Thursday, May 27, 2010

It's a mad, mad, mad, mad market

Yesterday the bad news continued. I haven't sold anything so my returns are taking a beat down. But today wasn't as bad, it was ugly early but the markets rebounded a lot by the end of the day. Still it was ugly. Many people sold their stocks as the markets were dropping, this additional sell pressure probably caused the market to continue dropping farther than it would have if everyone just stayed calm. But then, that's the point. Staying calm. Sure, it's scary to think of your life savings going down the drain. But history has shown that the stock market, over the long term ALWAYS goes up. But as this article points out, the market doesn't always rise, it's the indexes. Very important distinction.

Today the Dow gained 284 points. But more importantly to me, my stocks all rose, my big winner, SiriusXM (SIRI) rose 13%. I'm not near where I was a month ago, but had I sold yesterday I would have left several thousand dollars on the table. My point is, there is no right or wrong decision. The best decision is the one you feel comfortable with at the time you make it. Period. If you second guess yourself you will drive yourself crazy.

Thursday, May 20, 2010

Buying in a bear market

I've been away for a few days, life gets involved. Anyway, the markets have been ugly. Now they are blaming it on fears in Europe. Whatever. My portfolio is catching a smack down today. As I've said before, I see this as an opportunity to stock up. There are many stocks out there that have been beaten down for new reason, even more now. When this proctology exam is over, they'll be back. I'm going hunting....

Wednesday, May 12, 2010

When your stocks drop

In the last week the Dow (DJIA) has dropped 1,000 points and recovered every one. And many stocks have done the same. Those who panicked and sold locked in their losses. But loss is a relative term. My net gain was cut in half in about 3 days. I didn't sell anything, I bought a few stocks. I've since recovered most of what I lost in total, although some of my holdings haven't come back yet. I was still up good amount, but not as much as I was 2 weeks ago. My loss was on paper, meaning it's not a true loss, and my current gain is not a true gain, until I sell the stocks that are responsible for it, thus locking in a transaction price and the gain or loss. This is one reason why investing on your own is so hard. It is very tempting, when your holdings take a price beat down, to think the sky is falling and try to stop the loss. But in my experience, what goes down usually comes back up, especially if it goes down for no specific reason. The question is how long will it take. In the instance of what we saw last week, I figured it was something non-normal (they were blaming the Greek financial markets) so I figured all the stocks would go back to their previous levels within a few days or weeks. This is or was not guaranteed. Stocks could have kept falling. If they had, before I made any decisions I would have asked the simple question "why?" If there was no quick answer, maybe I hold on and ride it out. During the banking mess of '08 and '09 a lot of people got caught holding the bag when stocks dropped. Many of them sold. In hindsight, the smart ones bought more. Remember, it is a risk. The number one rule of investing is to be able to sleep at night.

Monday, May 10, 2010

Those crazy stocks!

Last week the Dow dropped 1,000 points in one day before bouncing back. My stocks got whupped good. Too late to get out, its due to some drama in Greece. Time to look for bargains. Picked up The Street (TSCM), they dropped 13%, their earnings report says they reduced their loss since last year by $44 million and revenue rose by 7%. To me this looks like a company getting hammered with everyone else. Which means it will probably rise back to its yesterday level. I think this week is going to see a huge rebound, the analysts will say investors are grabbing bargains. After last week, there are a lot more of them.

Wednesday, May 5, 2010

When to sell

The market got hammered yesterday. Time to look for bargains, those companies that are getting slammed today for no particular reason. Sirius XM (SIRI) is down about 8% and they announced positive earnings. Booyah. Bought some at $1.15. I owned them earlier this year and got out at about $1.00. They kept rising, going above $1.20, but got hit today. I expect them to hit $1.20 again. This brings up the issue of when to sell. As you can tell from some of my returns, I haven't figured that out yet. When I sold Sirius earlier this year, they had doubled in about a month. Then they dipped a little so I jumped out. Hindsight is 20/20, I didn't know if the rise was sustainable so I took the money and ran. Same thing with Vonage (VG) a few months earlier, they announced their global flat fee calling plan, the stock took off and I got a nice bump. In general, I don't have a rule about when to get out. I've read that some investors will sell after a certain return, say 7% and will also sell if the stock drops that same amount. This seems like a good and prudent philosophy, but I don't like to set an random return % and sell. If I feel like a stock has no more upside, I will sell it. My return at that point could be 5%, 20% or 120%. When the upside is gone, so am I. On the downside, I have the same philosophy. I bought American Express (AXP) at about $26/share. They dropped to $13/share and I bought a bunch more. They're now around $46/share. I didn't think they were going belly up and the low price was a buying opportunity.
I also bought Leapfrog Enterprises (LF), they make toys like the Leapad. Been watching them off and on for a year, today they missed the ANALYSTS PREDICTIONS by a few pennies but revenue is up 42% and they got slammed, lost 18% on their stock price. I think they will recover that. No time window, may take a month, may take 6.