Ask Mike:
What happens when you get too many subscribers?

Question:

Joe, from San Francisco asks:

Mike,

I am very interested in TurnerTrends and really like your approach to investing. I attended one of your presentations and must tell you that you were the best speaker at the Money Show. Everything you said just made sense to me.

I have signed up as a new subscriber and am anxious to get my own portfolio matched up with yours.

I do have one question that bothers me. I saw a lot of people signing up at your booth and it occurs to me that it won't be long before you have so many subscribers that when you make a recommendation, your subscribers will artificially push the market up on a stock. This means that some of us will end up paying more than we should (or could) have if the number of subscribers to one of your model portfolios becomes too large.

Here's my question: Do you plan to limit the number of subscribers who can follow one of your model portfolios?

It was great to meet you, Mike. I look forward to following all three of your investment strategies.

Yours truly,

Joe

Mike's Response:

Hello Joe,

You ask a great question, and one that comes up often.

First of all, I agree completely with you. It is obvious that if several thousand investors suddenly buy or sell a stock, that action, when done in concert, will have a market-moving impact on almost any stock.

One way to combat this problem is by only trading in stocks that have a significantly large number of shares that are traded on a daily basis. Currently, we use a minimum average daily volume of 100,000 shares when we are looking at potential stocks to add to one of our portfolios.

When we announce that our list of new buys has been posted on the website each week, we look to see if there is any after-market trading done that would indicate more than normal trading activity. Then, we look for the how often the price jumps up at the opening bell.

So far, our subscribers have not been appreciably pushing the market.

However, I expect that will soon change.

Our rate of growth is steadily increasing as more and more people learn about our services and our approach to investing. It is obvious that sooner rather than later, we will begin to see the market for a stock being pushed just by the shear number of new buyers or sellers based on our recommendations.

When that occurs, we will either raise our minimum average daily volume criteria or close the model portfolio to new subscribers.

As a matter of fact, we are instituting a new buying strategy as of this date: In the future, we will only enter our limit orders equal to the closing price of the stock as of the end of the past week. This strategy, alone, will force most of the trades to occur later than the opening bell. Further, we will be placing these orders as GTC for the week. If we are unable to get the position filled at our price by the end of the week, we will let it go. This strategy will all but eliminate any initial market manipulation that might occur from our recommendations.

Now... what this means is, there may be some situations where we do not get the stock because it runs away from us. But, I suspect those situations will be rare. It also means that, in some cases, a subscriber may get his/her limit order filled, when we do not or vice versa.

Stop losses are another matter. Since our stops are stop market, this is where we could see the number of subscribers having an impact on share price.

As we grow, we will do our best to keep our recommendations from pushing the market. If it begins to happen, we'll make the appropriate change in how many subscribers can follow a single portfolio.

Thank you for attending my presentation, Joe. Thank you for your kind remarks. And thank you for subscribing!

Best regards,

Mike