New Positions Added/A Few Positions Dumped
I’m here to be honest. I’m not an investment professional and I do not have years of investment experience. I can’t say that
I anticipated Tuesday’s stock market debacle and I most certainly did not come away unscathed. Someday, I’m going to run larger portfolios and make sure to do my best to have cash on hand at all times in order to better react to the markets. Unfortunately, last Tuesday, in addition to a few bad choices made in December, wiped out a good portion of my earnings over the last year in Portfolio A and most of my year to date earnings in Portfolio B. Further, the turning of the tide (so to speak) in the markets has forced me to rethink my strategies in some ways.
I sold my Portfolio A position in Alpharma for no gain despite being up nearly 10% a month ago. The stock had clearly entered a base over the last month and, for one reason or another, I didn’t sell. A lesson learned. I can’t be lazy with my technical picks and I also can’t presume that I can just wait out a flat base. As I am investing a relatively small amount of money, I do feel the need to remain fully invested and do my best to take advantage of current market situations. It is my belief that we are in a correction/pull back cycle and that it will be necessary to drop down into a proper support territory before the markets can rebound. As a result and in following with my technical/shorter term strategy for Portfolio A, I’ve decided to bet against the NASDAQ through an ETF (QID). This is a double inverse ETF and represents a bit of a gamble as I don’t forsee the market falling much more than 8 or 10% but the only way to make a substantial gain is for me to invest in a fund which will hopefully double my exposure to this.
In Portfolio B, I sold Tiffany’s (TIF) for a gain of 7.5%. Interestingly enough, it has rebounded in the last few days as a result of a huge hedge fund investment (Trian Hedge Funds bought 5.5% stake in the company) and the belief by many analysts that it is still trading at a value despite being at 52-week highs. To tell you the truth, I loved the recent news that came out about Tiffany’s improved performance in Japan and Korea and around the world. This was a hard choice to make, but I felt the need to protect gains that I had made this year. I will definitely look to purchase the stock again after the market corrects or if it’s technicals become strongly favorable once again. In order to reduce exposure to risk and volatility in the stock market, I reinvested the proceeds in gold through an ETF (GLD). While gold seemed to get hammered along with the falling global markets, I view this as a good thing providing cheaper gold without any material damage to the fundamentals which were carrying the current gold bull run. I believe that we saw gold get hammered as a result of traders unloading their gold positions in hopes of covering for losses in stock positions. Once these traders and speculators shake out and once the markets prove that they are going to continue with more volatility, gold will not only begin to run again but also return to its natural position as a defensive investment.
I think, given the current market conditions and the seemingly drastic changes in my investments, it might be prudent for me to explain why I’ve decided to hold Cosi (COSI) and Southwest (LUV) despite the two stocks having been battered over the last week plus. While I bought Cosi based on its technicals and a perceived breakout, I have held on because I do believe it currently trades at a discount and has a lot of positive momentum going forward as far as improving same store sales and improving revenue in general. Southwest, similarly, is trading at well below its typical P/E range (15 compared to 20) and did a remarkable job hedging last year (100% of forecasted oil needs hedged at $50/barrel) and with oil prices looking to stay above $60 this year, it really seems like Southwest can’t help but continue to outperform the airline industry as a whole and add to its remarkable streak of profitable years. While Cosi is not necessarily a pick consistent with the Portfolio A strategy, I think Southwest has become even more so a pick consistent with Portfolio B’s strategy and in the current market I would prefer to hold onto these stocks which are clearly depressed and have nowhere to go but up than to attempt to time buys in new positions during a period of increased market volatility.
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