Here’s an update on my Acquirer’s Multiple (TAM) Live Portfolio.
As you can see below, my TAM Portfolio is up 10.68% since inception. Largest gains to date have come from Global Sources Ltd. (Bermuda) (NASDAQ:GSOL) up 142%, Fiat Chrysler Automobiles NV (NYSE:FCAU) up 134%, and FreightCar America, Inc (NASDAQ:RAIL) up 82%. Biggest drops to date include Applied Genetic Technologies Corp (NASDAQ:AGTC) down 59% and Eastman Kodak Company Common New (NYSE:KODK) down 52%.
More Than A Stock Screener – A Deep Value Portfolio Management Strategy
Something which sometimes gets overlooked by investors regarding TAM is that this website provides more than just a Stock Screener, it provides a Stock Screener and a Deep Value Portfolio Management Strategy.
While the screens provide us with the stocks to buy, we also have some very simple rules for managing our hold and sell decisions. Additionally, TAM also factors in important investment decisions concerning the impact of transaction costs and tax on hold and sell decisions and the number of stocks to hold. All of which are encapsulated into the strategy.
It’s now just over twelve months since I started my portfolio and each month I continue to simply follow our systematic approach to buy, hold and sell decisions as follows:
1. Buy the 2-3 cheapest stocks in the All Investable Stock Screener each month until you have 20-30 stocks, and hold for twelve months.
2. One week before the 12 month holding period check to see if the stock is up or down. Then:
a. If the stock is up – hold for 12 months and one day until it leaves the screen (or has already left the screen), then sell.
b. If the stock is down – and still in the screen hold until it leaves the screen, then sell.
c. If the stock is down – and out of the screen, then sell before the 12 month holding period.
While this systematic approach is indeed very simple, there are a number of reasons why investors abandon or alter a TAM strategy. Namely:
- Investors become impatient if the stock picks provided by the Stock Screener underperform on a short term basis.
- Investors try to pick the stocks that they believe will perform best out of the Stock Screener rather than simply picking the cheapest from the All Investable Stock Screener.
- Investors sell winning stocks too early and hang on to underperforming stocks too long, both of which have considerable tax implications and in the case of hanging on to underperforming stocks, an opportunity cost.
- Investors mix stocks from the Stock Screener with other stocks outside of the screen.
- Investors hold more than the recommended 20-30 stocks which leads to over-diversification.
On A Personal Note
I have invested 100% of my superannuation into TAM. What I personally love about TAM is that the most difficult investing decisions regarding, when and what to buy, how long to hold, when to sell, portfolio size, and consideration of tax and transaction costs are all factored into the strategy. This prevents mistakes associated with our human cognitive biases.
It is important to remember that no single strategy works all of the time. All investing strategies go through periods of underperformance. But, if you are an intelligent and patient investor prepared to go through periods of underperformance to achieve investing success then I recommend using the TAM deep value investing strategy which has been rigorously back-tested using the most diligent analysis.
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