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Post# of 173704
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lentinman

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lentinman

Re: MSGI post# 76911

Friday, 07/20/2007 5:06:45 AM

Friday, July 20, 2007 5:06:45 AM

Post# of 173704
$5.00 Rule:

I'm not actually making a commentary on the $5 rule regarding margin, but rather to comment on MSGI's point about once $5 is broken whether that causes a spike in the price as more people can margin it.

I can't be 100% sure about any conclusions, but from the results of PSL1-PSL5, the $5.00-$9.99 category is the best. This would not seem intuitive because the lower priced stocks (under $1.00) would seem to have so much more explosive power. Of course, stocks above $5 are probably overwhelmingly less likely to get hammered too.

Anyway, make note of these numbers. It might pay to concentrate more on $5.00-$9.99 stocks in your regular portfolio or in future PSL's.
PSL1 + PLS2 + PSL3 + PSL4 + PSL5 
 -------------------------------- 
 $  .25- .99 Purchase Price: Quantity =267: Performance +15.31% 
 $ 1.00-2.99 Purchase Price: Quantity =355: Performance +11.15% 
 $ 3.00-4.99 Purchase Price: Quantity =173: Performance + 6.34% 
 $ 5.00-9.99 Purchase Price: Quantity =195: Performance +17.75% 
 $10.00+     Purchase Price: Quantity =241: Performance + 9.94%
One more thing that sticks out like a sore thumb is how much better the $5-10 category has done compared to the $3-$5 category. It could well be that stocks that have dropped below $5 get disproportionately hammered by margin calls - which would be consistent with KIK's original question. I really don't know any factual information about any of this. The only thing I DO know is that 195 ($5-10) stocks is a very large sample size. And, 173 ($3-5) is also a very large sample size. It's almost incomprehensible that this much divergence in these two price categories could be chalked up to coincidence.

Len



Warren Buffet: 5 minutes and 17 seconds of pure, unadulterated, bulletproof, flawless logic.



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