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Author: FLEETWOOD One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6743  
Subject: MY END OF APRIL REPORT Date: 4/30/2000 2:25 AM
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For those who may be interested in this real-life example of portfolio management, here is how I have managed mine during this unusually hectic and memorable market month of April 2000.

After being sold out of all of my stocks and safely converted to money market funds by my automatic bail-out prices during the mid-month freefall, since April 14 I have been engaged in a step-by-step reformation of my portfolio.

Due to my age (71) and portfolio size as well as present market volatility, I have added a new facet to my strategy – i.e. investing about 20% of this portfolio in Schwab's Yield Plus Select bond fund (SWYSX). This will provide a "cash" reservoir to ride out a bear market (if it occurs) without having to sell my BUY&HOLD stocks at depressed levels. I'll have no buy and sell transaction costs in this fund, low (0.40%) annual operating costs, excellent liquidity, and it has been generating more than a 7% annual yield. By comparison, the Schwab Money Market now is paying 5.37%.

Other than this modification, my strategy will remain the same as it always has been -- i.e. investing exclusively in blue chip alpha gorilla tech stocks and applying automatic bail-out points normally set at 80% of each stock's most recent 52-week closing high.

Of course, many stocks presently are quite a bit below their 52-week highs. So if one chooses to provide this downside risk protection then one must adapt, accordingly. For example, at this point in time it would work out to be reasonable that for 9 of my 11 stocks you temporarily could use a 75% factor. For the 2 exceptions, you temporarily could set stop limit points based upon their buy prices. Remember that adding stop-limits as downside risk protection is an option, not an imperative. It depends on many personal factors including your comfort zone for risk.

As a percent of total market value, this portfolio's end of April apportioning is as follows:

Tier #1 (29.1%) -- EMC, CSCO, INTC
Tier #2 (26.1%) -- HWP, SUNW, ORCL, TXN
Tier #3 (9.0%) -- NOK, AMAT, KLAC, MSFT

Sub-Total = 64.2% in stocks

Tier #4 (17.8%) -- SWYSX Bond Fund
Tier #5 (18.0%) -- Money Market Funds

Total = 100.0%

My re-purchasing of alpha gorilla tech stocks is work in progress. As you can see, I am up to the 64.2% level and taking advantage of any daily dips. The 18.0% amount in money market funds is "dry powder" for more stock purchases that could max them out at slightly more than 80% of this portfolio's total market value.

After being in the position of holding no stocks, I ended this "thrilling" roller coaster month with 7 "re-buys" and 4 "new-buys", and all with market values that now are above their cost. In fact, several already have yields in double digits (NOK 18.8%, TXN 16.7%, EMC 15.5%, KLAC 13.7%, CSCO 10.0%).

My average bail-out sell price was 103 on the 7 stocks I owned, and so far my average re-buy price on these 7 stocks is 105. So my losses from selling at automatic stop-limits and then buying them back presently are close to nil. Of course, capital gains had no impact in this IRA account. I am rather pleased with these results that are a consequence of having promptly re-entered the market incrementally.

As of the end of April the YTD yield of my portfolio is 15.1%. This compares very favorably when one realizes that the NASDAQ is down 5.1% and the DJIA is down 8.4% YTD.

Of course, my yield percent potential is going to be somewhat tempered as compared to previous eras when I always was fully rather than just 64.2% invested in my favorite stocks -- and now with a maximum cap of about 80% in stocks due to keeping about 20% in a lower yielding bond fund for reasons denoted above.

However, even the 64.2% dollar amount is more than the dollar amount of this portfolio as recently as October 1999. So in this sense I really am not significantly short-changing the potential for dollar growth.

I believe the most important food for thought is that today this portfolio's market value is 27.8 times as much as its market value was in 1994. I look upon this as a resounding testimonial for BUY&HOLD of blue chip alpha gorilla tech stocks -- and as something an investor practicing "Conventional Wall Street Wisdom" (broad diversification, asset allocation and repeated re-allocation, etc.) never could have come close to achieving. The expanding technology genie is out of the bottle and I see no reason to doubt that it is a viable wave to ride toward the future with BUY&HOLD of blue chip alpha gorilla tech stocks.

Perhaps the month of May will settle down a bit and provide some calmer direction and trends. We shall see. Good luck to one and all!

FLEETWOOD
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