June, 2005:

Summer is coming and I want to go somewhere for vacation. I haven’t gone anywhere since my last trip to Barcelona last year. Where have people gone in the past few weeks? Any place you would suggest? Any good deals?

I’m thinking of Jamaica. My friend said there’s a package we can get for $2000. It includes a town house for 7 days, 6 bedrooms, a private beach, chef and maid. It sounds really good.

As per JLP‘s advice, I called up Vanguard and see if they have a similar variable annuity plan similar to the one offered by Bank of America. It would be nice if they do because Vanguard is known for low fees. Unfortunately, they don’t have something like that. The advisor seems to be very professional and lay-back. He didn’t do so much aggressive selling as other advisors did. He did not push me to buy any Vanguard annuities. In fact, he suggested VA should be last buys. He talked to me in general what I should do — buy IRAs, 401ks, first, etc.

I’m going to look at the Vanguard Target Retirement Funds, because those funds seem to be an easy way to grow your money with low risk and low management fees. Also, the funds re-balance every so often to reduce risk as the year approaches your targeted retirement date.

PACT has been doing very well for the past five trading days. Look at the 5 day chart.

I sold all my shares already. My total gains so far for this stock is $459.69. I’m planning to rebuy when the price dips.

When it comes to buying stocks I know most people would recommend holding it for the long term, or a year’s period to save on taxes. But I think in my case, with the stocks I trade and the strategies for them, I can justify the short term trades. I worked the numbers and it comes out to my favor. See chart for details. Even after taxes of 25% to 30%, the net gains are higher than the long term gains.

Chart

Of course there are risks involve to this style of trading. If the stock explodes upward after I sell then I will miss the boat. That’s why I have developed a strategy that consists of both holding and trading. I would hold half the number of shares, for example, and let that half sit and ride the wave up. And with the other half, I would swing-trade with the waves. The psychology behind that is… with the small amount I have, it will take forever to earn money, so I must be aggressive and cash in on the volatility. For a guy with little money to make lots of money in the market, he must play smart and take calculated risks.

But I am very careful with the companies I pick along with this strategy or else it will be ineffective. I primarily look for companies that have high potential growth and have not been price in yet. I like companies with very strong fundamentals and a low P/E. I look at the market cap, profitable margins, debt ratio, float, insider holdings, cash flow, and earnings growth. Then I look at the companies’ sector and make sure it’s a growing sector. A good company in a declining sector is not going to help. So I make sure that sector is has money coming in and the company has a good chance to make money.
For example, take a look at Cisco:

• $128 Billion Market Cap (actually this is an exception, I normally looked at companies less than $100MM market cap)
• 23.11% Profit Margin
• Forward P/E 18.93
• ZERO Debt (A big plus)
• $5 Billion Cash
• 1.37% Insider Holding (high % matters more in small companies)
• Earnings Growth 16% Year Over Year
• Sector: Technology (Very hot right now)

Industry: Networking & Communication Devices (hot and growing). Networking is becoming increasingly more important in areas ranging from small businesses to large business and in government and educational facilities.

I mentioned Cisco a while ago (check on my earlier posts) when it was only 17.xx. I bought at the low and mid 17′s and sold it at high $18′s. Now the stock is at almost $20. I sold all my shares and the stock continued to take off without me, but that was the risk and I was okay with that, because the stock was too expensive for me to have a large holding. Most of the companies I look at are very small, less than 100MM market cap.

For a majority of the people, I would still recommend a buy-and-hold stategy, especially when you don’t want to deal with all the fuss. For my trading style, there is a lot of research involve and I monitor the stocks very closely. I don’t guarantee 100% wins. Nobody can. I’ll do my best and I’ll see how much money I can make. I’ll keep those who are interested in my performance up to date. I’ll post my gains and losses. I don’t mind talking about my losses, because it is part of growing up money-wise.

I will continue to learn and tweak my strategies as necessary. I welcome you all to give constructive criticisms and your strategies for investing.

My limit for PACT kicked in today at $8.50. I also had a chance to pick up more shares at $7.80, and sold it for $8.30. I was actually surprised all my BUY and SELL limits got taken out so soon. Oh wells, at least I profited.

Broker: AmeriTrade iZone (previously FreeTrade) account.
5/23/05 BUY PACT 7.60 250 1,905.00
6/1/05 SELL PACT 8.30 250 2,075.00
6/1/05 BUY PACT 8.00 250 2,000.00
6/2/05 BUY PACT 7.80 250 1,950.00
6/2/05 SELL PACT 8.30 250 2,075.00
6/2/05 SELL PACT 8.50 250 2,125.00
Commissions = 6 transactions x $5/transaction = $30
Gross Profit = $420
Net Profit = $390

Here’s my loss from yesterday:

Broker: Scottrade
5/11/05 BUY AA 28.30 175 4952.5
6/1/05 SELL AA 27.50 175 4812.5
Commissions = 2 transactions x $7/transaction = $14
Net Loss = $126

I’ve decided to let go of AA on my long term list. I’m planning to add PACT to my long term list. If there is a huge drop, I’ll load up on the shares. I’ll also use partial holdings to do some swing trades.

I know there will be taxes on short term trading, but I can justify the tax costs with higher profits. Taxes alone will not stop me from selling. I’ve made that mistake before. I’m holding a stock where it had gone up to over 100% of my purchase price in less than a year, but I have not sold it. And then the stock had really bad news and it dropped more than 30%. Had I taken profits, I would have to pay 25% taxes (my last year’s tax bracket) on the short term gains, but I would still have come out more money.

Therefore, I’ve come up with a more effective strategy. I will load up a large amount of shares for a fast growing company, and trade with a portion of my holdings. Of course, this will only work with a certain type of stocks, so it is important that I find high growth stocks and buy at low prices. For a different type of stock, you will use a different strategy. High yielding dividend stocks are good buys at huge dips. Accumulate at drops and hold long term. Look at SJT. What a great holding stock. I wish I had loaded up a year ago and I’ll be just sitting here collecting nice dividends.

What kind of strategies do you use? What kind of stocks do you buy?

Talk about good timing… I sold PACT at $8.30 this morning and bought it back at $8.00 at noon. The price is currently at 8.08 but it fluctuates a lot. I hope it goes up uP UP. Who else trades stocks here?

I realized my vacation days will expire soon, so I took today off. I’m going to ask my supervisor to allow me to carry some days off to the next cycle so I don’t lose them. I have still yet to plan a vacation.

I am home now and I have been watching the market since the morning. It is a fabulous day for stocks. Dow Jones, Nasdaq, and S&P500 are up.

I decided to rid of ALCOA Inc (AA), because my trading strategy is to buy high growth stocks. AA has also been very disappointing and I decided not to wait for it to rebound. PacificNet Inc (PACT), on the other hand, had a small pop. I sold it at $8.30, netting $165.

Isonics Corp (ISON) open sharply higher with super positive news. It is up about 18% at the moment. I don’t own any shares, but I’ve always kept an eye on this company. Very risky play, IMO, but if you can tolerable the risk, it may be worth it.