Gurufocus.com provides a pretty good look at what some of the major money managers have been buying and selling in recent past. May take a look at T. Boone Pickens as an oil related investor.
Hi Gang, Additional thoughts about looking at different metrics for entry, especially for ETFs and other low 52 week range stocks.
As I pointed out, buying in at 30% above the 52 week low does not make a lot of sense, especially when the range is relatively narrow like most ETFs. With SDRL this is not a big issue as the range is a bit over 4 to 1. But with XLF, say the current 52 week range - 21.19 - 25.14 would never trigger a buy or sell. Since AIM requires volatility to do its magic this would turn it into B&H with all its limitations. Many other ETFs/ETNs also have narrow ranges. Of the 1507 on my list, only 277 have a 52 week range bigger than 1.5 to 1. Only 29 have a range of 3 to 1.
Does this mean we should avoid ETFs/ETNs? No, but we need look at the settings to work around the problem.
Since we will never catch the exact bottom of a downtrend where should we buy? Clearly not 30% above the low for almost all that we wish to hold.
Here is what I suggest. Take the high price and subtract the low. Divide this by 10 and then add that to the 52 week low. This is where you buy in after it has gone below that figure.
So for SDRL this approach would get us in at 12.31, for practical purposes the same as the AIM sell signal. On XLF, looking at the last two years on a monthly basis, with a $20k position, we would get in at 21.59 and leave us enough room to get a sell signal at 22.81 and a buy at 18.25 with 20% cash, 10% buy and sell, and 5% minimum shares. However, looking at the last two years you would still be waiting because the price to get a fresh buy (at 18.25) at is below the 52 week low, below the low all the way back to April 2013, looking at daily prices.
Almost all of those with dividends that are above 4% have a range considerably less than 2 to 1. Only 5 have a range of 2 to 1 or better.
A couple of lessons, ETFs/ETNs don't make great fodder for AIM. ETNs being considerably riskier than ETFs because of the risk of going to zero with bond/note defaults are probably best avoided, especially given that we are in strange economic times and that we are likely to see a significant down turn in the market sometime in the next couple of years because the bull market is getting long in the horn and will likely gouge the hell out of the market when it turns bearish.
Another lesson might be to have cash available to get some of those dividend paying ETFs when they take a hit.
It is clear that selecting the right fodder for AIM is a key to success.
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