Hi TF, I've refined the overall PIC strategy since starting it. It seemed logical to bounce the stocks if they returned to a #1 Timeliness in the beginning, but at that point we had no experience.
The removal of several stocks from the PIC list in the last few months was based upon two facts. 1) the list was getting exceedingly long. 2) some stocks had risen so much that their future potential had been "used up."
Pete had been updating our PIC graphs regularly for us, but his computer crashed. So, you are back to Yours Truly doing it once a month.
So, I'll edit the PIC web page to show what we're doing for our editing of the components. Essentially, when I review the PIC list I check to see if the Value Line 3-5 year gain is good enough to have kept the stock in the realm of the Highest Growth Stocks list, even if it's no longer officially on the list.
If you compound 11% annually for 5 years you come up with just under 70% overall gain. Currently the Highest Growth Stocks list calls for an 11% compound growth rate to make the list (both retrospectively for 10 years and prospectively for the next 3-5 years). So, we want all the stocks to meet that requirement which was why they had been on the HGS list in the first place.
This seems better to me than the #1 Timeliness rule. A stock could potentially hit #1 and still have a 3-5 year compound growth potential of 35% per year. Why throw that one out? If a stock, on the other hand, only had a 5% potential per year and was Timeliness #3 it means that its growth time may be over.
I'll amend the web page. Sorry for the confusion. We'd not edited the list since the start other than Elan when it vanished from Value Line. The list had become very long - longer than was practical for most people to use as an investment model. So, we started hacking away at it. It's more reasonable in length now. We've left the histories of those deleted PICs on the site so people can see what had been the history of even the delisted ones.
I'm accounting for the delisted ones in the overall profit/loss statement. I assumed a pool of investment money to start. If all the stocks were still owned, then we'd have invested $10,000 (equity plus cash) in each. So, when we sell off a holding, we return the proceeds to a "cash" holding. $10,000 is returned plus whatever profit or loss has been accrued. This seems to be working out well.
Further as we add new PIC stocks, the $10,000 to start it is taken from the "cash" holding. Currently there's a sizable cash balance available for new PIC stocks as we've eliminated more than we've added in recent times.
I'm open for other suggestions on what to do. PIC was an experiment to see if 1) buying out of favor high growth stocks was a good idea. 2) whether it is even a better idea to buy them and manage them with AIM. So far it's been pretty good even with the cats and dogs we've accumulated along the way.
We've not culled stocks because of poor performance, only if their future growth potential had moderated. This is important to me. Hiding our "mistakes" wasn't part of the plan. For better or worse, the sore thumbs are there with the diamond rings. Even so, we're kicking the S&P500's butt.
PDAH's work for a year or so was a big relief. I also think he benefitted from actually "managing" the list in that he learned quite a bit about many different companies, AIM, vealies, the I-Wave cash limiter and other things. I assume he's lurking still from his local library until his machine is replaced. Thank you Pete for all your hard work.
Best regards, Tom
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