a major stampede is coming.
Up to $3.94 in after hours:

http://www.nasdaq.com/aspxcontent/ExtendedTradingTrades.aspx?mode=frameset&kind=&timeframe=&intraday=&charttype=&splits=&earnings=&movingaverage=&lowerstudy=&comparison=&index=&symbol=CIMT&symbol=BBND&symbol=BBD&symbol=ZANE&symbol=TSTF&symbol=MSI&symbol=NVTL&symbol=GIGM&symbol=SILC&symbol=ALDN&symbol=AMKR&symbol=TSL&symbol=JASO&symbol=LHCG&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&FormType=&mkttype=after&pathname=&page=afterhours&selected=CIMT

[rickjust]

Kudos for those of you who held CIMT!
Looks like a major stampede is coming.
Up to $3.94 in after hours:

only 300 share traded after hours hardly a stampede yet. although this stock has shown that it can move up quickly so tomorow might be interesting.
to david,
applause to you with your long term motivation . it is tough to be a holder long term of a stock if you have to be here everyday to talk about it. especially if you plan to hold for months to years.
i personally , have not yet flipped over to the long term camp as yet . still building my small account and doing well this year ( up over 40% this year) with not so much technical work but work on my mental toughness
and my attitude towards myself and money . the thing that will beat you  in the market is not the sharks and market makers but your own mind.  it takes a  determination  to trade and to keep trading after failing and to keep learning ( while making the same mistakes)
i am now glad to say that i have been trading almost 2 years and i am still alive , hahaha. and enjoy it even more than ever.
back on cimt , this one i am holding long and strong .  355 entry. i will keep the faith on this one
maxi
p.s. on a technical note i like to flip the fib and buy on the first green candle after the bottom , crossing the 23% fib
learnt this from  therumpledone who has been around here a couple of times

[David Randolph]

to david,
applause to you with your long term motivation . it is tough to be a holder long term of a stock if you have to be here everyday to talk about it. especially if you plan to hold for months to years.

Yep, it's a tough job, but I love it . Thanks for your support rickjust.

i personally , have not yet flipped over to the long term camp as yet . still building my small account and doing well this year ( up over 40% this year) with not so much technical work but work on my mental toughness
and my attitude towards myself and money . the thing that will beat you  in the market is not the sharks and market makers but your own mind.  it takes a  determination  to trade and to keep trading after failing and to keep learning ( while making the same mistakes)
i am now glad to say that i have been trading almost 2 years and i am still alive , hahaha. and enjoy it even more than ever.

Nice to know you're doing well rickjust The Disciplined Trader seems to be the right book for you. But, I mean, how small is your account? $5,000? If you make 30% a year in 30 years (I know you're young) you'll have $13.1 M, a nice retirement. If you add, say, $250 a month to this, results would increase a lot.

back on cimt , this one i am holding long and strong .  355 entry. i will keep the faith on this one
maxi

Great, I believe CIMT will help you increase your overall return, you hold on to this one

Going back to CIMT, we had an healthy small correction after yesterday's strong bounce. I have nothing to change to my long term outlook for this stock. I'll keep holding CIMT.

[rickjust]

hi david ,
thanks for the recommendation on the book . i will get it. my account is around the 10,000 mark. (( i started with $3,000 2 years ago, lost most got it back lost it again got it back ) i tend to take it out and spend it occasionally . ( like trips to australia) i feel like i have turned a corner in my trading , i don't expect to gain on every trade but i expect my account to grow
i just bought " the zurich axioms" which is so far the best book on specualtion i have ever seen.
it was reccommended to me by a extremely wealthy friend .
written by a swiss  it outlines the 12 axioms a bunch of wealthy swiss have used to gain their wealth. i will outline them in the members area. ( diversification is not one of them !) although i respect your position and have no doubt that you will continue to beat the market.
go cimt!
maxi

[wxmang]

Nice Post rickjust!

I actually was checking into "the zurich axioms" and it looks as if number one is my problem 
I am always worried. I hate it! From business to life. I am a big worry wart! Hee Hee
And I just love this part of the axiom: "The Pareto Principle" - So True!!!

Here are some quotes from the book in relation to risk.

1. "Worry is not a sickness but a sign of health - if you are not worried, you are not risking enough". How often are you told only to risk what you can afford to lose in investing - when you know you should risk more? You then see the gains you could have made - but you never acted upon the trade.

2. "Always play for meaningful stakes - if an amount is so small that its loss won't make any significant difference, then it isn't likely to bring any significant gains either". If you don't risk much, you won't gain much. If however you play for meangiful stakes, you have an opportunity to get rich quick - if you don't, you never will.

3. "Resist the allure of diversification" - Diversification is the buzz word in the modern investment community - but all it does is dilute your potential profit.

The Zurich Axioms encourage you NOT to diversify for small gains, but to look for the big potential winners and hit them hard. An easy way to explain this is the pareto principle - the Pareto principle is commonly known as the 80/20 rule.

The rule states that 80% of your results come from 20% of your activities - and this is true in many areas of life, including investing.

It means, by concentrating on the best investments, and ignoring the others, you can easily quadruple your results - by searching and acting on the 20% that yield the really big profits.

By only focusing on this 20%, you will see better gains, and you will create a new Pareto principle, refined from the old one, but at a new higher level."

Link:
http://ezinearticles.com/?Get-Rich-Quick-with-the-Zurich-Axioms&id=185301

[David Randolph]

i just bought " the zurich axioms" which is so far the best book on specualtion i have ever seen.
it was reccommended to me by a extremely wealthy friend .
written by a swiss  it outlines the 12 axioms a bunch of wealthy swiss have used to gain their wealth. i will outline them in the members area. ( diversification is not one of them !) although i respect your position and have no doubt that you will continue to beat the market.

I read your post rickjust, thanks. If you had shown those axioms to me a year ago I would agree completely. But now I'm in disagreement with most of them.

But I tend to agree with wxmang's post:

2. "Always play for meaningful stakes - if an amount is so small that its loss won't make any significant difference, then it isn't likely to bring any significant gains either". If you don't risk much, you won't gain much. If however you play for meangiful stakes, you have an opportunity to get rich quick - if you don't, you never will.

3. "Resist the allure of diversification" - Diversification is the buzz word in the modern investment community - but all it does is dilute your potential profit.

The Zurich Axioms encourage you NOT to diversify for small gains, but to look for the big potential winners and hit them hard. An easy way to explain this is the pareto principle - the Pareto principle is commonly known as the 80/20 rule.

The rule states that 80% of your results come from 20% of your activities - and this is true in many areas of life, including investing.

It means, by concentrating on the best investments, and ignoring the others, you can easily quadruple your results - by searching and acting on the 20% that yield the really big profits.

By only focusing on this 20%, you will see better gains, and you will create a new Pareto principle, refined from the old one, but at a new higher level."

Maybe I should own just 5 stocks, instead of 15, to be full invested. But I guess my hands would be weaker then, since risk would increase considerably. I guess 15 different stocks is concentrated enough, most mutual fund managers own more than 100 stocks.

Going back to CIMT, it seems we're not out of the woods yet, over the short term. Did I tell you there will be days when volume will be zero? That doesn't mean anything for the long term outcome of this investment. The company's value has nothing to do with the times its shares change hands.

Q1 results will probably be out around May 15. Actually I see now there's some seasonality, and Q1 revenue was always lower than the previous Q4 revenue in the past. But what matters most is net income and EPS.

CIMT's results have been quite erratic in the past, but Q4 2006 was the best ever in net income terms. That's why I believe the Chairman of the Board words:

«Mr. Rimon Ben-Shaoul, Chairman of the Board of Directors of Cimatron Said, "after several years of re-organization, cost cutting and extensive product development, we believe the Company is now on the right track for sustained growth and profitability, and that Cimatron's current competitive advantages enable us to reinforce our worldwide market positioning, both in emerging and traditional markets."»

I'll keep holding CIMT.

[nullzero]

I like the idea David of being fully invested in 5 stocks... but I dont know if that would be inline with your investing strategy. 20% in each stock wouldnt be that much of a hit to the porfolio if that stock dropped lets say like 20% unexpected and needed to be closed. That would only take a 4% hit to the portfolio but the way the portfolio has been acting on down days 2-3% down are not uncommon. The upside potential would be much greater espically with great picks. Going more of a swing trade approach for max gains 1 week to 6 months holds.

[David Randolph]

I like the idea David of being fully invested in 5 stocks... but I dont know if that would be inline with your investing strategy. 20% in each stock wouldnt be that much of a hit to the porfolio if that stock dropped lets say like 20% unexpected and needed to be closed. That would only take a 4% hit to the portfolio but the way the portfolio has been acting on down days 2-3% down are not uncommon. The upside potential would be much greater espically with great picks. Going more of a swing trade approach for max gains 1 week to 6 months holds.

I could agree with everything you say nullzero, except the last part:

Going more of a swing trade approach for max gains 1 week to 6 months holds.

I dislike the "swing trade" idea. I don't think it can give a man money over the long term, and I can explain it quite simply: there's no economic or scientific way to predict "swing movements".

Why should a fundamentally attractive stock have a correction now, why not 20%, 50% or 100% above? And when it starts falling, where will it stop? At the ascending trendline? At the 50 days moving average? At the 200 days moving average? At the 50% fibonacci retracement level? When the MACD comes out of an oversold territory? And what if it bounces a bit from one of those support levels, but then falls back and break the support? And what if after that it rallies again above support? And what if after all the stock isn't attractive? Is it bearish, is it bullish? Ok, it is bearish, but also oversold, so there can be a bounce, right? Or, this stock seems attractive, but it rose so much, let me wait for a pullback. Damn, it rose another 30%. Ok, finally a 10% pullback, let me buy now. Ooops, going down another 20%, what now?

I could be here all day and night describing situations that clearly show that you're trading based on instincts and luck when you're "swing trading". Sure, you can have some winning streaks (no doubt about it), but 10 years after you're basically at the same level or worse than when you started, because the game is skewed due to transaction costs and slippage.

Expecting CIMT to sustain profitability and achieve a 20% revenue growth rate is speculating/investing. Buying today to sell 10 or 15% higher is gambling, because to be coherent, you need to sell if the next 10 or 15% move is lower. I'm not going to sell if the stock rises 15% or if it falls 15%, because that doesn't give me any clue to the future, say, 6 months from now for this stock.

To hold a stock for a big, long term move I need to focus on predicting variables that make a stock rise 500% or more. No technical indicator does that, they're always changing. My 4 estimates tell me CIMT will be a $27 stock three years from now. I know there's no way I can beat this type of return jumping around other stocks. I just need to sit tight and let the future become the present, for as long as I believe the future will be what I'm forecasting.

I'll keep holding CIMT.

[nullzero]

I can see where you are coming from with the swing trading its not for everyone and you can miss out on potential gains, the longer you hold the more potenial you have to make up a loss or catch the full move of a stock... However I think the filtering of stocks and money management rules could be tweaked to maxmize risk/reward for the plays... For instance you picked several stocks that got around 100% gains like SYX, and others that got close to 30% losses. We should only be buying the best of the best stocks with the highest chance of reward for the porfolio. Stocks like TZOO, CECE, etc shouldnt be picked in the porfolio when there is great stocks like... SILC, ALDN, GIGM, CIMT, etc out there. Filtering the picks more vigerously would definately increase odds we get a lot of winners. Also having the members add input or point out things weither they are negative or positive would also keep are eyes and ears open for more detailed analysis for the picks (maybe reaching out more to the members asking their input or feelings on a stock with the use of polls or questions more often.)

Another idea is when a fundamental milestone or target is reached you could sell 1/3, 1/2, or 1/4 of the position (to cut down on risk for the porfolio and lock in gains). I think that would help a lot if every pick had a more detailed exit plan and a backup plan for certain possible scenerios that arised as well. I know the the main porfolio can get incredible gains we just need to unlock the potential and increase the risk. The last 2 months we would of made better gains sticking the whole porfolio in a double leverage ETF that tracks the DOW.

Anyway to sum it up and stop my rambling... David your doing a great job but I know you can do even better. I believe keeping track of 15 stocks is keeping you occupied from finding and focusing on the real winning stocks. For those considern on risk... You need to risk more to gain more and being a long term porfolio is already reducing the risk a great deal. 5 stocks is not going to put to much risk especially if the stocks are diversified from one another. From the looking a previous stocks in the porfolio it seems it always had at least 2 big losers out of the held stocks in the porfolio each losing about 15-30% or so... Considering those picks would of been most likely have been avoided if we were more strict on the filtering of stocks and only picked the cream of the crop. I believe just from that fact alone we would be losing potenial risk.

[jos]

 THEstreet.com rating for CIMT

[yukiii]

I can see where you are coming from with the swing trading its not for everyone and you can miss out on potential gains, the longer you hold the more potenial you have to make up a loss or catch the full move of a stock... However I think the filtering of stocks and money management rules could be tweaked to maxmize risk/reward for the plays... For instance you picked several stocks that got around 100% gains like SYX, and others that got close to 30% losses. We should only be buying the best of the best stocks with the highest chance of reward for the porfolio. Stocks like TZOO, CECE, etc shouldnt be picked in the porfolio when there is great stocks like... SILC, ALDN, GIGM, CIMT, etc out there. Filtering the picks more vigerously would definately increase odds we get a lot of winners. Also having the members add input or point out things weither they are negative or positive would also keep are eyes and ears open for more detailed analysis for the picks (maybe reaching out more to the members asking their input or feelings on a stock with the use of polls or questions more often.)

Another idea is when a fundamental milestone or target is reached you could sell 1/3, 1/2, or 1/4 of the position (to cut down on risk for the porfolio and lock in gains). I think that would help a lot if every pick had a more detailed exit plan and a backup plan for certain possible scenerios that arised as well. I know the the main porfolio can get incredible gains we just need to unlock the potential and increase the risk. The last 2 months we would of made better gains sticking the whole porfolio in a double leverage ETF that tracks the DOW.

nullzero
I agree with you. Everyone has there own style, but I believe it can be improved.
1. Lock in shorts term gains  sell 1/2 and find another stock to invest.
I suggest 70% stock picks 30% ets or cefs.
better sector selections energy and material sector was ignored the past 3 months when they had big runs.

I been do very well picking your 3-4 best picks and adding them to my asian, europe, reits and util  cef's and making a very nice portfolio. Util and reits are up 30% ytd.