Down to Three Positions, I'm Ready for End of Bear Market

Includes: CVD, GHM, IMO, NOV, ROL
by: Robert Freedland

Clearly my investment approach shows the greatest weakness on severe contractions and large degrees of volatility in the market.  While trying to step aside and then re-enter equities, I feel like I have been getting my face slammed in a revolving door over and over again.

I may have gotten smacked once more. As I discussed previously, I have adjusted my own trading system to reduce the number of trades in a very down market by increasing my loss tolerance to 16% losses on my last five positions. Even this apparently is not enough.

Early Monday I sold two of my five remaining positions.  I sold my 102 shares of Covance (NYSE:CVD), which has been behaving particularly weak this past week, at $48.23/share.  These shares had been acquired 4/9/07 at a cost basis per share of $62.61. Thus, I had managed to incur a loss of $14.38/share or 23% since purchase, so out they went.

I also unloaded my recently acquired shares of Imperial Oil (NYSEMKT:IMO) at $29.31.  These shares were just acquired 10/20/08 at a cost basis per share of $35.17.  Thus, I had quickly incurred a loss of $5.86/share or 16.7% since purchase - yikes.

So I am now down to three positions:  Graham (NYSEMKT:GHM), National Oilwell Varco (NYSE:NOV), and Rollins (NYSE:ROL).  I will try to hang onto those unless they too incur a 16% loss, at least for the time being.

And on any new positions, I will try to limit their size to 1/2 of the average size of the remaining positions.  In this way, my commitments to the market should diminish if I tend to be 'whip-sawed' frequently into buying and then selling positions as the market gyrates.

Will this work? I frankly don't know. My brilliance is rapidly losing its shine.  My performance is moving right to the mean and I am ready for this bear market to be over, even though that may take months or years.

Disclosure: The author owns GHM, NOV, and ROL.