Ever since I decided to "Rock A Full Portfolio" I have been having one my my best months to date. I attribute this to five different decisions I made when I decided to start testing out this trading strategy.
1) If the stock doesn't act as expected, dump it.
2) Hold short as well as long positions simultaneously.
3) Keep some cash on the sidelines just in case an opportunity presents itself.
4) Don't let the daily fluctuations force me to make quick unplanned decisions.
5) Pick stocks which have near term catalysts or look to be at a bottom.
--If the stock doesn't act as expected, dump it--
Each stock I picked I did so because I had expectations for it, usually to go in the direction that I had anticipated. Of the five stocks that I chose two decided to act unexpectedly.
The first, STP, seemed to be in a nice position to take advantage of rising oil costs. It was a solar play that had been lagging behind the other stocks in it's sector. I bought in at $47.62 just before oil started making its treck up to $120 a barrel. It started to trend between $45-48 and wasn't able to break out of the range. With oil hitting all time highs STP should have been breaking out so I decided to sell at a loss at $45.10. It is better to take the small loss and put the money elsewhere than hang in there with a sock that going against your research.
The only other pick that acted unexpectedly is Amazon. I sold short going into earnings because I expected them to guide down for the rest of the year and potentially have just an OK quarter. Both of these predictions did become true, and the stock did go down after earnings. What I hadn't anticipated was the market wide rally that happened just days before due to the amazing Google numbers. Google managed to carry every tech stock up 5-10% which prove to be awesome for my Apple pick, not so good for my short position in AMZN. I have decided to hold onto AMZN because I still feel it will go lower. It has backed off of its recent high and is now trending downward, back to where it was before the Google earnings. I still expect to make money off of this short position.
--Hold short as well as long positions simultaneously--
This rule is one of the primary reasons I have been in the green almost every day since picking this basket of stocks. During these turbulent times the market has seen some nice green days, as well as some ugly red ones. When the market is down, my short positions have kept my portfolio from seeing big losses. During the green days, a lot of the time my short positions have still been down because they are not good stocks. Having both short and long positions has really helped keep the equilibrium in place and I cant imagine ever being only one sided.
--Keep some cash on the sidelines just in case an opportunity presents itself--
You never know when a situation might come up where you need cash to pick up some stock. This happened on 4/28 when I was confident GLW would have a great quarter and I wanted to get in before earnings. They were showing some super bullish signs and It just seemed like a no brainer. If I hadn't had some cash around to buy GLW I would have had to sell another winning position to get some. Selling one winning stock to buy another doesn't change anything, but taking some cash and putting it to work does and I am glad I had the money ready to go.
--Don't let the daily fluctuations force me to make quick unplanned decisions--
This rule has proved itself time and time again. So much that it deserved it's own post back on 4/22. The best example of this has been my Under Armour position which has been on a downward trend for some time now. I have been short since 2/5 now and almost bought back on multiple occasions. Just before their recent earnings UA ran from $32 to $39. That put a serious dent in my position but I was confident they would have a bad quarter and was right. Just after earnings they fell from $39 back to $33. When the daily fluctuations are making you think twice about your position, sit back, pull up a 6 month chart, and remember why you chose this position in the first place.
--Pick stocks which have near term catalysts or look to be at a bottom--
Deciding when to get in on a position is one of the hardest parts of portfolio building. One strategy I have used with great success is getting in on stocks juuuust before a near term catalyst. The reason you do this is because you don't want to get stuck in a position that keeps fluctuating between profitable, and in the red, green, red etc. For example, I decided to buy GLW just before it's earnings announcement and just as the 50 day moving average crossed the 200. I got in at $25.93 the day before earnings and found the stock up a full dollar the very next day. If it had gone down, I would have sold, but since it went up, now I can hang on knowing that it is well above my buy in price. I can even put a stop in at $26 to make sure I don't lose any money on the investment.
Testing different strategies and recording their results was the primary reason I started this blog and this is a perfect example. So far over the last month I have had one of my most profitable months to date (up over 20%) while testing a strategy I had never tried before. I don't think I have ever had more than 4-5 stocks at once. It has been a real learning experience, and I plan on sticking with this strategy for some time. |
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How could this week be complete without a Microsoft Yahoo post? I haven't posted about this yet but it seems pretty obvious. Microsoft had offered $47.5 billion to buy Yahoo Inc., but scrapped the bid late Saturday after they could not agree on a sale price. Yahoo!'s stock popped pretty big the last couple weeks as investors anticipated the deal would go through.
I have been having some serious problems with my browsers lately. I have always been a big FireFox fan, but then I switched to the new safari and loved it. When I started having some issues with safari, I downloaded the new FireFox beta and gave that a try. No matter where I go or what I do, browsing just isn't the same anymore.
So since I don't like the new firefox I have been using Safari. For the most part, safari is fast and I love it. I miss the extensions that firefox offers, but after a while without them you forget they ever existed. Am I the only one having serious problems with Safari and cookies!? It seems to have something to do with logging in and user accounts. Sometimes when I have had Facebook open for too long, when I come back and click something it tells me to log back in. So I try to log back in and I get rejected. Then I need to go into Safari Preferences, delete my Facebook cookies and come back again. I log in again and get a different error "Cookies not enabled". Then when I login the third time it lets me back. Whata painnn! In short I have been having similar problems with my Google Account.
AAPL seems like it is dying to break into the 180 range. Yesterday afternoon it made a run for it just before the fed cut IRs and then tanked. Today it hit $179.50 and then retreated until the last 10 minutes of the day when it made a crazy run for it! I posted on twitter 
Under Armour announced their earnings last night and they were not to impressive. Plus they lowered guidance for the rest of the year. For this quarter, they beat on revenues but were down on net income "due to increased marketing expenses". I think it is so funny that they blame their earnings miss on marketing, one of the few aspects of business that the company has complete and absolute control over. This made me chuckle so I mentioned it to 
So the newest web 2.0 company to take over my life is twitter. Basically twitter is just a text messaging platform in hyperdrive. The simplicity and openness of it makes it super attractive to developers and we are seeing lots of fun apps. Some cool apps which I have been using are: