May 2021 Stock Strategy Review

 So I have started a new stock strategy during the month of May, so let's see how it has performed.  

I started May at 163% of my initial investment, and I finished at 179%, so I made 16% ROI from my initial investment.  Not too bad since I was just getting started in the new stock strategy, and since I am not planning on adding any more money to my IRA.  May was a pretty good month.

I am targeting 10 trades a month making 4% per trade.  Including the exponential growth factor, that ends up being 48% per month.  The 16% was the end of the last stock strategy I was using with Humanigen, HGEN stock.  I was heavily loaded in on HGEN, and was holding until the submitted the application for Emergency Use Authorization with the FDA.  If I would have sold the day before, I would have ended up making 40% growth for May.  I learned that HGEN has been following the principle of "buy the rumor, sell the news."  That is where the stock price increases on anticipation of a catalyst and then as soon as it happens, there is a mass sell-off.  I expect the same thing to happen again before receiving EUA in a couple of weeks.  It's not that HGEN is a bad stock.  I will probably buy more the 3rd week of June, but it depends on the price.  HGEN does meet the general qualifications of my stock strategy (see the screenshot).

June is off to a good start with ASTS.  I went all-in on 6/3 for 7.20 and sold on 6/4 for 8.20 and made 14%, but because of the exponential factor, I am now sitting at 203% ROI.  

If you have followed my previous blogs, you might be checking out WINT stock as well.  The Windtree Therapeutic stock went way up on Friday, from 1.99 to 3.40.  That would have been a good one to have, but you never know when a stock is going to go up like that.  However, I think it is strange that two stocks I have been targeting went up quite a bit this week.  That is a good sign that my strategy is picking stocks that have a lot of potential.  I have noticed that targeting 2.5-3.0% less than the open is more successful than 3.5-4.0%, and that makes sense since most stocks have about a 2.5% decline from open all the time.  Not a rule but an average.  I have yet to review the stocks completely for Monday, so I am not sure which one I am going to target.  It could be one of the ones that I have already targeted before.  Maybe HGEN since it has been in a little slump, but I see that one going down some more before EUA is granted.  Also, I am not too keen on ASTS or WINT since both of them had a big spike on Thursday and Friday.  Happy trading!

Stepping Stones of Investment

 

Let me preface by saying that this is not investment advice, but this is my plan for investing in stocks.

In the simplest terms, investing is buying part of a company as shares, and then selling at a profit.  The goal is to buy at a low price and sell at a high price in the shortest amount of time to maximize your return on investment.  These are my stock investing principles for trading within an IRA.  Time for some definitions and formulas.

Return-on-Investment (ROI) is: (Share Sell Price / Share Purchase Price) – 1 = ROI %

ROI Example:  If you buy 100 shares of WINT at $1.71 and sell them at $1.82, your ROI for that trade is (1.82/1.71) – 1 = 6.43%.

Profit is:  (Shares Sold x Sell Price) – (Shares Bought x Purchase Price) = Profit ($)

Profit Example:  If you buy 100 shares of WINT at $1.71 and sell them at $1.82, your Profit for that trade is (100 x 1.82) – (100 x 1.71) = $11.00.

Now time for a little strategy via the Stepping-Stone Principle.  Let’s say the spring rains have been relentless and your yard is saturated.  You need to fetch some tools from the shed, but you do not want to get your feet wet in the standing water in the yard.  Your goal is the shed, which is 30 feet from the back door.  If there was only one stepping-stone 15 feet from the back door, you would have be a Olympic long-jumper to reach it, only to find yourself stuck on an island with no runway for your next jump.  In investing, this would be like saying you were only going to wait for large ROI’s, like 50% or up.  You will spend most of your investment career feeling like you are stuck with a stock that mostly disappoints and you seldom make money. 

If you have 3 stepping-stones spaced 7.5 feet apart, you will still be jumping pretty far from stone to stone.  This would be equivalent to 25% ROI.  You’re probably going to get your feet wet again even with three!

However, if you have 11 stepping-stones spaced 2.5 feet apart, that is a comfortable walk to the shed. 

The Investment Stepping-Stone Principle:  Long-term investment goals are more easily achieved with more frequent yet smaller ROI goals. 

If I want to double my investment, I could buy a stock and sit on it for a long time and wait for it to grow in value and then double.  That is an option, although it may take a year or two, or more.  But if I calculate that a specific stock’s average daily low is 3-5% less than its opening price, AND that the average range from previous day low to next day high is 5-7% or greater, then I have laid out the plan for my stepping-stones.  If my target stock opens at 1.73, I will create a limit purchase bid at 1.68.  If the bid is not picked up, then I try again the next day based off the next day’s opening price.  If the purchase goes through at my target price, then it is expected because that falls within the average.  Then the next day, I will set my sell price for something comfortable that falls on the low-side of the next day high average range.  I will target a 4% ROI, so I set my limit sell price at 1.75.  This is a likely outcome since it falls on the low-side of the calculated previous day low to next day high average.  When my stock sells, there is always a little regret that I did not set my sights higher, because I have seen it go up another 5% after I sold sometimes, but I have also seen it go the opposite direct, so be careful to not play at the edge of the average.  All investments have risks.  Even this strategy might fail me since averages always contain some anomalies.  When you are looking at your average ranges, you might want to throw out the anomalies and set your target price after excluding those data points.

 

In the long run, this will give me a 40% ROI per month, but really 48% compound ROI since I will also be reinvesting my profits with each subsequent purchase.  By targeting a 4% ROI with each purchase, and planning to sell the next day, it creates a path of stepping-stones that yields more than double the investment in 2 months (119.1% ROI).  Small achievable stepping-stones will empower the investor with more control and a better performance than a wait-and-see or moon-shot approach.