HenryWirth.com Beating the Market since June 2001 Frequently Asked Questions All the FAQs are not ready yet; I'll be adding to them every month or so. FAQ 9. Please tell me what you think of the "XYZ" Corp A stock will sometimes capture the public’s attention. Think about Enron, Tyco, GM, Chrysler, Google, or any of the other innumerable companies that are experiencing their latest fifteen minutes of fame or, more likely, infamy. I am frequently asked what I “think about them”, meaning of course, “Where are they going?” Doug and I analyze individual stocks, but only to determine if they meet our criteria. We buy and sell GROUPS of these stocks based on criteria that we have developed over the last ten plus years. These critical factors are constantly evaluated and are sometimes revised, but we have never been able to predict which of our picks will crash, and which will rise far beyond reasonable expectations. If it were possible for us to separate the winners from the losers then we would NEVER give you a loser. We do not perform a comprehensive analysis of individual stocks. We have decided it is not worth the effort for two reasons: 1. We do not believe ANYONE can separate the winners from the losers by performing an extensive or boundless analysis on individual stocks, simply because there are too many known and unknown variables that will affect future performance. “The more precisely the position is determined, the less precisely the MOMENTUM is known.” (Werner Heisenberg) 2. There is an emotional price to be paid when one focuses on individual stocks i.e., if you look at them closely enough, you will find there are literally hundreds (probably thousands) of opinions about them. Some of the opinions are bound to be right and some of them are gonna be wrong. The problem is that it is not possible to separate wrong from right. That is frequently true of life in general, and it is certainly true of stocks. The bottom line is that if you make a buying or selling decision on the basis of an opinion then chances are that you are making an emotional decision i.e., you are going to agree with whatever opinion sounds good to you at that time. If you permit your emotions to enter the equation then my data show you are going to pay for it. If you are asking for my advice, and if you want to make decisions yourself then here’s my advice: 1. Write your MEASURABLE objective on a piece of paper and refer to it frequently. Your objective can be anything you want it to be, but if you asked about individual stocks, an appropriate objective could be: My objective is to analyze individual stocks so that I can separate the winners from the losers before the fact. 2. Then develop a WRITTEN strategy to achieve your objective. Number 2 is going to be incredibly difficult, and it is going to consume a huge amount of time and energy. If you are successful, then tell me about your success, and I will tell you everything I know about the newsletter business. Perhaps we can start a new newsletter. FAQ 8. Why do we occasionally hold stocks longer than 3 months? Before 2005, we held them for three months, and then sold them. That meant we had to hold cash if new stocks were not available to replace the stocks that were sold. Now, we only sell them if new picks are available to replace the old picks. That means the holding period may sometimes be slightly more than three months. The average holding period for all stocks sold during the fourth quarter of 2005 was ninety-six days. My guess is that future holding periods will be very close to ninety-one or ninety-two days, which is a three-month holding period. The reason for holding our stocks beyond the three-month holding period is that my data show that our stocks, on average, out-perform cash AND they out-perform the market, especially if the market is rising. Some subscribers believe they can "Beat the System" by selling before the three-month holding period expires. They can believe that if they want, but their belief is not substantiated by the two thousand six hundred WEIMERandWIRTH picks in my database. It is true, for a variety of reasons, that occasionally a stock that is due to be sold will crash. However, on average, our picks go on to out-perform the market for considerably longer than three months. The reason we sell them is that, our data show, the new picks will out-perform the old picks. FAQ 7. Are stocks under $1.00 ever recommended? No. However, a stocks price could fall below $1.00 after it has been recommended. We recommend that you ignore these stocks but they will be included in the website audit simply because ALL recommended stocks are included in the audit. FAQ 6. A sixty stock portfolio contains more stocks than I care to buy. Why do you recommend so many stocks? Could I duplicate the returns of HenryWirth.com with fewer than sixty stocks? We have determined that there may be extreme return variability if a portfolio contains a small number of stocks so our goal is to give our subscribers sixty new picks every quarter. Armed with the knowledge that they are going to get close to sixty new stocks every quarter AND armed with the knowledge that the model portfolio on the web will purchase new picks for one sixtieth of the current value of the portfolio, our subscribers can allocate their resources accordingly. The returns could probably be duplicated by buying every second recommended stock. However, the chance of out or under-performing the website increases as fewer stocks are purchased. If you want to duplicate the performance of the website then you should probably hold as many stocks as possible. FAQ 5. What is the raison d'etre of HenryWirth.com? The WEIMERandWIRTH portfolio started as an academic exercise to determine the best way to invest. Now it is a blog that I, and I hope a few others, find enjoyable. However, I have also discovered that there are considerable associated maintenance costs. Ultimately, I hope that HenryWirth.com will become a self-sustaining blog. FAQ 4. How are new purchase values determined? New purchase values are determined by dividing the portfolio net worth by sixty. FAQ 3. Should I sell my stock after a greater than "normal" increase of 25% or more? That's up to you but my data, based on more than 2000 Growth and Momentum stocks in my database, show that those stocks that have declined or advanced more than 25% during the first 30 or so trading days after their purchase, are MORE likely to advance than the others, especially in a rising market. FAQ 2. What effect has market timing had on the Growth and Momentum Portfolio? Before the third Quarter of 2004 no attempt was made to time the market even though the HenryWirth.com portfolio was generally less than 100% invested. That was because stocks that had been held for three months were generally sold and, if no new picks were available, cash from the sale was held. During the third Quarter of 2004 my consultants and I decided to lighten up because we were worried about market fundamentals. That was a mistake that cost the portfolio about 8% during the fourth Quarter. Because of that mistake and because all my data show that market timing is likely to hurt more than it will help, after 2004, the portfolio will be 100% invested at all times. FAQ 1. Should I sell my stock after a precipitous decline of 25% or more? That's up to you but my data, based on more than 2000 Growth and Momentum stocks, show that those stocks that have declined more than 25% during the first one and one half months after their purchase, are MORE likely to advance than the others, especially in a rising market. In other words, if you had sold them prematurely then your loss would have been approximately 25%; if you had held them then your loss would have been considerably less than 25%. These results are consistent with data mined over the last five years. What you should be asking now is this: Should I BUY a stock after a precipitous decline of 25% or more? If the future is anything like the last five or so years (there’s that pesky “BIG IF” again) the answer is a definite yes! On average, if you bought and held for one and one half months you could reasonably expect an average return of approximately 10%. That's a pretty good return for holding about 1-1/2 months and I occasionally buy one myself. The problem is that this is an incredibly volatile group and it is a very small group. Since the group is so tiny, it means you can go for long periods without being rewarded, so it's easy to get discouraged. Return to Home Page