Hello Keith, Conrad, Mark and all threadsters.
My Sunday morning updates on my 10 AIM stocks, has given me a few notions on some of the vexing questions of the AIM universe: cash exhaustion, Vealies, delayed buys/sells, etc.
You may recall that I moved late autumn from a 'market basket' approach of lumping them all into one big AIM account to individual AIM programmes. All but one holding are in the volatile semi-equip sector, the industry I feel I know best.
Most accounts have generated either BUYS or SELLS since September and some lucky ones have had both, which is the key to AIM outperforming. Working through the figures, some observations emerge that may be relevant to the thread's ideas on refinements to BTB AIM. In themselves, they are obvious but taken together they give a few hints of the best way to proced, especially at what we all agree is the crucial beginning of an AIM programme (ie entry point, and setting time between trades, SAFE values and minimum trades).
The perfect AIM stock behaves something like this: We initiate at $20; it declines to $15 by the time of our check-up and we BUY more; it declines further, to $12 and we BUY more. It then reverses course and we get a sell at $23 (these values are plucked from the air but are rooughly based on my own recent experience); we get another sell at $26. The stock then eases back to the $20-21 range. Clearly we are way ahead of Mr Buy-and-Hold, although the share price is around the price that began the exercise.
Now take a stock that follows this pattern: we initiate at $16; it goes to $20 and we SELL; it goes to $24 and we sell some more; we pull at Vealie at $28... etc. At the end of the term, whatever that is, the price is $28 and Mr Buy-and-Hold is better off than we are.
Finally, a third one heads down sharply right at the outset [Conrad will like this example ;)]. We begin at 13 and get BUYS at 10, 8.50 and start to run out of cash as it hits 6.75.
What to do? Of course, we have more total shares than Mr Buy-and-Hold but are we confident of a come-back that will generate AIM profits?
My point is: it would appear that the behavior of an AIM stock and the actions we take in response at the beginning of an AIM program are crucial to longer-term success. Some here have focused on the right entry point (Rien), others say pick the right stock (Keith)... Both are difficult.
Perhaps the way to go is to create some different rules for the start of an AIM program to deal with the 3 basic scenarios (the 4th, in which the stock never moves out of the HOLD zone, means we need a new stock). Once this difficult early phase is over, then we could revert to AIM BTB or such.
Just a few early morning thoughts. I think I'll have some more coffee.
Rgds,
Jonathan
