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Hi Ernie et al,

Approximately 75% of the picks in Ernie's portfolio have hit the 15%
gain mark and have been sold. Wow! I see a problem arise when the
portfolio fills up with stocks that no longer behave as momentum
stocks. If a lot the slots in the portfolio (14) are taken up with
non momentum stocks, there is reduced chance for new stocks to be
added - because the ones currently in the portfolio aren't being sold.

I asked Ernie about this in August:
<<<<< me: I agree that your model protects against real lemons, but
occasionally a mo stock hits a rough patch. How long will you hang
onto a sideways performer? How long will you hang onto a downside
performer? What criteria do you use to decide to cut bait if
necessary?

Ernie: Since a key criteria to my selection process is earnings and
revenue growth, if a stock price is not responding I will hold the
stock as long as it is performing on an earnings and revenue growth
basis. As a result, stocks that do not move up as quickly as I had
projected will realize lower and lower P/E's making them better
values. I have no problem holding low P/E stocks long term, it is
kind of a forced diversification that lowers my overall risk.

If something fundamental changes in the company, then I have no
problem dumping it...hope this helps.

$$$MR. MARKET$$$ >>>>>


If there is no ongoing systematic analysis of the companies whose
stock is in the portfolio there is a risk that a bunch of non
momentum stocks are taking up the limited number of seats in the
momentum bus.

I don't know how often you perform DD on the stocks in the portfolio
(or when you would find the time!) Ernie, but I am curious to why
WGOV, USPH, PLB, KCS, ANF, AMSG are still in the portfolio?

Steve





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