Investment Strategy

One of the tasks we set ourselves to do as club is to come up with an investment strategy so hear goes a first stab at it…
As a general rule it is prudent to ask ourselves:
Which stocks do we want to invest in-which means what are we looking for in stocks we invest in? Share price growth or dividends or both? Stock spilt or bonus share issue?
How many shares? Do we want to buy them all in one go and sit tight or increase our share holding in the particular stock slowly?
At what price?
How long do we want to hold them for?
As 5 year-term investors, the last one is especially relevant. This election year and the NSE will react both to who it thinks the new govt will be and also to who is elected. My current view is that a Kibaki government will be greeted more positively because it promises continuity where another govt will get a wait-and-see reaction for the first few months. However, it is also our first year and it would be good to get off on an ambitious footing. So bearing the need to balance these two imperatives, my suggestion was that we use a 50:40:10 rule on our monthly investments for the first year and review this next year. This excludes any spend on IPOs. So:
50% would be long-term stable shares with good dividends; strong profits possibly market leaders in their sector. We’d typically want to hold these for the next 2/3 years and have clear entry strategy (number of shares, price & timing) and exit strategy (timing and price).
40% would be growth shares where either the company is doing really well profit-wise, strategically or a strong company has recently had a share-spilt which will likely rise. These are stocks whose performance we’d review very closely on month on month basis and require careful research.
10% on speculative moves. This would be cash we could keep free during the month with the option to respond to any event on any stock regardless of its strength. If remaining uninvested, we can reinvest this in the next month. We could also use this 10% to invest in companies that have the potential but there are certain barriers or issues that stand in the way e.g. Kengen, KPL, National Bank of Kenya

On IPOs, my suggestion was that we go for the minimum available-please note as we are treated as a corporate, this is likely to be around 10,000 shares anyway. My reasoning on this is because my experience on IPOs is that refunds are now taking 1 month or 2 after the share has listed. If you also include the 2/3 weeks spent doing the allocation prior to listing, it comes to about 2/3 months when our cash will not be earning us anything.