Doc's Diamonds

The RIMM Run !!

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It's been 11 days since my last entry and I wanted to update the SLO clan about my RIMM purchase and how it is always good to keep some cash on hand to react to opportunities. Several posts ago I mused about the unfortunate hypothetical investor who happened to buy RIMM at $123 and two days later was staring at a stock price of $104. Not a happy site for a short-term trader or even a long-term investor who picked that exact time to start a position. However, that drop was caused by, in my opinion, a severe overreaction by the market to rumors and analyst downgrades. Those types of market overreactions can present buying opportunities for those who are patient and ALSO have capital remaining to invest in those opportunities.

For my part, I had sold 20% of my positions just before the FED rate decision because I believed that there would be a "sell the news" reaction. That capital was now ready to look for an opportunity. When I take these opportunities it is not good to use a "value" stock because, as with my retail stocks, when they become bargains they may drop further and come back slowly. Excellent growth stocks such as RIMM will recover much faster if you are ready to buy at an opportune time. In this case, I saw the drop back to around 100 as being a chance to pick up a cool 20% or so. Since I am so far behind, I felt that this was a time to place my recently freed up capital to work. I purchased as much of RIMM as I could before the earnings announcement. I should have used all my cash but one of my limit orders did not "hit".

In response to this move, I was able to capture a nice gain and plan to sell part of my position if I see a better opportunity. If not, I will just "ride it out" and see how it stands at the end of the competition. I would be very surprised if it dropped back much considering the excellent earnings and guidance.

In my view, a good portfolio has a "core", an "edge", and an "opportunity stash". This is riskier than a perfectly balanced portfolio, but I think has better return potential in the long run. It also should be diversified in areas you feel comfortable investing. Although I have been thrased in this competition by some worthy opponents, I still want to pass on what Ideas I might have before the competition ends.

Back soon,

DocA