Chapter 12
Why the System Works

A check of the share price of Campbell Resources (spreadsheet next page) shows it has declined from the original $ 6 a share to $ 2.37 a share or a 61% drop. Thus a lump sum investor (all money is in stock) if he had invested the same total amount of money you had ($35,000), would have lost 61% and the $35,000 investment would have lost $21,350 and be worth $13,650 in November 1987. Compare that to what your investment is now worth. Your portfolio is worth $48,610; quite good for a stock that may be a total disaster. You're ahead $13,610 or 38.8%. How did we do it? What's the trick? Why does the system work?

I was curious myself and so I started investigating. A review of the buy/sell chart at the end of the chapter shows that your average buy price (excluding initial buy) was $ 1.35. Your average sell price was $ 1.95. Thus, you made 60 cents per share profit on every share sold. You sold 13,094 X .60 = $7,856.40.

Some profit comes from interest earned on the cash balance (add column 10) = $1,120. The rest of the profit comes from the increase in value of your remaining shares from what you paid for them. I won't give all the details but will show you a couple of examples: you buy 5,771 shares at $.94 each and 5,291 shares at $.87 each. As of September 1987, the share price is $2.37. Each of the 5,771 shares is worth $1.43 more than what you paid for it or 5,771 X $1.43 = $8,252 more. Each of the 5,291 shares is worth $1.50 more than you paid for it or 5,291 X $1.50 = $7,937 more. If you check the buy sheet, you'll see other months where you bought stock for less than the current $2.37 share price.

When you see that you can make money on a stock that drops 61% below your original purchase price, you know you have a really amazing system. Of course you had to have a fairly tough attitude to hang in there and put that extra $25,000 into the stock. Think of the profits if Campbell Resources merely goes back to its original selling price. Or if you decide to get out, sell out; you can sell all your shares, take your profit and get into another stock. The choice is yours.

WHY SYSTEM WORKS
CAMPBELL RESOURCES

BUY SELL

DATE	SHARE	# OF	TOTAL	SHARE	# OF	TOTAL
	PRICE	SHARES	SPENT	PRICE	SHARES	REC'D
1/85	4.12	394	1625
6/85	3.12	738	2306
7/85	3.25	189	613
9/85	2.87	434	1238
10/85	2.12	1348	2864
11/85	2.25	251	565
2/86	2.12	619	1316
3/86	1.87	1026	1924
4/86	1.25	3977	4971
5/86	.94	5774	5428
6/86	.87	3779	3307
7/86	.87	1512	1323
8/86				1.25	2326	2908
9/86				1.50	3019	4528
12/86	1.12	1180	1327
1/87	1.12	472	531
3/87				1.62	2287	3716
4/87				2.62	5344	14027
5/87				2.50	118	295
TOTAL		21693	29338		13094	25474

Campbell Resources - Oct 84 - Sep 87

DATE	REMARKS	SHARE	SHARE	SAFE	CASH	SHARES	SHARES	PORT.	BUY	MKT ORDER	6%	PORT.
		PRICE	VALUE			BOUGHT	OWNED	CONTROL	(SELL)	(SELL)	INT.	TOTAL
						(SOLD)			ADVICE	BUY
10/84		6.00	6666	666	3334	-	1111	6666	-	-	-	10,000
11/84		5.62	6249	624	3351	-	1111	6666	417	0	17	9,600
12/84		-	-	-	-	-	-	-	-	-	-	-
1/85		4.12	4583	458	3385	394	1111	6666	2083	1625	17	7,968
2/85		5.25	7901	790	1769	-	1505	7479	(422)	0	9	9,670
3/85		4.50	6773	677	1778	-	1505	7479	706	IGN 29	9	8,551
4/85		4.75	7149	714	1787	-	1505	7479	330	0	9	8,936
5/85		-	-	-	-	-	-	-	-	-	9	-
6/85	+$2,000	3.12	4703	470	3805	738	1505	7479	2776	2306	9	8,508
7/85		3.25	7290	729	1506	189	2243	8632	1342	613	7	8,796
8/85		3.37	8208	820	897	-	2432	8939	731	0	4	9,105
9/85	+$2,000	2.87	6992	699	2901	434	2432	8939	1947	1248	4	9,893
10/85	+$2,000	2.12	6090	609	3661	1348	2866	9563	3473	2864	8	9,751
11/85		2.25	9482	948	801	251	4214	10995	1513	565	4	10,283
12/85		2.50	11163	1116	237	-	4465	11752	589	0	1	11,400
1/86		2.37	10604	1060	238	-	4465	11752	1148	IGN 88	1	10,842
2/86	+$2,000	2.12	9488	948	2239	619	4465	11752	2264	1316	1	11,727
3/86	+$2,000	1.87	9533	953	2928	1026	5084	12410	2877	1924	5	12,461
4/86	+$5,000	1.25	7638	763	6009	3977	6110	13372	5734	4971	5	13,647
5/86	+$5,000	.94	9482	948	6038	5774	10087	15858	6376	5428	5	15,520
6/86	+$4,000	.87	13878	1387	4613	3779	15861	18572	4694	3307	3	18,491
7/86	+$1,000	.87	17185	1718	2313	1512	19640	20226	3041	1323	7	19,498
8/86		1.25	26440	2644	995	(2326)	21152	20888	(5552)	(2908)	5	27435
9/86		1.50	28239	2823	3923	(3019)	18826	20888	(7351)	(4528)	20	32,162
10/86	adj s/c	1.25	19759	1975	8493	-	15807	20888	1129	0	42	28,252
11/86		1.37	21735	2173	8535	-	15807	20888	(847)	0	42	30,270
12/86		1.12	17783	1778	8578	1180	15807	20888	3105	1327	43	26,361
1/87		1.12	19110	1911	7287	472	16987	21552	2442	531	36	26,397
2/87		1.37	24006	2400	6790	-	17459	21818	(2188)	0	34	30,796
3/87		1.62	28371	2837	6824	(2287)	17459	21818	(6553)	(3716)	34	35205
4/87		2.62	39827	3982	10603	(5344)	15172	21818	(18009)	(14027)	53	50,430
5/87		2.25	22113	2211	24753	-	9828	21818	(295)	0	123	46,866
6/87		2.25	22113	2211	24877	-	9828	21818	(295)	0	124	46,990
7/87		2.25	22113	2211	25002	-	9828	21818	(295)	0	125	47,115
8/87		2.50	24570	2457	25127	(118)	9828	21818	(2752)	(295)	125	49,697
9/97		2.37	23061	2306	25549	-	9710	21818	(1243)	0	127	48,610