Annualized Returns of Trading Strategies for ZMH

This table shows the results some simple trading policies from brute-force calculations on every trading day during the last 9 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 -2.00 %.

The naïve interpretation of the Buy and Hold strategy is tested by buying on every day of the period, and evaluating the value of the accumulated holdings at 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 ZMH 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!

Strategies lacking a stop-loss policy are too dangerous, given that every stock, sooner or later, will become worthless.

From the Report Dated 11/15/2010: -3 % has been the best sliding stop-loss setting for ZMH in the past. This assumes the stops are adjusted on the week-end. However, setting stops this close can result in excess transactions. The best stop wider than 10 percent is -20 percent. This has historically produced a yield during holding periods that annualizes to 14.00 %.

How to set sliding stop limits for Zimmer Holdings, 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