There is no doubt that Graham (NYSEMKT:GHM), a relatively thinly-traded AMEX stock, has been one of the most volatile of my holdings. It has performed for me on the upside, and I have burned my fingers on this stock more than once. Add Tuesday to that list of burnt fingers!
Graham was purchased in my Trading Account last month, on 10/8/08 at a cost basis per share of $16.34. I sold my first portion of Graham at a 30% gain only five days later on 10/13/08 at $22.37. Tuesday, after the 2nd quarter 2009 earnings report was released, the stock slumped, even though the rest of the market was enjoying an Election Day rally. As I wrote this, GHM was trading at $15.43, down $5.52 or 26.35% on the day.
I sold my 360 remaining shares of Graham earlier Tuesday morning at $15.441. This represented a loss of $0.90 or 5.50% from my purchase.
This sale was not at a 16% loss limit as I have discussed in my previous posts that I have been implementing for my remaining five positions. But this represents my still employed strategy of selling stocks if they break through my purchase cost if I have sold once at a gain, and this is exactly what happened.
Going down to four positions, this entitled me to add a new position, and I did purchase 45 shares of Expeditors International of Washington Inc. (NASDAQ:EXPD) at $40.19/share.
But what I wanted to discuss further was my partial sale of WMS Industries (NYSE:WMS-OLD), sold almost immediately after my Graham sale, but this time on 'good news' due to an appreciation in that stock's price!
WMS Industries was a recent purchase of mine, having acquired 96 shares at a cost basis of $20.12 on 10/28/08. Tuesday morning I sold 1/7th of my WMS holdings or 13 shares at $26.67. This represented a gain of $6.55 or 32.6% since purchase. My next targeted appreciation point for a sale of 1/7th of my remaining shares would be at a 60% gain or 1.6 x $20.12 = $32.19. On the downside, just like my sale of Graham shares, after a single partial sale at a 30% appreciation level, I sell my shares should they decline or pass through break-even. Thus, remaining shares would be sold if WMS should decline to $20.12.
These two sales demonstrate my philosophy of selling both on bad and good news. Both of these sales have triggered buys in different fashions. My Graham sale brought me under my minimum of five positions and I did go ahead and purchase a small position of EXPD (1/2 of the average size of my remaining positions), and now have a 'permission slip' to be adding a sixth position which would be slightly larger, actually at the average size of my remaining holdings.
Disclosure: The author owns WMS and EXPD.