A.I.M. Users Bulletin Board

[SFSecurity]

Hi gang,

Well, as I go about learning as much as I can about the whole process of investing I came across:

[url]http://www.telegraph.co.uk/finance/personalfinance/investing/shares-and-stock-tips/11034663/Jim-Slater-50-years-on-my-formula-still-works-and-heres-some-new-share-tips.html
[/url][tag]UK Telegraph newspaper[/tag]

about a "legendary" investor, Jim Slater and his approach to investing.

So, there are a couple of tips in the article, one for Telford Homes (TEF.L) and I decided to do a backtest with BareS.xls which I have modified to make it easy to see what default AIM would do and what a Buy and Hold would do as a percentage. I can also easily change the % cash to see where the sweet spot would have been over the test period. I've been using the last 5 years, perhaps not the best as it does not include a major downdraft.

The quotes are in Lbs Sterling but AIM doesn't care. Anyway B&H wins with this one at 321.86% versus 198.62% for AIM.

For the other, Restore (RES.L), B%H wins, but not by all that much. 143.55% versus 126.95% but I had to go to 60% cash to avoid having to add money to the position. If I went 20% cash with a 10,000 GBlbs portfolio I would have had to add 11,359 GBlbs from 10/1/09 until 4/1/11 but the return - even calculating the added money over the entire 5 years rather than the 16 months it was needed - would have been much better at 192.76%

Slater's advice seems to be good on the whole given that his son runs an investment firm,

Slater Growth, during the past 12 months, is first out of the 288 investment management companies covering the FTSE All Companies index with a gain of 34.6pc.

Over the past five years he is first with a gain of 247pc against 88pc for the FTSE All Companies Index.

So, lessons learned?

1) Keep sufficient powder dry to meet business cycle needs - Restore being a supplier to others when they have not yet recovered from the previous down turn and so are losing business and people are fleeing their stock.

2) Keep all your spare cash in a single pool, again because of the differing needs of investments in different sectors and where they are in the "normal" business cycle. It really doesn't matter if you are in stocks or sector ETFs, they are subject to the usual business cycles (and bad news.)

3) Back test all "advice" from others for even the good ones who make money consistently will not necessarily fit an AIM model.

Best,

Allen