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Re: None

Wednesday, 12/20/2006 4:48:16 PM

Wednesday, December 20, 2006 4:48:16 PM

Post# of 21


May 22, 2006 to September 1, 2006
88 Participants -- Gainers: 30, Losers: 58
Average gain: -4%

WINNER: KnowledgeIsKing (KIK):

Top 10 Posters
2 SNAKEMAN84 28.80%
3 C1001 24.77%
4 MIKEO56 23.90%
6 LINUSPOP 20.97%
7 STANU78 15.04%
8 JIM_WI 12.80%
10 HWEB2 11.52%

Top 10 Stocks:
 1 ISIG   176.03%  
2 IAAC 124.11%
3 SIM 92.43%
4 PRVB.OB 67.31%
5 BTJ 49.54%
6 TMED.OB 46.22%
7 KTCC 45.81%
8 IEAM.OB 45.10%
9 NGA 40.68%
10 ALY 38.51%

Persons in First Place during the contest.



Came out of the gate strong and was 2nd after the first day. Dropped to 10th by the third day, but fought his way back - eventually taking over first place from ABH3VT three weeks into the contest. He never looked back peaking at just over 55% in late Juley and ending with the highest margin of victory of any of the first three PSL champions +16.52%.


While I'm proud of my performance in PSL3, and my cumulative performance in all 3 PSLs, I was surprised how hard it was to put a couple of paragraphs together to describe what I do from 9:30AM to 4PM Monday-Friday. It made me realize what key factors instinct and intuition are to success in the stock market.

In terms of concrete strategy, I'm a low P/E freak first and foremost. I don't care if the company makes caskets or gaskets, bread or thread, spyware or eyewear ... if its trading at a P/E of less than 7, I'm digging into it -- and most likely buying at least a few shares. That's why I currently hold about 50 different stocks. Don't confuse that number with a fondness for diversification, it's not. I'm simply a collector of (in my view) cheap stocks.

It is from that Double AA and Triple AAA collection of cheap stocks that I draw for my major league portfolio. Like any good manager, I like my players to have some seasoning/experience in the "minors" before I allocate significant investment dollars and bring them up to the big club. I watch my nifty-fifty for continued sales/earnings improvement, increased trading volume, upward trending price action, acquisitions, divestitures, etc. When a particular stock starts putting together some impressive power numbers based on these qualifications, I'll up my commitment.

As for my original 6 picks from PSL3 (ARIS, CKGT, EZEN, PFCO, TCRS, and TELT), I continue to own all but PFCO. However, I only consider EZEN of major league caliber right now -- and he's a .230 hitter on the trading block! I hope I'm wrong, but the EZEN price action over the past few months suggests to me that the company is selling yesterday's technology and is therefore facing a contracting market.

TCRS is my second favorite with a P/E of 2ish, but recent results have been downtrending and, being on the pink sheets, the stock is quite obscure. TELT is cheap on a P/sales basis and given the company's large investment in R&D, but profits are elusive on a quarterly basis. CKGT looks cheap with strong growth, but how can you even keep a straight face when talking about the Chinese cactus market -- much less invest in it? I'm just getting more skeptical about China stocks by the day. ARIS will be bought out for about $3.10-3.25 someday and I'll just hold it 'til then.

I also really like FRD (which I traded into by the end of the contest). It has an earnings track record, stock price, and shares outstanding profile similar to ERS before that stock made its legendary run. If the same guys that ran ERS are looking for a new horse, I'm going to be at the track betting on FRD.

Despite my fondness for FRD, another key aspect of my approach to investing is a concentration on low-priced stocks. I've spent 20+ years mining the low P/E vein of stocks trading at less than $3/share. And the golden nuggets at the $.50-and-below level are what keep me coming back to the mine. The best example is BRR (formerly ACRG), which I first bought for $.44/share and continue to hold in my wife's IRA today at $5.90. I just smile as I continue to hear the drumbeat of so-called financial experts warn investors to stay away from "low-priced stocks" -- my investments in those "risky, scandal-ridden flea bags" have made me rich!

As for my picks in the upcoming PSL4, you can bet there will be some obscure surprises in there. It's no coincidence that I'm near the bottom of the "sheep rankings" each time. In my view it's necessary to turn over more rocks and dig deeper in the mine to generate superior returns. I look forward to the upcoming competition and, more importantly, to the idea flow from our superb stock picking crew. Remember Knowledge Is King!

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