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Let your profits run and cut your losses short.
The idea was first put into words by British economist David Ricardo who, when asked the secret to his success as a bond trader around 1700 opined that one should” Cut short your losses; let your profits run on.”
In the Flagship Small-Cap Momentum Portfolio, we apply it not just to the price action but to the fundamentals. My research has shown that for momentum to have a chance to deliver huge returns it must be based on fundamental momentum.
As we told you on day one, this often leads to high runover months, especially around earnings season and this month is no different. Our version of Carmen (the computer Danny DeVito used to make a fortune in the classic Other People’s Money) chewed up the data this month and told us to part ways with 10 stocks.
Those 10 stocks are $CISO ( ▼ 6.9% ), $JVA ( ▼ 3.1% ), $CPS ( ▼ 1.42% ), $MTRX ( ▼ 1.96% ), $NTWK ( ▲ 1.03% ), $OPRT ( ▼ 0.21% ), $PLBY ( ▼ 5.33% ), $QMCO ( ▼ 0.91% ), $SIF ( ▲ 0.48% ), and $SPWH ( ▼ 3.72% ).
It is a mixed bag of winners and losers, but the computer has suggested that fundamental momentum is wanting, and it is time to pass company.
In place of these stocks, we will purchase 10 new stocks that have both fundamental and price momentum with the potential to drive the stock prices to new high levels in the months ahead.
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