Tuesday, December 29, 2009
Tuesday, December 15, 2009
Going Nowhere
Every morning, we wake up in a cold sweat over here at Magnum Opus Financial wondering: "What is going to happen today?" Instantly we grab an iPhone and click on the CNBC App which inevitably goes straight to the PRE-MARKETS where we see whether this day "looks" like it'll be easy or hard. Then we get ready, find something to eat and make our way to the office.
This morning, when we brought up the PRE-MARKETS, we see a very telling chart of the DOW, S&P 500, and NASDAQ over the last 30 days. We have had 4 dips in these indexes over that period of time, nearly all of them reaching the same levels and then returning back to the same level as before. Now, from an absolute basis, the markets do claw higher and higher each time we come back from the dip. But it's the fact that it claws higher that we can be OK with this market going higher. Compare the recent period from November 1st to today, and it's really not that exciting. Really, since August 14th (nearly 5 months ago) the market has been forming higher lows and higher highs. The slope (the mathematical term that means the angle of the line, or how dramatically it rises or falls), is really slowing down since November 9th...it's almost a straight line.
We need a market that is NOT parabolic (like the period from March 9th to May 8th). See, the other side of a parabola is the same as the upside...just straight down. When we saw the S&P do nothing from May 1st to July 14th (seriously, the level of the S&P at the beginning of the period is nearly the exact level it was at on July 14th, at the end); it went much higher from July 14th to November 1st. Bottom line, we may be going nowhere over the next month or so...and that's just fine. We need periods of consolidation, or even decline for this market to stay healthy. Our favorite saying is: "The longer the base, the higher in space." There is nothing wrong, we think, with believing that we are building a base right here around 1100 in the S&P that will end up being a very good support going forward.
As long as we keep seeing signs of improvement like Exxon buying XTO and banks returning TARP, we think things really are improving. So, do your homework, find individual stocks of good companies that have gotten too cheap, like Terex (TEX) and Molex (MOLX) and don't forget to take something off the table when you're up big. Just know that for now, the indexes may just go nowhere for a while (but that doesn't mean your stock has to).
This morning, when we brought up the PRE-MARKETS, we see a very telling chart of the DOW, S&P 500, and NASDAQ over the last 30 days. We have had 4 dips in these indexes over that period of time, nearly all of them reaching the same levels and then returning back to the same level as before. Now, from an absolute basis, the markets do claw higher and higher each time we come back from the dip. But it's the fact that it claws higher that we can be OK with this market going higher. Compare the recent period from November 1st to today, and it's really not that exciting. Really, since August 14th (nearly 5 months ago) the market has been forming higher lows and higher highs. The slope (the mathematical term that means the angle of the line, or how dramatically it rises or falls), is really slowing down since November 9th...it's almost a straight line.
We need a market that is NOT parabolic (like the period from March 9th to May 8th). See, the other side of a parabola is the same as the upside...just straight down. When we saw the S&P do nothing from May 1st to July 14th (seriously, the level of the S&P at the beginning of the period is nearly the exact level it was at on July 14th, at the end); it went much higher from July 14th to November 1st. Bottom line, we may be going nowhere over the next month or so...and that's just fine. We need periods of consolidation, or even decline for this market to stay healthy. Our favorite saying is: "The longer the base, the higher in space." There is nothing wrong, we think, with believing that we are building a base right here around 1100 in the S&P that will end up being a very good support going forward.
As long as we keep seeing signs of improvement like Exxon buying XTO and banks returning TARP, we think things really are improving. So, do your homework, find individual stocks of good companies that have gotten too cheap, like Terex (TEX) and Molex (MOLX) and don't forget to take something off the table when you're up big. Just know that for now, the indexes may just go nowhere for a while (but that doesn't mean your stock has to).
Friday, December 11, 2009
When is Boring Good?
So, what do you do, right now, with your portfolio? The stock market is undecided as to what it's going to do. Joe Terranova, today on Fast Money Halftime Report, he told viewers never to sell a quiet market. That is exactly what we have in front of us...very quiet. We have been in this range for weeks now. So, now what?
If you are long only (for a definition of "going long" please see our YouTube Channel video on the subject to get up to speed. So, if you're a retail investor, we are very sure that you own few options positions (if any) and very rarely do you sell stock short. So, what can you do to protect all of your long positions? We have two ideas.
1) The VIX, is the measure of options action on the S&P. The higher the VIX, the greater the movement on the S&P that is expected. So a 20 handle on the VIX indicates that corresponding move in the S&P 500 index. As the VIX rises, you see wilder and wilder swings on the index. Now, it has been called the "Fear Index" and there is a trader on the FMHT Report that they call the "Fear Merchant" but those are really silly, uneducated characterizations of the VIX. What we do know is this, when markets decline, especially big, people place more options bets, more protection, more directional calls...and it sends the VIX UP! So, stocks down, almost always, VIX up. SO, you can buy iPath ETN that tracks the VIX! You can buy the VXX, which tracks the shorter term futures of the VIX. They have another product that tracks the VIX on a longer term...but we think there is a lot of noise in that product, so take a look at getting long the VXX as a way to protect your portfolio of individual stocks.
2) The Dollar is one of the most crowded trades ever. The stock market and the dollar are certainly at odds with each other right now. A weak dollar is terrific for US companies that export goods to foreign countries. So, if you want to make money when stocks go down...you can own the US Dollar! Usually, with commodities, there is a "negative roll yield". This is just fancy talk that tells you every time the index is rebalanced, usually monthly or quarterly, then you lose a little bit of money as they roll those contracts (sell the current month and buy the next month contract). They have to roll commodities contracts because (like options) those contracts expire on the expiration date and they don't actually want to take possession of the actual commodity. This problem of a negative roll yield doesn't exist in the UUP (the ticker symbol of the Powershares Dollar ETF) because there is no cost to store dollars (as opposed to oil, corn, sugar, etc). This means that when you buy the UUP, you can really own in forever if you like.
One of two things will happen with the UUP. Either stocks will remain at odds with the dollar, and on down days, you'll see the dollar go up. Because so many people are short the US dollar, eventually those people will have to cover their short position by buying the dollar back at the then current market price. That could be ugly and you could see an amazing short squeeze (sending the UUP up huge). OR the dollar and the stock markets will decouple. This means that they can move in the same direction. When that happens, it means you can continue to own the UUP AND your stocks at the same time! So, we think, this may be something that you could hold forever. Essentially your only risk is political risk (which involves fiscal responsibility risk). Unless the US collapses, the dollar will always be worth something...and the people feel like the dollar will be much stronger in 5 or 10 years. A short covering rally in the dollar will certainly bring that to fruition.
There you go, two great ideas for how to protect a long only portfolio when you can't (or will not) go short or own options!
If you are long only (for a definition of "going long" please see our YouTube Channel video on the subject to get up to speed. So, if you're a retail investor, we are very sure that you own few options positions (if any) and very rarely do you sell stock short. So, what can you do to protect all of your long positions? We have two ideas.
1) The VIX, is the measure of options action on the S&P. The higher the VIX, the greater the movement on the S&P that is expected. So a 20 handle on the VIX indicates that corresponding move in the S&P 500 index. As the VIX rises, you see wilder and wilder swings on the index. Now, it has been called the "Fear Index" and there is a trader on the FMHT Report that they call the "Fear Merchant" but those are really silly, uneducated characterizations of the VIX. What we do know is this, when markets decline, especially big, people place more options bets, more protection, more directional calls...and it sends the VIX UP! So, stocks down, almost always, VIX up. SO, you can buy iPath ETN that tracks the VIX! You can buy the VXX, which tracks the shorter term futures of the VIX. They have another product that tracks the VIX on a longer term...but we think there is a lot of noise in that product, so take a look at getting long the VXX as a way to protect your portfolio of individual stocks.
2) The Dollar is one of the most crowded trades ever. The stock market and the dollar are certainly at odds with each other right now. A weak dollar is terrific for US companies that export goods to foreign countries. So, if you want to make money when stocks go down...you can own the US Dollar! Usually, with commodities, there is a "negative roll yield". This is just fancy talk that tells you every time the index is rebalanced, usually monthly or quarterly, then you lose a little bit of money as they roll those contracts (sell the current month and buy the next month contract). They have to roll commodities contracts because (like options) those contracts expire on the expiration date and they don't actually want to take possession of the actual commodity. This problem of a negative roll yield doesn't exist in the UUP (the ticker symbol of the Powershares Dollar ETF) because there is no cost to store dollars (as opposed to oil, corn, sugar, etc). This means that when you buy the UUP, you can really own in forever if you like.
One of two things will happen with the UUP. Either stocks will remain at odds with the dollar, and on down days, you'll see the dollar go up. Because so many people are short the US dollar, eventually those people will have to cover their short position by buying the dollar back at the then current market price. That could be ugly and you could see an amazing short squeeze (sending the UUP up huge). OR the dollar and the stock markets will decouple. This means that they can move in the same direction. When that happens, it means you can continue to own the UUP AND your stocks at the same time! So, we think, this may be something that you could hold forever. Essentially your only risk is political risk (which involves fiscal responsibility risk). Unless the US collapses, the dollar will always be worth something...and the people feel like the dollar will be much stronger in 5 or 10 years. A short covering rally in the dollar will certainly bring that to fruition.
There you go, two great ideas for how to protect a long only portfolio when you can't (or will not) go short or own options!
Wednesday, December 2, 2009
Planting the SEED: China Watch SFD, BG, SYT, MON, ADM, SEED, TSN - TheStreet TV
Planting the SEED: China Watch SFD, BG, SYT, MON, ADM, SEED, TSN - TheStreet TV
Monsanto is huge in the genetically engineered seed market. What Monsanto can do with technology just can't be done with nature. Check out this video from TheStreet.com TV to learn more about a hot company that is on our radar as a growth play going into the future. Origin Agritech Limited (SEED) is the fist company that has been granted approval from the Chinese Government to sell their seeds in China. So, what Monsanto is to the US farmer COULD be what Origin becomes to the Chinese farmer, the second larges corn market in the world. If they report a good quarter, after sales start, then you're looking at a great catalyst for this stock to move higher.
Monsanto is huge in the genetically engineered seed market. What Monsanto can do with technology just can't be done with nature. Check out this video from TheStreet.com TV to learn more about a hot company that is on our radar as a growth play going into the future. Origin Agritech Limited (SEED) is the fist company that has been granted approval from the Chinese Government to sell their seeds in China. So, what Monsanto is to the US farmer COULD be what Origin becomes to the Chinese farmer, the second larges corn market in the world. If they report a good quarter, after sales start, then you're looking at a great catalyst for this stock to move higher.
Tuesday, November 24, 2009
What to do with Retail
Today, we saw a big pop in retail stocks. I think that people are really starting to believe that Holiday sales really will be better than expected. In advance of that, we are seeing retail names ramp into the shopping this weekend. Chuck Grom, the analyst at JP Morgan Chase on Fast Money tonight, talked about getting long department stores into Black Friday and then offset it with a discount retailer. We are actually taking on half that trade and bought Grom's name: Macy's (ticker M). Macy's really has tremendous Star Power with the likes of Jessica Simpson, P. Diddy, 50 Cent, and others. I think this ultimately drives traffic into the stores and that should translate into sales this Holiday Season.
Other names that we think are really attractive are True Religion (TRLG) which has nearly $100 million in cash and zero debt; all with double digit margins. Even more, we like Buckle (BKE) because it offers a 2.9% dividend, also with double digit margins. The Buckle does have over $100 million in cash; it's actually $163 million in cash and still no debt. These retailers are very trendy and offer clothes that young people really want to wear. I don't know about you, but I rarely buy new clothes. Who does? Young people buy clothes, because they are worried about how they look (especially when it comes to the opposite sex) so they will continue to wear "what's hot". The other end of retail that should work is the higher end, because those people actually have money to spend...which is what keeps us from buying more clothes! So, you should be able to own BKE and TRLG, as well as a higher end name.
We don't know high end like we know the other segments. And there is no one more popular and knowledgeable than Patty Edwards from Storehouse Partners. In our conversation tonight with Patty we talked about the high end of retail and she felt very comfortable with a couple names. J. Crew was her number one name and she said she is very comfortable owning that name. We also talked for a while concerning the Diamond Market. We took a look at the industry from the bottom where the Diamonds are pulled out of the ground (Harry Winston Diamond Corp. (HWD)) all the way to Tiffany and Company and Blue Nile. Patty said she has personally been able to visit the facilities at Blue Nile and they are a fabulous company that is extremely well run. She said that their follow-up after a purchase is top notch and their customer service is top of the market. We know that companies that provide service to their customers like Chipolte and Panera Bread (which have run up huge). Blue Nile offers everything from a pair of earrings for $38 to a piece of jewelry that cost over $100,000; you can have both at Blue Nile (NILE). Her other name, TIF, is a testament to the high end retailer. She did have concerns about HWD, and we admit that we have them as well. But, we are value investors and $2 downside and $30 upside is a great risk reward for us. They have had a string of rough quarters and are not projected to be profitable until another 3 quarters of losses. So, it will take a surprise turnaround for this company to be profitable. Our time horizon on this is in years, so know that up front. A search for news on HWD also brought MOV out, but this company may just need to be avoided. In fact, Jim Cramer told you to sell it a day or two ago on Mad Money. But, unlike many of the American Companies, the Chinese-based Fuqi International (FUQI)has consistently grown earnings and is projected for each quarter next year to beat those numbers year over year. Plus, their Q4 is seasonable strong each year (thanks to Holiday sales). Of all the Jewelry names, FUQI seems the most dependable, HWD is our idea of a longer shot value play, and Blue Nile (NILE) is a way to play both the rise in online transactions and the return of the consumer to jewelry purchases. You may want to avoid TIF and MOV. We will not have to wait long to see how TIF is doing.
Jim Cramer did a fine job tonight on Mad Money, bringing in the CEO of Phillips-Van Heusen Corp (PVH). Let it be known that they have apparel lines that apparel in everything from Walmart* to Nordstroms. They have outlet stores, are in department stores, and across many lower end retailers. The number show that about 45% of all shirts sold are from PVH and about 50-55% of the neck ware. Those are amazing market shares and can be found in their Calvin Klein, DKNY, IZOD, Donald J. Trump Signature Collection, Kenneth Cole, and (our favorite) Sean Jean. With this lineup, you really get all segments of retail and if you want a retail play...this is good one with $7.16/share in cash. They have already said that if the Q4 goes the way they see it going right now, the'll see meaningful improvement in their margins.
So, the moral of this story, when it comes to retail, you have to own the best. There is no room to own a company that is debt laden, nor one that can't execute. I did have a conversation with a trader today that pointed out that I shouldn't hate Walmart* as much as I do because it has a fabulous online business just like Amazon does. I have been endlessly negative on Walmart* because of it's brick and mortar operations not being able to grow. But, last night, Jim Cramer pointed out that Amazon and other online transactions are only 3% of total retail transactions right now and that in the future, it could be higher, much higher, closer to 30% (not just 3% anymore). So, I'm going to have to take Walmart* out of my Sell Block and tell you that it just may be safe to own Walmart* here on that growth in online retail transactions and the fact that they continue to innovate with their financial services division. They are good executors of their business and that should benefit shareholders going forward.
So, do your shopping for retail stocks before the Black Friday numbers come out and ride it into Christmas. But, we want to let you know that when those numbers come in...if you see your stocks rip...don't be afraid to take some of those profits off the table. We are letting you know now, because we may not get around to telling you when we actually move it off the books. If we get 10% moves in any particular names, that's a great opportunity to pull the rip cord and take home those profits. Heck, then you can go shop at your favorite retail store!
Other names that we think are really attractive are True Religion (TRLG) which has nearly $100 million in cash and zero debt; all with double digit margins. Even more, we like Buckle (BKE) because it offers a 2.9% dividend, also with double digit margins. The Buckle does have over $100 million in cash; it's actually $163 million in cash and still no debt. These retailers are very trendy and offer clothes that young people really want to wear. I don't know about you, but I rarely buy new clothes. Who does? Young people buy clothes, because they are worried about how they look (especially when it comes to the opposite sex) so they will continue to wear "what's hot". The other end of retail that should work is the higher end, because those people actually have money to spend...which is what keeps us from buying more clothes! So, you should be able to own BKE and TRLG, as well as a higher end name.
We don't know high end like we know the other segments. And there is no one more popular and knowledgeable than Patty Edwards from Storehouse Partners. In our conversation tonight with Patty we talked about the high end of retail and she felt very comfortable with a couple names. J. Crew was her number one name and she said she is very comfortable owning that name. We also talked for a while concerning the Diamond Market. We took a look at the industry from the bottom where the Diamonds are pulled out of the ground (Harry Winston Diamond Corp. (HWD)) all the way to Tiffany and Company and Blue Nile. Patty said she has personally been able to visit the facilities at Blue Nile and they are a fabulous company that is extremely well run. She said that their follow-up after a purchase is top notch and their customer service is top of the market. We know that companies that provide service to their customers like Chipolte and Panera Bread (which have run up huge). Blue Nile offers everything from a pair of earrings for $38 to a piece of jewelry that cost over $100,000; you can have both at Blue Nile (NILE). Her other name, TIF, is a testament to the high end retailer. She did have concerns about HWD, and we admit that we have them as well. But, we are value investors and $2 downside and $30 upside is a great risk reward for us. They have had a string of rough quarters and are not projected to be profitable until another 3 quarters of losses. So, it will take a surprise turnaround for this company to be profitable. Our time horizon on this is in years, so know that up front. A search for news on HWD also brought MOV out, but this company may just need to be avoided. In fact, Jim Cramer told you to sell it a day or two ago on Mad Money. But, unlike many of the American Companies, the Chinese-based Fuqi International (FUQI)has consistently grown earnings and is projected for each quarter next year to beat those numbers year over year. Plus, their Q4 is seasonable strong each year (thanks to Holiday sales). Of all the Jewelry names, FUQI seems the most dependable, HWD is our idea of a longer shot value play, and Blue Nile (NILE) is a way to play both the rise in online transactions and the return of the consumer to jewelry purchases. You may want to avoid TIF and MOV. We will not have to wait long to see how TIF is doing.
Jim Cramer did a fine job tonight on Mad Money, bringing in the CEO of Phillips-Van Heusen Corp (PVH). Let it be known that they have apparel lines that apparel in everything from Walmart* to Nordstroms. They have outlet stores, are in department stores, and across many lower end retailers. The number show that about 45% of all shirts sold are from PVH and about 50-55% of the neck ware. Those are amazing market shares and can be found in their Calvin Klein, DKNY, IZOD, Donald J. Trump Signature Collection, Kenneth Cole, and (our favorite) Sean Jean. With this lineup, you really get all segments of retail and if you want a retail play...this is good one with $7.16/share in cash. They have already said that if the Q4 goes the way they see it going right now, the'll see meaningful improvement in their margins.
So, the moral of this story, when it comes to retail, you have to own the best. There is no room to own a company that is debt laden, nor one that can't execute. I did have a conversation with a trader today that pointed out that I shouldn't hate Walmart* as much as I do because it has a fabulous online business just like Amazon does. I have been endlessly negative on Walmart* because of it's brick and mortar operations not being able to grow. But, last night, Jim Cramer pointed out that Amazon and other online transactions are only 3% of total retail transactions right now and that in the future, it could be higher, much higher, closer to 30% (not just 3% anymore). So, I'm going to have to take Walmart* out of my Sell Block and tell you that it just may be safe to own Walmart* here on that growth in online retail transactions and the fact that they continue to innovate with their financial services division. They are good executors of their business and that should benefit shareholders going forward.
So, do your shopping for retail stocks before the Black Friday numbers come out and ride it into Christmas. But, we want to let you know that when those numbers come in...if you see your stocks rip...don't be afraid to take some of those profits off the table. We are letting you know now, because we may not get around to telling you when we actually move it off the books. If we get 10% moves in any particular names, that's a great opportunity to pull the rip cord and take home those profits. Heck, then you can go shop at your favorite retail store!
Tuesday, November 10, 2009
Playing a Rising Middle Class
Why does Kraft want to own Cadbury? They want to own them to benefit from the rise of the middle class. I know what you're thinking...that's crazy; and how are the two connected? Chocolate is the secret. If you read James Altutcher's book, The Forever Portfolio, he talks about the rising middle class in India, China, Brazil, and elsewhere. Guess what people with money do that people without it don't do? They eat, and they eat well...certainly better than rice and potatoes. People that struggle with money often have to skimp on eating better. So, a rising middle class means that people will eat chocolate; and to make chocolate you need sugar.
Now that we've taken you through the thesis, we're not going to recommend you pick up Kraft...we don't even know if their bid for Cadbury will be successful. But we will recommend Imperial Sugar Company (IPSU). They had an explosion at a their plant in Port Wentworth, Georgia that took nearly half their capacity offline in February of 2008. With this company about to ramp up production, we think this is a good way to play both the rising cost of sugar and the rise of the middle class. We think that the recent rise in sugar prices is a function of a rising middle class that is eating more sugary foods because they can now afford them and we want to profit from it. We also like DBA, the Powershares Agricultural Soft Goods ETF as a way to play rising commodity costs over the next decade or so. Imperial even has a dividend. It's not much, but getting paid something is better than getting paid nothing.
Let us know what you think of this idea and others by leaving a comment on the blog!
Now that we've taken you through the thesis, we're not going to recommend you pick up Kraft...we don't even know if their bid for Cadbury will be successful. But we will recommend Imperial Sugar Company (IPSU). They had an explosion at a their plant in Port Wentworth, Georgia that took nearly half their capacity offline in February of 2008. With this company about to ramp up production, we think this is a good way to play both the rising cost of sugar and the rise of the middle class. We think that the recent rise in sugar prices is a function of a rising middle class that is eating more sugary foods because they can now afford them and we want to profit from it. We also like DBA, the Powershares Agricultural Soft Goods ETF as a way to play rising commodity costs over the next decade or so. Imperial even has a dividend. It's not much, but getting paid something is better than getting paid nothing.
Let us know what you think of this idea and others by leaving a comment on the blog!
Saturday, November 7, 2009
Don't Forget to Take Profits
We would be remiss if we didn't remind you to take profits. Now, we could just remind you that you need to be listening to our Lunch @ the Markets Segments (You can listen to them here: http://linkth.at/vl) and leave you in the dark, but we'll let you in on our market discipline (not that we are the only one's in this school of thought).
When the markets roar, no doubt you will make money if you're long good stocks. I guess you could lose money if you owned $RIMM (Research in Motion) or $MYGN (if you bought it @ $30 because you listed to us late after we told you to buy it under $25). But, for most people, especially if you've been in the market since March, or even April, or May, or June, and especially July (because so much of it was spent in the red). Then you have made money. Please, don't let all that ride. Do not be a pig.
When we were in California, we had one of the advisers we work with come back and tell us a story about a client of theirs who had refused to sell $GE @ $17 and $WFC @ $31. When confronted with the brutal facts that $GE fell $3/share and $WFC fell $4/share; they said that the companies were good solid companies and they'll come back. That's true, the probably will, and in 5 years those prices might sound low. But that is not the case right now, and the bottom line is. If you're up big, even if you like the stock, you have to sell when you're up...especially if you're up big. Why not take some off the top and then, if you like it so much, buy it back after it pulls back. Nearly every stock pulls back. People didn't think Goldman Sachs ($GS) would pull back...and now you can pick it up for $171.90! That's down $20/share from the 52-week high!
Look, the bottom line: "You cannot own stocks forever." That's one of our favorite quotes from the advisor we talked with in CA. Can you imagine if you bought $GE @ $8 in the early 1990s and watch it go up over $40/share...and then DIDN'T sell it and watched it fall all the way back down to $8!?!? Don't put yourself on that type of roller coaster, and don't own stocks forever. Very few companies should be owned forever. When you have big gains...take some off at the top, or on the way up (because know one knows exactly where the top...or the bottom is for that matter). You'll have plenty of cash on hand for when the market has a rainy day and dumps a stock you like big time. That will be your cue to come in and buy. We've had a lot of fun with $STJ down 10% in one day, $TRLG down 20% in one day. You'll have to go listen to our Lunch @ the Market Segments (http://linkth.at/vl) for all our research. We work hard, but we're not going to make it that easy for you every time. :-)
We'll tell you the bottom line, because that's the way we like to shoot it, nice and straight: ALWAYS keep cash in your portfolio for rainy days, try to avoid ever buying on an up day, and please don't sell on a down day. Instead, when markets are up big...look for things you can sell. When they're down big, look for things to buy. To avoid being emotional, keep a shopping list around for these days and keep sell price targets. Heck, go ahead and enter in the limit orders to sell ahead of time so that you take the emotions out. Know what you own, and always do your homework!
When the markets roar, no doubt you will make money if you're long good stocks. I guess you could lose money if you owned $RIMM (Research in Motion) or $MYGN (if you bought it @ $30 because you listed to us late after we told you to buy it under $25). But, for most people, especially if you've been in the market since March, or even April, or May, or June, and especially July (because so much of it was spent in the red). Then you have made money. Please, don't let all that ride. Do not be a pig.
When we were in California, we had one of the advisers we work with come back and tell us a story about a client of theirs who had refused to sell $GE @ $17 and $WFC @ $31. When confronted with the brutal facts that $GE fell $3/share and $WFC fell $4/share; they said that the companies were good solid companies and they'll come back. That's true, the probably will, and in 5 years those prices might sound low. But that is not the case right now, and the bottom line is. If you're up big, even if you like the stock, you have to sell when you're up...especially if you're up big. Why not take some off the top and then, if you like it so much, buy it back after it pulls back. Nearly every stock pulls back. People didn't think Goldman Sachs ($GS) would pull back...and now you can pick it up for $171.90! That's down $20/share from the 52-week high!
Look, the bottom line: "You cannot own stocks forever." That's one of our favorite quotes from the advisor we talked with in CA. Can you imagine if you bought $GE @ $8 in the early 1990s and watch it go up over $40/share...and then DIDN'T sell it and watched it fall all the way back down to $8!?!? Don't put yourself on that type of roller coaster, and don't own stocks forever. Very few companies should be owned forever. When you have big gains...take some off at the top, or on the way up (because know one knows exactly where the top...or the bottom is for that matter). You'll have plenty of cash on hand for when the market has a rainy day and dumps a stock you like big time. That will be your cue to come in and buy. We've had a lot of fun with $STJ down 10% in one day, $TRLG down 20% in one day. You'll have to go listen to our Lunch @ the Market Segments (http://linkth.at/vl) for all our research. We work hard, but we're not going to make it that easy for you every time. :-)
We'll tell you the bottom line, because that's the way we like to shoot it, nice and straight: ALWAYS keep cash in your portfolio for rainy days, try to avoid ever buying on an up day, and please don't sell on a down day. Instead, when markets are up big...look for things you can sell. When they're down big, look for things to buy. To avoid being emotional, keep a shopping list around for these days and keep sell price targets. Heck, go ahead and enter in the limit orders to sell ahead of time so that you take the emotions out. Know what you own, and always do your homework!
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