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Strategies & Market Trends | January Effect 2001

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To: Q who wrote (147)	2/2/2001 4:49:36 PM
From: Q	of 289

final results for January Effect 2001 portfolio: I'm closing the portfolio after today, the first Friday in February, as I indicated in the first post of this thread. Here are the results: 12/29/00 -- the final trading day of the year: The Russell 2000 closed at 483.5 my port closed with a value of $ 8,405. InfoStream's port closed with a value of $18,726. 2/2/01 -- the first Friday of February: The Russell 2000 closed at 500.99, a change of + 3.6% My port closed with a value of $10,902, a change of +29.7%, or +26.1% compared to the index. InfoStream's port closed with a value of $37,039, +97.8%, +94.2% compared to the index. These results do not reflect trading costs of commissions or spreads. I'm pleased with my results, and they were much better than my previous years, when I also outperformed the RUT. This time I outperformed the RUT by a wider margin. I attribute my better performance this year to choosing cheaper stocks, with prices as low as $1.50 this time, and to our good luck of having a bubble burst in 2000.* However, my results are almost embarrassingly poor compared to the superior results of Infostream. Probably the main differences were that * his stocks were even lower-priced than mine (including Nasdaq stocks trading well below a dollar) * he selected many stocks that that took a terrible beating in the final weeks of December. These stocks were among the best performing in January. In my stock picking, I chose only stocks priced > $1.25, with an average of $3.40. I was more concerned with value considerations, such as cash per share and cashburn than I was with the RS during the final ~2 weeks. My analysis of my picks this year was presented here: Message 15093906 After this experience, I think I will next year put less emphasis on the safety issues like cash per share, and more emphasis on low-RS in the final weeks of December. I think I'll retain the other aspects of my stock screening: low RS for the year and high ownership levels by individuals. Since I only keep the stocks for about 5 weeks anyway, safety isn't that important. This approach, modeled after Infostream's, will have the disadvantage of higher trading costs, but the superior performance seems to more than justify the costs. My actual trading profits were different from the paper portfolio especially because I actually bought before the last trading day of the year. In retrospect, the optimal time to buy was generally about halfway between Christmas and New Years Day. By buying one day before the last trading day of the year, my portfolio would have returned +36.3% on paper, as compared to +29.7% for buying on the last day. * The year 2000 was peculiar because it featured a tech-stock bubble that inflated until March and then burst, leaving huge numbers of stocks at a level 90% below their 52-week high. This doesn't happen very often. I suspect that a good part of our success this year is attributable to this bubble burst. All in all, it was a very satisfying and profitable January Effect for me, and I'd like to thank everybody here who participated and suggested stocks. In December 2001, I'll start a new thread, "January Effect 2002." I'll post a message here, so if you bookmark this thread now, you'll find out when I start next year's thread. Please join me then.

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To: Q who wrote (241)	2/4/2001 6:11:57 PM
From: RockyBalboa	of 289

N, I post my results for the January Effect 2001 portfolio: siliconinvestor.com Most of the selling was done on Jan 18th and 19th, (http://www.siliconinvestor.com/readmsg.aspx?msgid=15177187) ,... some of the prices have already degraded a bit since the top earlier that week. Sheet 2: January2001 Sym bought Sold Share Amtbought sold Gain %Gain CLRS 6,00 8,00 166,67 1.000 1.333 333 33,3% CNQR 1,03 1,75 969,70 1.000 1.697 697 69,7% COVD 1,47 2,63 680,85 1.000 1.787 787 78,7% DATC 1,50 2,94 666,67 1.000 1.958 958 95,8% DSLN 0,50 1,44 2.000,00 1.000 2.875 1.875 187,5% ELNK 5,00 8,63 200,00 1.000 1.725 725 72,5% ESTM 0,14 0,31 7.142,85 1.000 2.232 1.232 123,2% FFIV 9,50 13,00 105,26 1.000 1.368 368 36,8% LCTO 0,50 1,63 2.000,00 1.000 3.250 2.250 225,0% MAXM 6,00 8,75 166,67 1.000 1.458 458 45,8% NSPK 1,50 2,88 666,67 1.000 1.917 917 91,7% OPUS 0,25 0,69 4.000,00 1.000 2.750 1.750 175,0% PLRX 0,25 0,31 4.000,00 1.000 1.250 250 25,0% ROWE 0,50 1,22 2.000,00 1.000 2.438 1.438 143,8% SMSI 0,75 2,88 1.333,33 1.000 3.833 2.833 283,3% TERN 5,00 7,75 200,00 1.000 1.550 550 55,0% XLA 3,75 12,13 266,67 1.000 3.233 2.233 223,3% Totals 17.000 36.656 19.656 115,6% Totals assuming 1c/shr commissions 17.270 36.386 19.116 110,7% Assuming Value #12/29/2000 close 18.726 36.386 17.660 94,3% During the time and up to now, none of the stocks got halted or went bankrupt. One stock, PLRX(D) got delisted to the OTCBB where it rose over 80% after I sold. As I announced that it left prematurely I used the original sale price rather than the price on Jan 18/19 for evaluation. Some statistics: 7 of the stocks traded initially under $1. The average gain on those mongrels was: 166% Included the trade price for PLRX at 0.50 (instead of .31) the gain on this subportfolio was 177% 5 of the stocks traded over $1 and under $5. The average gain here: 112% (including XLA which gained 220%). Excluding XLA the gain was only 84%...this only underscors the speculative nature of xcelera.com 5 of the stocks traded over $5 when bought (MAXM, FFIV, CLRS, ELNK, TERN). Here is the average gain: 49%... The gain in the $5 group is perhaps understated because I clearly missed the bottom on those guys (especially MAXM on average as well as tern) as I bought the initial lots too early and had to average. That which was definitely not the case in stocks like DSLN or DATC which have been thrown away later in December and which I watched like a hawk before buying... Where to from here: While the whole portfolio appears to have some resistance and does not go down while the market dives (it still shows $37k on Friday after the nasdaq carnage), some part of it can be shorted, as I pointed out that such spikes may provide nice entries for shorts - see XLA)... Shorting the whole thing might be difficult, there is always one stock (like DSLN recently, or XLA earlier) which helped the performance...

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To: RockyBalboa who wrote (245)	2/4/2001 10:14:23 PM
From: Q	of 289

Congratulations, IS ... and ... re. performance vs. price, your results are very instructive. I think this says a lot about your results: initial price average gain under $1 166% > $1 and <$5 112% over $5 49% Russell 2000 4% In my case, with stocks all between $1 and $6: The half that were lower priced returned +41.5% The half that were higher priced returned +31.2%. It's clear that there's a lot to gain by moving to lower-priced stocks, for the January effect. I tried to exclude stocks under $1.50 to help avoid delistings, but the one delisting you got during January actually didn't hurt the stock price. Moreover, delistings based on stock price don't happen very fast. After the stock has been below $1 for 30 days, the company gets a warning, then it gets another 90 days grace period, and if it petitions it can get even more time. So, if the stock traded above $1 in November, you don't need to worry about a delisting until March. So next year I'll focus on stocks below $1. It won't come naturally to a value investor like me, but it's hard to argue with the results we've seen.

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