Doc's Diamonds

You can't time the market, but being prudent is still OK.

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In stock investing, sometime you need to recognize when a good thing is just a little too much of a good thing. I have been very pleased with my portfolio performance recently, and I am sure most other "Strategy Lab Challenge" players have as well. My personal performance has been negatively impacted by one bad investment (ENT) that has limited me to a 7.3% gain as of this time. I will discuss the ENT investment in a later post, but I wanted to explain the major changes to my portfolio I am making tomorrow at the market open.

I will readily admit that I have no idea where the market will be headed over the next 4-6 weeks (or longer). However, it rarely goes straight up for very long and I feel the market has had a great recovery and a great "run" after the fall out from the credit crisis. We are "pricing in" another FED rate cut which may or may not happen. Therefore, I have decided to rebalance my portfolio at this time and take some profits. I am not closing out or even cutting in half any position even though many are close to my short-term price target. However, I am cutting some of my most profitable positions down to around or below $30,000. Most of my sells are "at the market" for tomorrow AM. I really do not like to make "at the market" trades especially when the futures are pointing down as of midnight when I right this. My feeling is that I cannot monitor the price movement from work and it is better to follow my plan and make sure the stock trades happen. If I get greedy and try to squeeze every last dollar from each trade, my overall strategy of rebalancing will be more difficult to complete.

This will provide me with more flexibility going forward and I have some ideas about where I might want to put the money to work. I will discuss that in a later post.

Doc

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Cranking out the blogs

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Sorry I was gone for awhile and I plan to blog regularly from here on out until the end of the contest. As I have said several times, I have a goal in this contest to help others understand my approach and thoughts as I make changes in the portfolio. Lately, that has not happened and I apologize to the readers for this. This blog is the first in a series of postings about my recent portfolio changes and more details on the winners in my portfolio as well as the "stinkers".

In general, I have followed my plan and try to keep some diversification and fairly level positions. As you will recall, I also said that I keep some money available for opportunity and I will take overweighted positions when I see a more significant upside for a position. I often feel that the market will overreact to a situation and drive a stock down far more than the fundamentals suggest it should. Remember, the market is not a perfect place. At any given time there are stocks that are undervalued and some that are overvalued. If I feel that the market has overreacted to the downside, I will often increase my position to lower my cost basis. Or, I will take a new position in a stock I have been following and waiting for a lower price.

That situation occurred in the case of Texas Instruments. TI (symbol TXN) reported earnings that minimally exceeded Wall Street estimates. However, the company took a conservative future stance in the conference call and guided lower than Wall Street anticipated. The result was a brief pounding of the stock. When I see a quality company pounded by soft guidance but I still see a longer term growth trend intact; I will often jump in and take a full positon all at once. When I saw TI was pounded by the soft guidance, I decided to buy a full position immediately. My reasoning is that the FED will likely cut rates further this year and the technology stocks have traditionally outperformed late in the year. Given these trends, if I can buy a quality company at a discount, I am happy to do so. Thus far my position is up 3.11% in just 6 days. I will take that kind of quick return anytime. If the FED does decide to cut rates, I think TI will most certainly benefit and go even higher.

More to come !!!! Talk with you tomorrow after the FED rate decision.

Doc

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