I'm especially happy with this Chapter because these are the types of stocks I pick for myself. Alaska Airlines, Compaq, and Golden Nugget are three stocks I've owned. These type of stocks are a little bit from the wrong side of the tracks to blue chip blue bloods. As such the investing world deems them riskier and thus to my mind increases my profits. As you can see by comparing your yearly profits under semi-aggressive to the conservative stocks, your profits were over twice as high - 139% vs. 59%. By taking a slightly bigger risk, you will be greatly rewarded.
This illustrates the system at its best - big profits from dynamic young growing companies. Again study the charts. For the stocks that started later than Oct. 84, I just used the profits as of Sep. or Oct. 85 when the other stocks had completed a full year.
Don't let the $10,000 per stock discourage you; you could have turned $15,000 ($1,500 per stock) into $38,850. Always do the best you can with what you got. Not only will the money come in handy some day, but the self-respect and pride in yourself coming from doing something for yourself will yield an inestimable, unmeasurable boost to your self-confidence and your life. Remember every day in every way you're getting better and now richer.
You made 132% in three years, more than doubling your money. This illustrates the system at its best. It will do the same for you.
Also you will notice I do something different with the ten stocks here and the ten in the conservative strategy. I readjusted the stock/cash balance back to the 2/3 stock, 1/3 cash ratio. I did not do this in Chapter 2 as I was trying to keep learning the system easy.
I took the excess cash over 1/3 and bought more stock. Again I haven't used the system to the max. I took the money out once a year and bought the same stock regardless of price. I ignored whether the stock was at or near its years' low.
When you do this for real, here are the best ways to maximize profits: 1- Look more often for excess cash. 2- Either buy one of your existing stocks that is at or near its years' low or buy a new stock that at or near its years' low.
Here's an explanation to show you what I did. Look at Alaska Airlines. I readjusted cash and stock in Nov. 85 (11/85). Here's what I did: I looked at 10/85 and found the following:
| SHARE VALUE | CASH | PORTFOLIO VALUE |
|---|---|---|
| $6,306 | $8,918 | $15,224 |
I multiplied $15,224 X .33 = $5,024. Thus, $5,024 is 1/3 of my portfolio value. So I subtracted the cash balance: $8,918 - $5,024 = $3,894 of excess cash
I took the $3,894 of excess cash and bought an additional 193 shares of stock - $3,894 divided by $20.12 = 193 shares. Then I put "+ 193 shares" in the shares bought column in Nov. 85 (295 + 193 = 488 shares owned). Also, I added 3,894 to portfolio control. Remember when you first buy stock or buy additional shares with excess cash, you increase portfolio control by 100% of the amount bought. Again it's simple and will become second nature with a little practice.
| STOCK/FUND | % GAIN | PORT. | % GAIN | PORT. | % GAIN | PORT. | ||
|---|---|---|---|---|---|---|---|---|
| ONE | VALUE | TWO | VALUE | THREE | VALUE | |||
| YEAR | YEARS | YEARS | ||||||
| ALASKA AIRLINES | 55% | 15524 | 37% | 13654 | 77% | 17719 | ||
| GRACO | 11% | 11372 | 72% | 17247 | 116% | 21629 | ||
| COMPAQ COMPUTERS | 64% | 16403 | 141% | 24105 | 425% | 52529 | ||
| HOVNANIAN ENTERP | 22% | 12224 | 107% | 20682 | 170% | 27008 | ||
| SUPERIOR IND. | 19% | 11901 | 51% | 15129 | 70% | 17001 | ||
| CONTINENTAL INFO SYS | 14% | 11367 | 68% | 16838 | 91% | 19615 | ||
| J P INDUSTRIES | 12% | 11244 | 55% | 15467 | 97% | 19699 | ||
| BUSH INDUSTRIES | -21% | 7919 | 32% | 13408 | 134% | 23093 | ||
| GOLDEN NUGGET | 15% | 11483 | 34% | 13350 | 57% | 15738 | ||
| PROSPECTOR | -2% | 9838 | 0% | 10037 | 74% | 17382 | ||
| TOTALS | 19% | 119275 | 58% | 159917 | 129% | 231413 |