Annualized Returns of Trading Strategies for LXK

These figures represent the annualized yields from several strategies for LXK, conducted mechanically for 10 years. The concept of stops does not apply to the top few entries, which are various flavors of the well known Buy and Hold strategy. Although this venerable strategy is frequently praised, in the most simple form, it failed for this company, with a loss of -4.00 %.

Buy and Hold strategy in the most simple form is exercised by buying on every day of the test period, and holding the issue to the end . Many people practice some of the more realistic versions of Buy and Hold, for example, Momentum Investors might buy on rising prices and then hold. A speculator with a bit of sophistication might buy on dipping prices, while a technician might wait for technical signals to buy and then hold.

Our tests show it is generally better to buy on the dips rather than trying to follow the momentum of the market. But LXK is an exception to that rule. Both strategies offer improvement over the unadorned Buy and Hold. Some stocks just do not seem to respond in a normal way to the usual technical signals. Here a signaled buy and hold offers no improvement at all!

All the buy and hold strategies suffer from a dangerous defect, as they do not cut losses. The statistics underestimate the harm of this defect, because market statistics are based on companies that survive. Doctors bury their mistakes, but Exchanges de-list them.

From the Report Dated 3/1/2010: At least from the standpoint of a single company strategy, the best setting over the past 10 years has been -3 percent for LXK when adjusting stops weekly. However, setting stops this close can result in excess transactions. The best stop wider than 10 percent is -32 percent. This has historically produced a yield during holding periods that annualizes to -12.00 %.

How to set sliding stop limits for Lexmark International, Inc.:

Stop loss limit orders would appear to be almost always desirable. But where to set the stop limit is controversial. Setting to limit too low may allow for too great a loss. But setting the limit too high may cause the trade to "stop out" prematurely, perhaps missing a rally and also incurring an unwelcome brokerage fee.

Two issues need to be settled in arriving at a stop limit strategy. The first is to determine the price to position the stop loss at a percentage below the buy-in price. The second is to determine a strategy for raising or sliding the stop to lock in gains without undue risk of prematurely "stopping out" on some insignificant dip in price.

Technical Buy Signals and Trailing Stop-loss