May 31, 2008 – Unfolding as planned

by JDH on May 31, 2008

Well, dear readers, I regret to advise you that I have come down with a very serious physical aliment:

The Common Cold.

(For those of you who are new to this blog, I’m a male, and we human males are not a very hardy sort. When I was young my mother, who raised four children, was never sick. She could be on death’s door but she never missed a beat. My wife is the same; keeps on going, sick or not. As for the modern day male, at the first sign of the sniffles we rush to the medicine cabinet and spend weeks in bed until we are fully recovered. I exaggerate, but only slightly).

As a result of this serious physical condition, my comments this week will be very brief. I will only make two comments.

First, my plan is unfolding pretty much exactly as I have laid it out over the month of May.

Three weeks ago, two weeks ago, and again last week, I advocated a simple plan: start building cash reserves in May, so that I could deploy that cash during the dog days of July and August. Three weeks ago I was 4% in cash; last week I was 49% in cash, and this week I am now 51% in cash, so I am well cashed up for the summer shopping season. However, the small increase in my cash holdings this week does not mean I was selling. In fact, this week I was buying.

Last week I purchased some shares of RIM.TO – Research in Motion Limited, purely as a technical speculation. This week I sold them, which gave me a quick profit, and thus freed up cash.

Second, I did start buying. I believe that the market will continue with the high volatility levels we have observed over recent months. I believe there will therefore be many good buying days on market dips. The plan therefore is not to chase stocks, but to instead put in below market “stink bids” and grab stocks at bargains.

What am I buying? Here’s the list: Target Portfolio

I have put in bids at the prices indicated. In some cases I have only put in bids for half of the holdings I want. For example, if I want to eventually have 8% of my portfolio in a certain stock, I may buy half of it now, and the other half (4%) later in the event of even greater volatility.

I have set my stink bid prices below the market; they may be near the bottom of the current trading range, or near other support levels, such as the 50 or 200 day moving average.

Some of these stocks hit these levels this week, so they are now in my portfolio. Others will be acquired over time.

This strategy could of course back-fire if the market goes on a sustained run for the next few months. If it does, I guess I’m waiting on the sidelines. That seems unlikely to me, so I’ll play it this way for now. The beauty of stink bids is that I can place the orders now, with expiry dates two weeks out, and then I don’t have to stare at my computer screen all day (I do have a real job, you now).

Thoughts? Are there stocks I have missed, or stocks that should be deleted? Let me know on the Buy High Sell Higher Forum, and next week I’ll be back to my long winded and verbose self.

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