I sold Geokinetics, Inc. (GOK) today for $7.91 per share, a 92% profit in exactly one year.  Geokinetics is the second of two Oil Services firms that I purchased a year ago during the BP Oil spill fiasco, when there were threats to shut down all offshore drilling in the Gulf of Mexico.  I knew the U.S. would not abandon our Gulf oil supplies.  I described the purchases in this article: Buying When there’s Blood in the Street.   The other stock (Hornbeck Offshore Services) was sold March 21st for a 112% profit, as described in this article.

That’s 2 great stock picks, averaging more than 100% profit, yet better money management, combined with my new trend exhaustion spreadsheet, would have yielded a much greater total return to my portfolio.

The bigger the bargain, the more you should buy..
I put 3% of my portfolio in GOK, which was my standard weighting last summer when I bought the stock.  There was nothing special about 3%, it just ‘seemed’ right.  But GOK was grossly undervalued when I bought, and I should have placed a greater amount in the stock in order to take advantage of the mispricing.  How much exactly to invest puzzled me until I remembered the Kelly Formula.  I then researched and developed  The Kelly Formula for Stock Investing: Growth-Optimized Money Management.  (Click on link for article)  I use that spreadsheet to tell me how much weight to give each new stock purchase.  It is based on a gambling method that gives you optimal betting fractions.  In the case of GOK I should have placed 9% of my portfolio in the stock.  This alone would have tripled my monetary return.

But that’s not all.

The Trend is your Friend – Until the End..
I bought GOK on June 29, 2010 at $4.12 per share.  The timing was perfect, late June 2010 was the 52-week low for the stock.  I timed the purchase of GOK using my then-brand-new spreadsheet:  Trend Exhaustion Market Timing Spreadsheet.

GOK hit it’s highest price of the past year – over $10 per share – back in February 2011.  Unfortunately I wasn’t monitoring my trend exhaustion spreadsheet for this stock, because it gave a signal to Sell GOK on February 28th.  I could have got out of the stock at around $10.59, when I was sitting on a 157% return!

You can see the Buy and Sell signals in the spreadsheet image below.  The Buy signal was a 9-week Buy SETUP, the signal is given in cell O709 (June 28, 2010).  The Sell signal was an ‘Aggressive Sequential’, the signal is given in cell BH744 (February 28, 2011).

I did not time my recent stock purchases (MANT, CSCO, and WMT) using my ‘Trend Exhaustion’ spreadsheet.  I may regret it, but those are stocks I really wanted to own at the prices I bought.  I did use the ‘Kelly Formula’ spreadsheet to optimize my bet size.

Both of these spreadsheets are now available on my Research Offers page.