One of the greatest strengths of this blogging effort that I have been working on this past five years (!) has been the requirement for me to put into words a trading strategy that hopefully would respond to investment environments in both the best and worst of times.
Probably my first defense with any investment is to limit losses. After an initial purchase of stock, I limit my losses to (8)%. I do this manually. Brighter minds I am sure could develop this loss limit automatically. It wouldn't take that much effort.
In a declining market, the first stocks often to go will be the latest purchases. They will be the ones which will be sold as they hit their loss limits faster than other stocks which may have hopefully appreciated some sort of buffer in their price.
This is the story of Greif (GEF), a stock that I have written up several times on this blog, a company of outstanding financial results, raised expectations, and a solid balance sheet. Unfortunately, like virtually every stock in the market, the greatest force on any individual equity is the "M" in the CAN SLIM formula---the market itself.
Thus, to make this long story shorter, my investment in Greif (GEF) which amounted to 140 shares purchased just a couple of weeks ago on 9/16/08 at a cost basis of $66.16 passed my own loss tolerance and were sold this afternoon at $59.61. This represents a loss of $(6.55) or (9.9)% on my investment. As I have said above, I monitor my stocks intermittently and enter these sales manually. The stock dipped below my (8)% loss level, and was sold as soon as I realized what the stock price was.
With my own sale of my shares of Greif (GEF), and with the stock market environment still ever-so-worrisome,
GREIF (GEF) IS RATED A SELL
It would be unfair of me to advise anyone to hold a stock with the overlying market so weak. In an otherwise strong market, my own sale on the passage of some sort of technical price point would merit a reduction to "HOLD". I share the concern of so many investors and although I believe that the company is terrific---I am truly sad to see it leave my portfolio---I shall continue to keep it on my own investing horizon so that hopefully I can once again in the future, assuming continued financial success from the company---call myself a 'shareholder'!
My own portfolio management system asks me to find another stock to buy to get me back to my 5 positions. I shall certainly keep this in mind and once we see some sort of positive action in the market, with possibly some sort of resolution of this credit crisis, I shall be back in the midst of things, looking through the lists of top % gainers to identify a new name to share with you, or perhaps an old name that once again, like Greif (GEF) looks attractive for an investment.
