September 27, 2012 Comments

It was a decent day in the markets with Toronto up 0.9% and the Dow up 0.5%.

I had heard this morning that some of the economic reports out today related to housing and GDP were weak but tht the market was up on rumors that China would stimulate its economy. A source I see tonight says markets were up because of an austerity plan in Spain. These reasons for the market going up do not fill me with confidence. I’d rather see it rise on earnings gains.

So it seems my thoughts are turning more so to selling than buying at the moment.

I reduced my Toll Brothers position again today, this time by 25%. My thinking on that is that it is at $34 having fallen from a recent high of $37. But it was only a month a go that I rated it Speculative (lower) Buy at $32.28. So it was not really a favorite of mine at $34 and so it becomes a candidate for reduction given I am in a selling mood. I am in a selling mood in order to reduce risk, lock in gains and raise cash for possible opportunities ahead.

It was a bit hard for me to sell today given that I could have sold more on Monday when I sold only about 12% at $35.75. So it feels a bit dumb to now sell at about $34. But I also considered that I am still up about 42% on the stock in the account it was sold in. That’s not really a rational reason to sell but it helps emotionally. Rationally stocks should be sold due to risk or valuation or to move to something else. The price paid for a stock is rationally irrelevant to the sell decision. But emotionally, the price paid always comes into play.

This evening I am looking at the fact that I last rated Walmart a Buy at $65.31. Now it is 13% higher at $73.98, down just a little from its high of $75.24. So I think that qualifies as a candidate for sale as well given it is not looking like a bargain. Emotional factors that make it easy to sell include that I have a profit of about 30% on it. Also I have not owned it all that long and I not emotionally attached to it. For some stocks I have to admit that after owning for a long time, perhaps buying on dips, and perhaps after having analyzed a company many times over a period of years I do get emotionally attached to the stock. I combat emotional attachment by trying to be unbiased when I update the analysis. Sometimes my heart says keep or Buy and the analysis says sell or don’t buy and I try to go with the analysis in those cases.

Research in Motion reported earnings after the close. It did lose money, but apparently less than feared. The subscriber count was up to 80 million as its CEO reported a couple days ago. Its cash on hand increased when it was feared to decrease. The stock rose 20% in after-hours trading in the U.S. and so would be expected to pop up about 20% in Toronto tomorrow morning. Sadly I did not buy any today. The reason it is sad is not just that it was a missed opportunity but that in retrospect, at least, it seems like it was a pretty good bet that that the earnings were going to be okay. The CEO would never have mentioned that the subscription count was looking good if he knew that the earnings coming today would be bad news.