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Market Lab Report - Quality over Quantity in Stocks on which we Report

Portfolio Concentration

Over the many years we have been running our website, we occasionally get the question during seemingly strong markets why we are not putting more names out as actionable. The key here is quality over quantity. There was a reason why William O'Neil himself as well as Gil and other top traders typically only had a handful, maybe 4 or 5 names, in their portfolio as a bull market raged on even in the late 1990s. 

O'Neil in his seminal work "How To Make Money in Stocks" wrote it is far better for an investor to watch over just a few eggs than to scatter their fire across dozens of names. One is far less likely to make 'operational' errors. And we all know that the first sell is the easiest sell as it has been said many times through the decades. Thus if one were to let even one name 'get away' by falling through their mental sell stop because they missed it, that stock becomes that much harder to sell, and thus could end up damaging the portfolio. 

In parallel, it is the one or two home runs that often make a big difference in one's annual portfolio performance.

So the key is to prevent individual stock catastrophes which are usually caused by missing one's exit point, then sitting on the stock while it continues to go lower, becoming even more difficult to sell. 

One always should trade from a position of psychological strength. Cutting losses before they become psychologically unmanageable while taking profits in context with a stock's chart and letting the rare winner run by trading around a core position has helped members outperform in these years of QE.

The Market As A Guide

Interestingly, as we have observed a number of times, even though major averages may move higher, it does not mean any new high quality names become actionable. Always keep that in mind when running your own screens and wondering why you might not see any entry points in your favorite stocks. Patience is always essential, thus best not to force your portfolio into stocks especially if the entry points are not there. We noticed NO names were hitting our screens thus nothing was actionable in the couple of weeks leading up to the huge market slide that started in October 2018. The market often leaves clues on how much their portfolio should be exposed to the market. September 2018 left loads of clues thus we stayed mostly on the sidelines on the long side. The short side, on the other hand, offered more opportunity at that time.
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This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2019 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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