On percentages off the highs

HI Chris, I liked your idea of plotting how far each of your stocks was off their high and did the same with mine. The trouble is, I’m not sure what to do with it now.

I modified it somewhat and used their high close in the last six months. I felt the close was more relevant than NKTR, for instance, shooting up to $99 for a minute or two and closing at $88.75 (I used the $88.75). I also used a six month limit because a high two years ago, for instance, didn’t seem to be relevant either, as circumstances were undoubtedly different.

Here’s what I got as of yesterday’s close:


**ANET		 2.3**
**SHOP		 5.3**
**HUBS		 6.2**
**PSTG		 7.0**
**NVDA		 8.0**
**OCTA		12.5**
**AYX		13.6**
**NKTR		13.7**
**SQ		15.6**
**NTNX		15.6**
**TLND		20.4**
**TWLO		26.0**

I noted that three of my four largest positions, and highest conviction stocks (Arista, Shopify, and Hubs) were the least off their highs, which I guess means they were good picks and strong companies (two of which were shorted by Citron, by the way). But does Twilio being off 26% mean that it’s a buy, or does it mean I shouldn’t buy it? That’s the question. It’s one of my smallest positions by the way. It’s nice to look at the list but it’s hard to interpret.

Best,

Saul

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My Portfolio web-app uses closing prices, not intraday high-lows. It tracks each stock’s all time high and how far down it’s from there. I haven’t found these numbers all that helpful, I prefer to look at charts instead.

The web-app also tracks 5, 10, 15, and 20 years growth rates using a best fit line method.

Denny Schlesinger

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When they hit 40% or more, it may be a great shopping list…

The trouble is, I’m not sure what to do with it now.

Some have suggested that they sold some of their positions that haven’t dropped much to buy the positions that have dropped more. My issue with that is it just seems like another way of trying to time the market. If after you make that switch, the market starts to go up, then yes, maybe the stock that dropped more would come back farther than the stock that didn’t drop as much (but maybe not). And if the market keeps going down, the position you purchased that had fallen more may continue to fall more.

The only way I would see that this “trade” would make sense is if your conviction in the stock that had not fallen as much had lessened (or it’s percentage was higher than you’d like), making the rotation into the stock that had dropped more a justifiable move.

Without any justification, though, it seems solely like another way to try and time the market (which we know can’t be done reliably).

8 Likes

I can’t remember who wrote it but: The argument that got me to sell TWLO wasn’t that Uber leaving was such a big hit - it was that Uber could more or less replace them so easily.

Hi fellow Fools!

Very interesting idea to look at the 52 week highs, especially in this current pullback. I also found it hard to interpret, but I liked how Saul made the connection to his conviction for the stocks.

So what did I do with this? I made a list of my stocks with the percentages off their 52 week highs like Saul. Then I put three columns on the right to track the conviction rating (low, medium, high) from three different sources: my own conviction rating, the Motley Fool conviction rating (from the Stock Screener tool) and Sauls conviction rating (assuming that >10% portfolio allocation means high conviction, <10% is medium, and not holding is low).

Similar to Saul’s results, the stocks who scored the highest conviction ratings were down less than the stocks with lower conviction ratings. Also the low conviction stocks that have taken a big hit tended to be smallish starter positions for me.

My interpretation is that a high conviction rating from all my three sources equals to a great business with tremendous future outlook. Those great companies also appear to be more resistant in down turns. I want to be invested in exactly those businesses for the long run.

I’m by far not as concentrated portfolio wise as many of the board members here. I like to buy into new stock ideas and rarely sell. But I also like to trim my portfolio once in a while, especially if it makes sense for tax reasons (my beautiful country takes 27.5% taxes from capital gains, but you can offset those capital gains with capital losses).

So I decided to sell some of those low conviction stocks and take some losses (which is useful for me for tax reasons, bc I had some capital gains from the JUNO takeover) and redeploy the cash to my holdings that had the highest conviction ratings and took comparatively higher hits off the 52 week high (whereby I took more emphasis to the conviction rating than the drop amount).

Best wishes

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And just like that, TWLO no longer far from its highs