Upon perusing keelix, it appears that some variation of a screen that has the following characteristics.1. market cap = 25 m - 125 M2. p/s <= 13. sort by momentumhas the best returns of all, although with a huge gsd.Is this true?Thanks for any comments.Mark
Well, the numbers don't really lie, do they? The fundamental problem with screens like Tiny Titan is that the passing stocks typically suffer from low liquidity. In other words, given the combination of a low stock price and low average volume, it can be challenging to trade in and out of them without suffering from large price swings that will negatively impact your returns.For example, American Realty Investors (ARL) was one of the stocks that passed this screen last week. On Friday, it closed at $3.41 and has an average daily volume of just 4,922 shares. This means that only about $16-$17k of this stock is traded on a daily basis.Even if you were to buy into a small position of say, $2-$3k, it's likely that your trades would cause the price to rise a bit, simply because your buying a position that represents a substantial portion of that stock's daily trading activity. The same can be said on the sell side, too.Due to this problem, a lot of the common screens we follow have liquidity filters in place to help mitigate this effect.
So you think in practice that even if you limited your purchase to 2000.00, you would not in practice do well. I would think that if the screen trades 16,000.00 per day, that buying and selling 2000.00 would not have too much of an impact. I am going on experience with other illiquid stocks, not the tiny titans. I'll run my screens through Jamie's backtester, and answer your question.
Has anyone here tried the tiny titans strategy with real money, and if yes, how did it work?Thanks.
How would the tiny titans work if you changed the market cap to 100M - 500M, to eliminate the liquidity problem.
If you take a look at today's (10/15/2012) chart detail, it does a good job of illustrating the challenge I mentioned over the weekend:http://finance.yahoo.com/echarts?s=ARL+Interactive#symbol=AR...If you look at the open, there were two trades that occurred: one was for 1200 shares and the second was for 2100 shares. Combined, these represent about 2/3 of the average trading volume for this stock; and together, they managed to take the stock down by close to 9%.In dollar terms, this wasn't much...perhaps $10k, but given the thin liquidity, these trades hit the stock hard. Imagine how you would react if you were holding a position in this or trying to unload it this morning...
I see your point. I am going to back test it, using a 100 - 500M market cap. I can imagine losing 10% on the spread alone.
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