Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.
As part of my continued effort at sharing with all of you readers my actual trades in my actual trading account, I wanted to let you know that this morning, shortly after the opening, I sold 15 shares of my 105 share position of Graham (GHM) at $86.00/share. Grahm (GHM) continued to do well today in spite of the awful market tone and actually closed at $90.50, up $2.45 or 2.78% on the day.
Why did I sell any shares? Why 15 shares? Why today?
If you are a regular reader of my blog, you will know that I sell shares of stocks for two basic reasons: "good news" or "bad news". I define "good news" as a stock reaching appreciation targets...that is going higher in price...and reaching levels that I have set up artificially at certain percentage gain levels. To explain, I use 30, 60, 90, 120, 180, 240, 300, 360, and then 450, 540, 630%...etc., appreciation levels from the original purchase price as intermediate goals. That is when a holding reaches these levels, if it ever does, I initiate a sale of a portion of that holding.
When I first started this blog I believed if a stock moved higher 1/3 to 4/3 of its original price (an approximately 30% appreciation), then it made sense to always be selling 1/4. But that was, as I found out, far too extreme a portion of a holding to sell at these same intervals as my position shrunk in size as the stock appreciated in price.
I tried 1/6th....but again no luck. It appears that selling 1/7th of a holding is working at taking a portion 'off the table' yet leaving enough behind to see it actually grow absolutely.
The "bad news" part of a sale is when a stock is sold either because of some fundamental news announcement (like a poor earnings announcement or the management accused of wrong-doing), or simply because the stock has declined from a higher level.
Generally, after a stock has declined 8% I sell the stock if I have never sold any portion of it at an appreciation target. If, on the other hand, I sold 1/7th of a position (like I did today with Graham) and then the stock dips in price...I do not plan on waiting for an (8)% loss to sell, but instead move the sale price (of the ENTIRE position) to 'break-even'...that is, the price that I purchased the holding.
On the other hand, if I have sold a stock more than once at different appreciation levels...for instance if I sold a stock three times at 30, 60, and 90% appreciation levels...selling 1/7th of my holding each time....then instead of waiting for an (8)% loss, or even waiting for the stock to move back to 'break-even', I sell the stock should it reach 50% of the highest appreciation sale level. In this case, since the highest appreciation sale of this hypothetical holding was at a 90% appreciation level, then my sale point on the downside is if the stock declines to a 45% appreciation level. All of my sales on the downside are ENTIRE positions---unlike my partial 1/7th position sales on the upside.
Anyhow, I am sure that for you regular readers this commentary is entirely redundant. But if you are new to this blog, I hope you appreciate some of what I would call my "inner-workings" of my portfolio management strategy.
Finally, I use sales of stocks as signals. Signals that in the case of sales on the upside or "good news" sales, suggest that the environment might be o.k. to add a new position. I call this my "permission slip" to add a new position (if I am below my maximum of 20 positions).
Likewise, I use a sale of stock on "bad news" as a signal as well. In this case telling me that there is something 'bad' in the environment and that I am well-advised to do what I call "sitting on my hands" with the proceeds (again, of course, unless I am at my minimum of 5 positions--in which case I would replace the holding with a suitable candidate).
It is this way that I can shift my holdings in a fairly automatic fashion between cash and equities. This part appears to be working as I am now at 5 positions and the market environment is frightful.
Back to Graham.
My 105 shares of Graham (GHM) were purchased in my Trading Account at $64.48/share. With stock hitting $86, this represented a gain of $21.52 or 33.4% since purchase. This exceeded my 30% appreciation target yesterday, so this morning I sold 15 shares or 1/7th of my 105 shares, leaving me 90 shares which actually went ahead to move higher.
Ironically, I have now been handed a 'permission slip' to be adding a new positions. I didn't find anything 'suitable' today on the top % gainers list (where I start looking), and thus decided to continue to 'sit on my hands' with the proceeds.
That nickel is burning a hole in my pocket already and I shall be on the lookout tomorrow as well for something suitable for my portfolio.
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Wishing you all good health and strong financial prospects,
Yours in investing,