Now I know there have been a few movies over time that have taken place out at sea but I won't waste your time pretending that I even know what some of those movies are. But there have been many right...where man tries to master the sea but it comes at a cost like lost crewmembers, near death experiences, and doubting your capabilities. But then out of nowhere comes the light that leads man into shore.
Well the stock market is a lot like the sea, investors are similar to the boats and crews out there, and I feel like I am often not only the captain of my ship but also the lighthouse that can assist other people out of the choppy markets. What has been on my mind lately is that I have not taken advantage of all of the opportunities out there but I have constantly tried to keep myself out of trouble while looking for areas to gain from a stocks occasional misalignment. This year you've seen me part ways with mediocre performing stocks that I probably never should have bought in the first place and also hold under performing stocks where I believe that there is room to grow. Most recently, I have parted with my gains in the oil sector with my Oil Services Holders ETF pick (ticker: OIH). And too many times I have taken hits on the chin and lost money through recent picks like Zhone Technologies and mistimed short sales of Small Cap, Emerging Markets, and Financial Services stocks. I am somewhat pleased with the status of my portfolio and will share some of the things that I have learned this year.
Cut Your Losses - When you happen to make stupid picks or the fundamentals start to look fishy...CUT your losses right away. I have continued to learn from analysts that it does not take much from a stock to tell you when it is sucking it up. Learn to not fall in love with your pick and set aggressive limits that will create a floor when your prized pick drops. These limits should range from 7-15% but take it from me it is sooooo hard to recover once you have a loser on your hands. If you think the stock is still a gem, then at least you can reevaluate it and buy it at a lower price.
Day Trades - Day trading is for people that trade stocks for a living. If you don't have time to watch these picks around the clock they can get away from you in a hurry. And not to mention you begin to out think your trade. I have in the last month made money on trades in the Oil and Financial ETFs only to see them evaporate because I was too busy working and didn't notice my shorter term gains washing away. I would say don't day trade, but it you do and you are up use limits again to protect the downside.
Earnings Season - If you read anything from me, READ THIS... stay away from trading stocks the week before and after they release earnings. This is the most volatile period and so many factors are considered that you will eventually get burned. For example, I bought GameStop (GME) last November and it tanked right after the earnings announcement...rapidly. I quickly sold my declining position only to see the market reanalyze the news on GME and it proceeded to rise higher and higher the weeks after, which would have made a great profit. Even better, I am currently in a stock picking contest and I bought Visa (V) before the earnings and watched it move higher, even during after hours. Then the next day this stock proceeded to get crushed and my quick profits were gone. Stay away from earnings season.
Homework - Jim Cramer calls it doing homework, I follow the Buffet mantra and say that you constantly research info about the stocks you own and evaluate whether the fundamentals have changed. If they have turned for the worse...BOUNCE! Remember Zhone, the management told us a MONTH before the earnings that it would miss, so do your homework and sell. I not only sold the loser, but made a back some money by shorting the stock.
Patience - After evaluating your stocks frequently, show restraint for the stocks where the fundamentals have changed. I have owned Radisys for second time and this has been one of the wildest rides in my investment career. The first time I bought this stock I watched it go up and then turn around and fall sharply. I did my work and felt that the fundamentals had no changed much. So I held on and watch it hit the 52wk high last year, where I promptly sold the stock so that I would be greedy. Now as you now I have re-recommended Radisys and since that recommendation I again watched it dropped. I thought I was soooooo smart because I bought it while it was approaching the lows of the year, however the stock kept dropping. And in the mind of Buffet, that means I am getting this stock at a discount...IF the fundamentals haven't changed. So I kept buying and the most recent earnings announcement was news to our ears. We watched Radisys report excellent earnings and the stock has been on a tear. It is my largest holding and I am pleased that analysts have raised next quarters guidance by an astounding amount, double what it currently is.
No comments:
Post a Comment