Automatic Investment Management Redux

[wayneL]

So I have remained curious about Lichello's AIM system, as we approach the widows and orphans stage of our investment journey, lol.

I wanted to give it a go with real money (but not very farkin much tbh), so about 18 months ago selected a couple of what I thought were dodgy retailers that are in our local Madland Shopping Centre, which I thought would struggle at the time but potentially recover *somewhat medium term, Dusk and Adairs.

I haven't got the spreadsheet on this device, but I did the standard 50% of cash in share holdings and 10% buy and sell safe.

I compared a 100% buy and hold versus the Lichello system, not including divs or taxation considerations, because I couldn't be bothered coding it into the spreadsheet.

Results thus far over 18 months:

DSK
B&H -16.5%
AIM +4.4
AIM cash 22.8%

ADH
B&H +5.9%
AIM + 22.7%
AIM cash 47.5%

Interesting?

 

[divs4ever]

So I have remained curious about Lichello's AIM system, as we approach the widows and orphans stage of our investment journey, lol.

I wanted to give it a go with real money (but not very farkin much tbh), so about 18 months ago selected a couple of what I thought were dodgy retailers that are in our local Madland Shopping Centre, which I thought would struggle at the time but potentially recover *somewhat medium term, Dusk and Adairs.

I haven't got the spreadsheet on this device, but I did the standard 50% of cash in share holdings and 10% buy and sell safe.

I compared a 100% buy and hold versus the Lichello system, not including divs or taxation considerations, because I couldn't be bothered coding it into the spreadsheet.

Results thus far over 18 months:

DSK
B&H -16.5%
AIM +4.4
AIM cash 22.8%

ADH
B&H +5.9%
AIM + 22.7%
AIM cash 47.5%

Interesting?

according to their own releases DSK runs very high margins ( over 50% )

it will be interesting to see how they handle the downturn , can they absorb a reasonable amount of cost rises ?

( i hold DSK )

 

[wayneL]

Results thus far over 18 months:

DSK
B&H -16.5%
AIM +4.4
AIM cash 22.8%

ADH
B&H +5.9%
AIM + 22.7%
AIM cash 47.5%

Interesting?

Another interesting data point.

For DSK the shareholding has approximately doubled.

For ADH the shareholding has increased about 40%

So any further run up in share prices will be very good.

By luck, the share movements have suited the system, but this is not always the case to be fair.

 

[peter2]

Also essential that any stock you select must not go bankrupt. Dusk was a risky choice back then.

I agree that Lichello's AIM strategy is an interesting one with a few tweeks for current markets.
eg. Buy/sell levels based on stock volatility rather than just percentage.
eg Consider modifying buy/sell levels based on market conditions (Bull, Bear conditions). In bull market sell at higher levels. in bear markets buy at lower levels.

Robert Lichello published his system in 1977 before LEAP options were available, before ETFs.

 

[wayneL]

Also essential that any stock you select must not go bankrupt. Dusk was a risky choice back then.

I agree that Lichello's AIM strategy is an interesting one with a few tweeks for current markets.
eg. Buy/sell levels based on stock volatility rather than just percentage.
eg Consider modifying buy/sell levels based on market conditions (Bull, Bear conditions). In bull market sell at higher levels. in bear markets buy at lower levels.

Robert Lichello published his system in 1977 before LEAP options were available, before ETFs.

I've been continuously spammed by a character who promotes leap options for this strategy... And of course, as you say, Peter, there are various modifications you can make to the system according to how you see the market phase.

I find both interesting especially being and options aficionado. I have intentionally eschewed both for this little experiment.

The is the so-called Vealy strategy for rampant Bull markets, which I think makes a whole bunch of sense considering that the basic unadorned strategy seriously underperforms the B&H in those conditions. The trick in anticipating those rampant bulls in a sufficiently timely fashion.

I do have lots of ideas on how to modify this system which I really do not have the capability of coding for the purposes of back testing, but which work fairly well with the benefit of hindsight.

At this stage I am completely unsure how it would perform on a portfolio wide basis in *real time*.

In particular one of my thoughts is the treatment of the "cash holdings" and where to park them rather than in a cash management account; perhaps in some sort of bond etf or bond proxies such as precious metals which can readily be liquidated in favour of buy orders.

Another factor is the apparent forgoing of some dividend income and taxation considerations, as you do create a series of potential capital gains tax events on the sell side. Again I wish I had the capabilities of coding this into a the spreadsheet. I have tried but it usually results in me having an intellectual meltdown and resorting to self medication via a few tinnies of Guinness and falling asleep

LEAPS/options (if available on the particular ticker), although my particular Forte, do add several layers of complexity, via the Greeks, matching Delta risk and added contest risk (ie transaction costs and spread/slippage). Additionally in my opinion the holdings should be calculated via deltas rather than no. of shares. Sometime I will investigate this further as time permits.

At this point it remains "interesting" enough to keep investigating, although back testing via spreadsheet is both time consuming and laborious.

FWIW