AIM RE-bal

[lostcowboy]

Hi Karw,
Here was my viewpoint on it. You have several stocks that have become Deep Divers, that even though they have dropped down in price to a new level, they are still, giving you good price movement. Just they are at too low a price level for normal AIM to react to them.
Now one of the first things you have to do is research the stocks all over again. You have to find out why the price dropped, and whether the company will survive. If you can convince yourself that the company will survive. Then if you don't want to wait for the stock to recover. You need to do something, so that you can get back to buying and selling.
If you continue to use normal aim you must ether reduce portfolio control, or add enough new cash so that aim can buy more shares. If you lower the portfolio control, and the stock starts to recover you will start to sell shares at to low a price. If you add more cash to the stock, you may end up having to much cash in one stock, you are defeating your risk management.

Note I have not done any spread sheets to support this, I am simply working with logic here.
With AIM RE-BAL, you are not adding any more new cash, so you are not increasing you risk. Your portfolio control stays the same, which means if one or both of the stocks starts to recover you will not start to sell too soon.
Now, the odds are high that your two stocks will not go up and down at the same time, (if they are I recommend selling one, and buying a stock in a different sector). As you re-balance them (I recommend you use a percentage, not at a set time) your portfolio value should start to rise, portfolio control stays the same ( you are not doing a AIM buy, no cash). After a while, could be a long while, portfolio value will get high enough, to get a AIM sell.

Here is one stock that is a Deep Diver that I think will survive, even though it is in bankruptcy, ACK. This stock went from $80 to a low around $1, then back to $4, and is now bouncing around $2.50 or so. It may take this stock over ten years to get out of bankruptcy though, they have a very large legal debt that they have to pay. If you got in this stock at $80 you probably would run out of cash around $40-$35 range. By re-balancing you should get decent buy sell action.
Note I am not saying buy this stock! It is high risk! Now that it is in bankruptcy, information is hard to come by, and no one is following it, you would be on your own here!
But if someone wanted to test my idea, I think it would make a good test candidate. Some of the other stocks that are covered by the Asbestos class action suit, may be good candidates to. Almost all of them have declared bankruptcy.