Wednesday, November 9, 2011

To Sell or Not to Sell...That is the Question

"Oh, it seems to me..."sorry" seems to be the hardest word"....

With respect to Elton John, for the investor, "sorry" isn't the hardest word.  Its "sell".

What do you do on days like today, where the market throws a hissy fit?  What if that hissy is combined with bad news on a stock?

That's where I am today.  I was hopeful on a new position in Alaska Communications Systems Group (ALSK) would appreciate.  And from a technical standpoint, it was about to break out of a downward channel.  Fundamentally, it has a practical monopoly in a market, and there was chatter of a takeover.  And the dividend in double digits?  It seemed like an almost non-brainer.

Then - WHAM!  A perfect storm.  The market gets slammed, down 300 points.  Alaska the state is slammed with a monster storm.  The stock gets slammed by a downgrade.

The question becomes - to sell, or not to sell?

As for ALSK, I've sold.  In the course of my investing life, when bad news hits and I sell, even at a loss, with few exceptions I find a better time to either get back in, or redeploy the funds into a more productive issue.  I did this with BP (sold within 3 days of oils spill at 10% profit) and HCBK (sold at profit before div cut announcement). 


When I haven't sold quickly, it usually doesn't end well.


I learned this the hard way with Armtech Infrastructure (AIIFF).  This too is a stock that was beset by inclement weather, to the point that the dividend was eventually suspended.  Two days before earnings announcement, I witnessed the stock take a 13% decline.  I was completely baffled.  I thought...I'll hold on.  Tomorrow will be better.   The next day, it declined another 20%.  I thought...I'm in the hole 30%...I don't want to take the loss, so I'll hold on more.  The next day, Armtech announced a dividend cut.  The stock plunged about 80%.

And there it sits in my account even today.  Even with reinvesting at bottoms, and with a mild stock recovery, it still sits in my account at a 49% loss.  A very stark reminder that a small loss taken quickly is better than a large loss that must be endured for months on end.

So, I sold ALSK.  It may well rebound, and I may well regret that I lost money on this one...but it's not looking hopeful at this time.  But I would rather lick my wounds if they are only skin deep, rather than be in the hospital for a giant knife stab in the back.

Tuesday, November 8, 2011

Can Investors Learn from Day Traders?

I have discovered a new outlet for listening to investment news when Bloomberg radio goes on ad infinitim with their preachy PSAs.  I've become addicted to "Day Trading Radio".

Not to worry.  I haven't gone over to the dark side.  I just wanted to listen to something different.  I thought...I'm going to disagree with this guy (with the self-serving handle of "Day Trader Rock Star") a lot.  Maybe I'll write a rebuttal argument on this character on SA.

Well...I have to say...in spite of what this guy does for a living, I've actually found some usefulness in what he's doing.

For one, he's not trading penny stocks.  His modus operandi is - trade quality.  I don't agree with the "trade" part.  But I do believe in "quality".

I also believe that it behooves investors to locate the very best price they can on their investments...especially if they ever intend to sell.

Here's an example of what turned out to be helpful advice:

I have been watching copper prices for a while.  We all know that no sector or stock maintains a downward trajectory forever.  When the downward trajectory stops, and the market begins to anticipate a rebound in a stock or sector...that's the time to consider a buy.

A few weeks ago he began promoting a buy on (FCX), which is a quality copper miner.  I thought...hmmm...I should begin looking at copper again.  Since I prefer a higher yield than FCX offers, the stock on my watch list I looked at was (SCCO).

Sure enough, just as FCX was rebounding, so was SCCO.  I thought...I'll give it a try.  I took out a small position.

Sure enough, the position appreciated.  I later sold at a small profit, and then got back into a full position when the stock made a more confirmable higher low.  I now have a nice 7% appreciation on the stock.

I am also learning more about the technical indicators the host thinks is important.

Now...am I advocating to new investors to listen to this guy and act on everything he says?  No, absolutely not.  Keep your thinking caps on and listen with your built-in "investor" filter. 

However, we all can use more tools in our investing toolbox.  It pays to understand technical indicators when investing.  Understanding technicals doesn't make you a trader...it just makes you a little smarter in your buying and selling.

Anyway, it's a fun listen.  You don't have to take his suggestions to heart.  But, if you balance what he's saying with your own investment principles, you might learn a few things.

The guy also plays killer music!

Take Care!
YoYoMama, aka Five Plus Investor on Seeking Alpha

Sunday, November 6, 2011

Floating Rate Preferreds

Hello, friends.  Thanks for following.  My hope is to blog more often than I have recently.  Thanks for your patience.

I recently took an interest in floating rate preferred shares, and was researching possibilities on Quantum Online.  In terms of share price, they all shared the same trend line...plummeting in August, with a current rebound making higher lows.  I smelled a buying opportunity.

One in particular caught my eye, that is ALLY preferred share B.  In full disclosure, I placed an order for this share in Friday.  Like another floating rate preferred share I hold, Citigroup Preferred Share J (CpJ or C-J), this one has a higher yield than others I researched.  

Be forewarned that if you hold these shares within Scottrade, what you will end up holding is ALLYPRB, which doesn't allow for either trading without broker help, or for understanding gain/loss in your Elite account.

Others to consider:  Goldman Sachs preferreds (multiple choices with a 4% yield floor)

Disclosure:  long CpJ and ALLYpB