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Tharp�s Thoughts
Market Efficiency Portfolio
By
Van K. Tharp
This market certainly looks like it has resumed its uptrend. Last month positive efficiencies dipped down to 65.3%, but this month they�ve jumped back up to 72.9%. That�s the third highest figure since I�ve been keeping track of it. Positive efficiencies are shown in Figure 1.
Figure 1: Percent Stocks with Positive Efficiency
In addition, our extreme efficiency stocks are also giving us the third highest reading since I�ve been keeping track of this. We had five stocks with efficiencies below minus 15 and 36 stocks with efficiencies above plus 15. And the measure we chart shows similar results. We have 18 stocks with efficiencies below minus 10 and 235 stocks with efficiencies above plus 10. That�s a 13 to 1 ratio. Pretty extreme, but I expect it will continue at least until the end of the month. These data are shown in Figure 2.
Figure 2: Extreme Efficiency Stocks
2007 has continued to be good for the efficiency portfolio. The current portfolio is up nearly 10R. Last month we were only stopped out of one stock, JRCC. But that was at a 1R profit, so that�s the second good short that stock has given us. JRCC was replaced by one other short MNI at its opening price on Monday April 16th. Again, there were not many good short candidates, that is why we only have one. Most of the extreme negative efficiency stocks are bank or loan companies that are hit hard by the substandard loan crisis.
| Table 1: Portfolio Values April 16, 20007 at 11:30 EDT | ||||||||
| Stock | Entry | Cost | Shares | Stop | Price | Value | Profit/Loss | R-multiple |
| Longs | ||||||||
| LQU | $54.05 | $1,960.80 | 36 | $56.93 | $75.73 | $2,726.28 | $765.48 | 1.94 |
| CXW | $42.33 | $1,919.85 | 45 | $40.22 | $53.35 | $2,400.75 | $480.90 | 1.22 |
| MWP | $35.54 | $1,756.46 | 49 | $47.70 | $62.41 | $3,058.09 | $1,301.63 | 3.3 |
| EWP | $52.12 | $1,734.96 | 33 | $44.35 | $59.18 | $1,952.94 | $217.98 | 0.55 |
| LFL | $57.80 | $1,749.00 | 30 | $56.44 | $75.15 | $2,254.50 | $505.50 | 1.4 |
| NU | $26.52 | $1,765.32 | 66 | $25.03 | $32.71 | $2,158.86 | $393.54 | 1 |
| CHL | $42.32 | $1,750.12 | 41 | $38.54 | $48.07 | $1,970.87 | $220.75 | 0.56 |
| SGF | $18.75 | $1,908.75 | 101 | $15.00 | $18.35 | $1,853.35 | ($55.40) | 0.14 |
| ALB | $71.55 | $1,732.20 | 24 | $65.30 | $87.06 | $2,089.44 | $357.24 | 0.9 |
| Shorts | ||||||||
| MNI | $31.56 | $1,878.60 | 60 | $37.82 | $31.56 | $1,893.60 | ($15.00) | 0.04 |
| Totals | 4172.62 | 10.68 | ||||||
I notice that one of Steve Sjuggerud�s favorite stocks, Orleans Homebuilders, is nearly an extreme efficiency short candidate. It came in at an efficiency rating of -9.97. So one of the problems we have been having with our shorts is that the value players are picking them as good buy candidates. And if enough people then buy, then it ends the downside.
ALB has split two for one since we bought it. Rather than confuse people I have kept the unadjusted price in the table. I also noticed that ALB paid a $0.21 dividend (unadjusted for the split) last month which also was not included because it�s only $5 for our portfolio. Generally, I�m not including dividend in our calculations of profit/loss.
Finally, SGF was hurt by the Asia drop on Tuesday February 27th. However, even though it is still showing a slight loss, I like the stock and, since we haven�t been stopped out, I am keeping it in our portfolio. We had a shock to the portfolio. Amazingly, we were only hurt significantly in our two Asia based stocks, SGF, our new addition last month and CHL, our China stock. However, neither of them was stopped out.
All of the closed out positions to date are listed in Table 2.
| Table 2: Closed Positions | |||
| On April 16, 2007 | |||
| Stock | Profit/Loss | R-multiple | |
| FAL | ($2.28) | -0.006 | |
| BSX | ($183) | -0.457 | |
| DLX | ($184) | -0.459 | |
| AETH | ($132.00) | -0.33 | |
| AYE | ($56.95) | -0.142 | |
| CG | ($66.72) | -0.167 | |
| OGE | ($51.06) | -0.128 | |
| WPI | ($315.08) | -0.788 | |
| EBAY | ($381.78) | -0.954 | |
| CHS | ($399.78) | -0.999 | |
| HOV | ($346.09) | -0.865 | |
| VTR | ($97.51) | -0.244 | |
| LEE | $64.04 | 0.16 | |
| JRCC | $873.90 | 2.185 | |
| GYI | ($175.82) | -0.44 | |
| SYX | $137.24 | 0.343 | |
| CPY | ($303.60) | -0.759 | |
| OMG | ($183.18) | -0.458 | |
| ENR | ($130.36) | -0.326 | |
| JRC | $77.84 | 0.195 | |
| FMT | ($268.38) | -0.671 | |
| MLS | ($655.26) | -1.638 | |
| MRCY | ($201.60) | -0.504 | |
| ASVI | ($352.58) | -0.893 | |
| RHB | ($352.16) | -0.903 | |
| VCI | ($471.27) | -1.309 | |
| PLRO | ($414.60) | -1.039 | |
| JRCC | $357.00 | 1.041 | |
|
-11 | ||
| -0.39 | |||
Our closed positions total minus $4379.44 while our current portfolio is up $4272.62. Thus, we are down only $106.72 to date and would be up without the mistakes that I pointed out last month.
Overall Commentary
In closing I�d like to share one of the emails that I recently received on this portfolio. It illustrates exactly why I am doing this portfolio:
�Thank you so much for what you have been teaching us with your Efficiency Portfolio! �I hope you will always do �projects� like this one because learning by �doing� (mistakes and all) is how I learn best. �Once you have your Efficiency Portfolio tweaked and profitable the way you want it (or discarded as not workable), then I hope you will tackle similar projects (for example, maybe some value investing method or other approach). �Your books and newsletters combined with your Efficiency Portfolio have really helped to make things �real�...At first, I didn't quite know what to think of your Efficiency Portfolio efforts. When you first started the portfolio and it lost money, I thought, �What!!!??? What's going on here?� �I was still learning a lot of new stuff and it wasn't quite sinking in completely. �But the light finally went on after I kept reading your books and mulling things over. ��Ah ha!... so that's what's going on!... Now I see. �Wow! �This is really cool!� �Working through the process of learning with your Portfolio is helping me do the same things with my few Portfolios (which are being built tailored for me). �Thank you so much for your wisdom, insights, and desire to share and teach others! I'm very grateful. �And I'm excited to learn more in the future.� T. Christian, Oregon
Until next month�s portfolio review, this is Van Tharp.
About Van Tharp: Trading coach, and author Dr. Van K. Tharp, is widely recognized for his best-selling book Trade Your Way to Financial Fre-edom and his outstanding Peak Performance Home Study program - a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at www.iitm.com.
Top Notch Internet Resources
By D.R. Barton, Jr.
I�m really looking forward to digging in and making a really nice catalog of useful financial websites. And based on the large number of e-mails that I�ve received, many of you are too!
As a reminder, I�d like your help!! If you have found a site that is particularly useful, please e-mail me at drbarton@iitm.com and let me know what sites you find useful and why (also let me know if you�d like credit for your find or would care to remain anonymous). This way lots of folks can benefit from the little nuggets that you�ve found.
Last week I talked about a simply laid out economic calendar at http://online.barrons.com/public/page/barrons_econoday.html .
Many folks took me to task, because they wanted to talk about another site � Briefing.com (little did they know, that was to be the subject of this week�s article!!)
And as I stated, the reason that I looked at the Barron�s page is because it ��has the easiest-to-read format that I�ve found.� I like the calendar layout for a quick glance at what�s happening. But for more in-depth information, my favorite economic calendar is the one at Briefing.com. (Thanks to the half-dozen folks that took the time to send an e-mail listing this as their favorite calendar!).
For in-depth analysis of the weekly economic calendar, check out this link: http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm
The great thing about this calendar is that by clicking on any of the reports, you get fairly in-depth coverage of the report. For example, there are graphs of the history of the indicator being tracked, commentary on the key factors affecting the report and how the report fits into the big picture. So while the initial layout is a bit more cryptic than the Barron�s site, it does offer more information and therefore is the one that I use most often.
I�m a paid subscriber to briefing.com and use lots of their for-fee content. But they have plenty of no-cost content for your consideration as well. As a matter of fact, the site has just opened a new and improved �beta� version of its no-cost content. It has expanded the no-cost offering, which includes push e-mails, useful analysis articles and a �Market Snapshot� area that has succinct overviews of markets, sectors, etc., that are updated multiple times a day.
To access this info, go to briefing.com and click on the �Investor � Beta� block.
Next week we�ll dig into some of the most useful news sites out there. So please keep those e-mails coming with your favorites! Until next week�
Great Trading!
D. R.
About D. R. Barton: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena where he is one of the most widely read and followed traders and analysts in the world.
He is a regularly featured guest analyst on both Report on Business TV, and WTOP News Radio in Washington, D. C., and has been a guest analyst on Bloomberg Radio. His articles have appeared on SmartMoney.com and Financial Advisor magazine.
Lighten Up�
by Melita Hunt
Last week I wrote about getting my buttons pushed and how my ex played a role in that, so I actually sent the article to him to read, because I thought he�d get a giggle out of it. And he did indeed, replying in a way that gave everyone in the office a good laugh (you can email me if you want to read his uncensored satire and get a chuckle too). This actually gave me a new perspective on some of my buttons that were being pushed and a cool reminder that it�s important to just lighten up and let things go sometimes.
So is there an area in your life that you perceive as being particularly troublesome right now? Is there something that just makes you feel heavy and sluggish? Could it be your Trading? Job? Relationship? Health? Money? Family? Or even Your Self?
Oh the pain of it all�
So this week I�m suggesting a really simple and �light� topic: what, when and how can you lighten things up this week?
I could joke and say bleach it, open the curtains or add more milk (get it�?)
But �seriously folks� � can you clean something out, delegate a task, smile about your faux pas, take some time out, laugh at the fact that you�ve always got to be right, throw your hands up at getting �it� completed, whatever �it� is? or why not just choose to lighten up right now, in this very moment.
Just lighten up. Let go.
Just for this moment.
Go on, I know you can do it (relax your shoulders, remember to breathe and just forget about "life" for a while).
Now, doesn�t that feel better?
And if this has irritated you at all or you don�t know what I�m talking about�
Then you REALLY need to lighten up.
You can contact Melita at mel@iitm.com
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