Wednesday was not a fun day in the market for many as the Dow fell 411 points. My in box has been flooded with questions about my system, my newsletter, Nails on the Numbers, and my general approach to investing. I thought many readers could benefit from seeing the answers, so it's time to dig back into the old mailbag.
Here are some of the most frequent questions I have received lately.
I see you are 83-0 this year. That's unreal. The market's been tough overall the entire year, but October was particularly terrible. How have you kept the streak alive?
First, I stayed disciplined and followed the rules to my system. I took my wins when they came and most of all, I didn't run with the pack toward the exits. I took the opportunity to buy companies really cheap and to stay smart. The world isn't ending.
I did bring in many wins in October. In total, I made 15 picks, 11 of which have already crossed the finish line as wins. I canceled two picks, as they did not fill within a week of my recommendation, and two are still in play. I was able to take victories because the falling market allowed me to buy on the cheap.
When a pick would fall especially hard, I even bought a lot of options at one time, because the prices were just too good to pass up. Readers who followed me stride for stride starting Oct. 1 already have $16,200 in winnings and have three open positions. One has 20 contracts and the other two have 10 each.
Those companies all gave me relatively quick wins, with the exception of
, which took three weeks. The others are
, which won for me twice during the month;
The Shaw Group
You have built up significant positions with several of your picks by averaging down, or adding more options when the price falls, to lower your average and adjust your stance to make it easier for a win. However, do you think it is ever the right time to just bail out of a trade?
This is a common question I receive from my readers and I have talked about my position concerning stop-losses before. I hate them -- I don't use them. What is really being asked is, when do I cut my losses? I don't cut my losses on picks because when a stock dips, I see it as an opportunity to average down.
By purchasing more contracts of the options, I lower my average price, which in turn lowers my GTC price. I don't like stop-losses, so that is out of the question.
I typically give my picks plenty of time to rebound. One pick that is currently still in play does not have that much time. It expires in January. So, I have taken some extra measures to reposition it for a win.
While I typically add 10 contracts at a time when a stock hits its next buy level, with this particular pick, I added 50 contracts on both Monday and Wednesday. This is because the option is so cheap right now, this will help me lower my average significantly.
That pick is oversold and should bounce back. I pick good companies and have faith in them. If and when the time comes to consider alternate measures, I let my readers know.
Sure, sometimes there are picks that take much longer than expected. Pfizer is my longest this season. However, judging by my undefeated record of 83-0, they still became wins. Last month, most won in just a few days.
In baseball, they say a home run is a home run no matter if it went 350 feet or 550 feet. Money is money.
To put my wins in a time frame, however, I will tell you this. On average, my picks ring the register after about 24 days. That's a little more than three weeks and includes weekend days and holidays, when I have zero chance of them turning into wins because the markets are closed.
However, the real success of my system lies within how fast many of my picks become profits. I have 33 wins that took five days or less. That is almost 40% of my victories.
Always remember: Life is a journey, enjoy the ride!
At the time of publication, Dykstra had no positions in stocks mentioned.
Nicknamed 'Nails' for his tough style of play, Lenny is a former Major League Baseball player for the 1986 World Champions, New York Mets and the 1993 National League Champions, Philadelphia Phillies. A three time All-Star as a ballplayer, Lenny now serves as president for several privately held businesses in Southern California. He is the founder of The Players Club; it has been his desire to give back to the sport that gave him early successes in life by teaching athletes how to invest and protect their incomes. He currently manages his own portfolio and writes an investment strategy column for TheStreet.com, and is featured regularly on CNBC and other cable news shows. Lenny was selected as OverTime Magazine's 2006-2007 "Entrepreneur of the Year."