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Money, Business & Finance Ground >> The PEG system for 2010


1/4/10 5:12 PM
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Stronghold
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Edited: 01/07/10 2:47 PM
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I've mentioned my investing system for years now, so I'll just post what I'm doing with it as the year progresses. I've been investing in it with real money or on paper for 12 years now and I've not had a negative year.

Rule 1) Buy 4 to 6 stocks selected from the top 5 PEG slots for the current week; choose the best 2 or 3 based on stock volitility and P/E ratio.

1A) do not buy all stock positions at one time; do it over 2 or 3 months time

2) Have 3 exit points for each stock. For me, it is based on price bought and Closing Price.

2a) exit #1: if the stock drops to 80% of the price bought, sell it within 3 days

2b) exit #3: if the stock closes above 113% of the price bought, a new high is formed; sell if the stock drops 12% from that high. Update all new highs as they occur at close.

2c) if the stock is held for 1 year and has not hit one of the above sell points, sell it

3) If the market tanks, sell off stocks and wait 2 to 4 weeks to reinvest (see rule 1a)

------NEW-------
4) Wait 2 to 3 weeks to rebuy stock positions after a sale. This tends to take the market's downward volitilities out of the system. Originally I used a 1st of the month buy ONLY. Again, this is easy to test and avoids trying to time the market, but in my computer backtests, this earned less returns (although an 'ideal' waiting time was never found).
1/4/10 5:13 PM
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Stronghold
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Stocks bought on 1/2/2010:

Position 1) ALK at 35
2) AM at 22.1
3) BUCY at 59.5
1/7/10 11:26 AM
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Stronghold
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I'm working on more verbose definitions here. Also, you'll note I didn't buy the #1 PEG choice because it's P/E was negative.

I am backtesting some things like that now but it's very time consuming. So far though, not buying stocks with bad P/Es is a good idea.

Another idea that is hard to describe is not buying stocks that are very volitile. You want stocks that have relatively stable in price, have gone up in value, and are poised to go higher. You want to capture about 20 to 40% profits per stock 3x year ideally.

This is based on a mechanical system where you guy stock the 1st day of the month then sell them on the last day. I expanded the system to having 3 'logical' sell points based on stock price or time held. The 'dumb' sell date of the 30th or 31st is easy to backtest but gives erratic results.
1/7/10 12:08 PM
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Stronghold
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I spent $300 on a historical DB of all stocks, uploaded it to a DB I made, then wrote sql scripts to do all of this. That was a while back and I need to push forward revising that.

I also just do it by hand!

http://www.mechanicalinvestor.net/category/mechanical-investing/

This can give you a list of stocks going backward for a few years. I have alist of peg stock going back a while, too.

I like PEG stocks because of their high growth potential and historic strength. PLOW and RS type stocks have really let me down!
1/7/10 12:10 PM
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Stronghold
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Oh, and I'm working on a 'smart' buy criteria but that amounts to market timing which I believe is impossible.

Note though, that a lot of PEG stocks dropped to $5/share last year and are $30/share now. I wish I'd had some money to invest 8 months ago.
1/7/10 2:45 PM
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Stronghold
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Edited: 01/07/10 10:08 PM
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I'll see if I can make a DB into a xls for you for the S&P.

I did do a few 'fun' tests a while back. I found some really volatile stocks and applied my rules to buying, selling them. As long as the stock moves, it works well.
1/8/10 10:57 AM
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Stronghold
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Hey, Wes, I extracted the S&P related indices historical data from 1928 to late 2008 into a spreadsheet if you want it. Zipped it's 2.5 meg.

Let me know if you want it and how to send it to you (you can send an inbox note to me with your email if you'd like).
1/12/10 4:00 PM
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Stronghold
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Here is the gritton mechanical backtester. It's not bad but pretty simple
1/12/10 4:02 PM
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Stronghold
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Also, the system is already doing its usual annoying thing - the 1 stock I avoided because of its shitty P/E is up 9% in 12 days. The one I picked over it is down 7.5%.

It never fails! I swear. Every time I add a rule on buying or selling based on past testing, I am immediately rewarded with results like this. Damn it is hard to stay the course sometimes.
1/13/10 5:25 PM
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Stronghold
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Just for giggles, I tested my rules for PEG13 stocks for 2008. If you'd have done a strict mechanical system buying the 1st of each month and selling on the last for the top 4 PEG13 stocks, 2008 would have yielded you -34%. That's a solid net loss.

Using my rules you'd have yielded +14.4%. I'm still double checking the numbers but it's not horrid.

I will post the full set of rules as the test progresses. There is more to the system but I wanted to see if there was ANY interest in this before all that typing.
1/14/10 10:31 AM
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PittWrestler
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 Stronghold, this sub-forum doesn't get alot of attention but I think the interest and feedback it does get is better than on the main OG.  I for one am interested in hearing your system and thoughts on this.
1/14/10 11:30 AM
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Stronghold
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Very good; I'll post any updates to the stocks.

I am planning on 'buying' the next 3 stocks next week or 2/1. The only reason to break up the buys is if the market is at a 26 or 52 week high and everythign is over sold.

One OGer tried my system in '05 or '06. He bought in at a peak and lost money for 6 months. If he'd have waited 5 or 6 weeks to buy in, the difference would have been astounding (market corrections are great things but hard to wait for).

The only way to 'mechanically' avoid this pitfall is to break up the initial buying into the system. It's not foolproof of course.
1/19/10 1:53 PM
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Stronghold
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Edited: 01/19/10 1:54 PM
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PEG13 Stocks for the year








SYMLast PricePrev Close BoughtBt Date%
CNK15.1714.9714.72-Jan-20101.018
ALK36.4436.06352-Jan-20101.030
CFI 11.7711.7510.52-Jan-20101.119
BUCY65.8063.81622-Jan-20101.029
NUS26.5926.0027.32-Jan-20100.952
+2.986
1/20/10 2:36 PM
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Stronghold
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I reran the '08 PEG13 stocks but this time using the stock pics from a mechanical investing site instead of backtest.org. The results were -3.4% for the year instead of a gain... but of the 4 stocks 'sets', only one lost, it just lost 45% of its value do to 4 out of 6 positions being sucky. The other 3 sets did okay.

This shows how fragile the stocks picks can be. However, if I'd been really investing and not doing a mechanical backtest, I would not have bought any stocks in November or February as the market SUCKED and was headed down too fast to jump into the market. But, it is that exact kind of thing I WANT to automate, I just cannot come up with blanket percentages of market performance that work most of the time.
5/3/10 2:08 PM
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Stronghold
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So far, the Peg26 system is sucking this year (up only 2.5%) but the Peg13 is doing 20% so far. The Peg13 stocks are more volatile so I am adapting the rules for this.

New Rule: If a stock dips to -15% closing price of the price it was bought at; watch it. If, following that day, the 5 day running average does not turn positive, sell it. If it does turn positive, sell it when it moves back to 0% +/- or when the running average turns negative again. This rule replaces the "sell 2 to 5 days after a stock dips to -20% of bought price".

Remember, stock price means a lot to us as we are taking strong stocks that were on the way up and trying to cash in on that upward price trend... until the trend collapses or shows considerable weakness. Buy high, sell higher.
5/16/10 11:32 AM
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Bean Bag
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 ttt
7/5/10 10:51 PM
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Tahiti Bo
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ttt
7/5/10 11:18 PM
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salyer36
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Edited: 10/16/10 10:38 AM
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edit
7/6/10 11:59 PM
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cincibill
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VectorVest is the single best tool I have ever used to back test and gain market insight.
4/25/12 10:41 PM
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SKARHEAD
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ttt
4/26/12 9:31 AM
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Stronghold
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Well, after a good 15 year run with that system, I have finally abandoned it, at least for the time being. It cannot deal with closely group marketcrashes and rollercoaster markets. I have a few newer ideas for a system I am working on now. Should something better arise, I will let you know

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