Updated LSCM Strategy

So it's been a while since we've posted anything on here, but not a whole lot has changed since April.  What I will touch on is some of the problems we've encountered and the strategies we've employed to counteract them.

When we first started Lake State Capital Management at the beginning of 2011, everyone was super pumped up about meeting every couple weeks, analyzing stocks, and voting to make plays that could give us a quick hit for a gain.  We ran with that mindset for the first few months of 2011, but we quickly realized that once summer started that it was hard to keep the pace we were running at up throughout our existence.  We would buy into securities that would gain a lot or lose a lot within the first few weeks of owning the stock so we decided to set safety nets on stocks that decided to drop fast.  We set an 8% loss rule to sell automatically if a stock fell 8% off its high point of our ownership.  This was a great strategy when we were meeting every few weeks to put our cash back into other investments, but when summer hit, things changed.

During the summer months, it was hard to get everyone to meet even once a month so what happened was that when we had investments that hit the 8% rule after just a week or 2 of our ownership, we were sitting on cash until we met next without the money working for us which in our opinion was not a good play on our part.  We tried a few times to push different plays on stocks through on group emails, but we hadn't agreed in LSCM meetings on a procedure to do this and it became a hot topic as we headed into our meeting in early September.  We had a group of people in the group who had the ability to monitor stocks on a daily basis and react to changing market conditions as they happened.  On the other side of that though, we had a group of people who's jobs didn't allow for as much exposure to the changing market landscape.  It became evident to everyone that we needed a procedure to move quickly on plays that we thought were no brainers and this is what we came up with in our September meeting.

What we decided to do was to change our groups strategy from one of voting on stocks that people brought up at meetings only, holding them until the next meeting and reevaluating to more of a split portfolio.  The largest portion of our portfolio is devoted to a buy and hold strategy, buying blue chip stocks that have had a solid history, strong brand, and a bright future.  Doing this will provide us the ability to be more hands off on the portfolio as it should be expected that these stocks increase as time moves on.  This will encompass 75% of our portfolio and will be the staple and backbone of LSCM.  It will be reevaluated every meeting as to what we want to do and how we think the market could affect our portfolio.  The remaining 25% of our portfolio will be devoted to "quick plays".  We decided that in order to continue to learn new types of investments we needed to continue to expand our knowledge into the different types of securities that we can invest in.  This group is made up of 5 people (Ben Turnwall, Pete Anderson, Jay Rainey, Kyle Lee, and Peter Rolando) who have the ability to react quickly to changing market conditions and make quick hit and run plays from day to day.  What this also enables us to do is to buy up stocks who we believe is very undervalued, even though they could be considered a perfect buy and hold opportunity, and then put it up for a group wide vote to move into our Long Term Portfolio.  Thus far this group has done a good job communicating with each other and have made some good plays since the new strategy took effect.  Our long term, buy and hold portfolio should be structured at our next meeting on Thursday, October 13th.

It has been a great first year where we've made some good plays, but just as many boneheaded moves which we gained our largest return on....the knowledge to not make the same mistake twice which at this point will carry us farther than even the largest returns in this first year.