The Volatility Is Killing Me: Explaining My Sale of Expeditors International

I do not like to get whipsawed and do so publicly. And yet, I am committed to implementing my own idiosyncratic system of limiting losses and responding to market influences in some sort of rational fashion.

Earlier Wednesday morning the market handed me my quick 8% loss on Expeditors International of Washington (EXPD) and I sold my 45 shares at $36.8506. These shares were just purchased Tuesday, yes Tuesday, at a price of $40.1894. Thus, my loss was $3.34 or 8.3% since purchase. With this being the sixth position in my portfolio, I am implementing my 8% loss limit, and now back to five positions, my loss tolerance is increased to 16% with the 'final five' of my 20 position maximum.

I hope this all makes sense.

My sale of EXPD is not representative of any dislike of this stock. I find the numbers on this company intriguing, the consistency of growth, etc.. My sale is just a reflection of my own amateur attempt of limiting losses and responding to market influences. The volatility is just killing me though.

I know there are lots of readers over at Seeking Alpha who are pointing out the VIX levels and I am learning this the hard way.

Since my sale is at a loss, and I still am now at five positions (my minimum), I shall not be replacing this holding.

Disclosure: The author sold his shares of EXPD.

Comments

[weiwentg:]

If you're really confident in your analysis of Expeditors' business, then why the heck are you setting stop loss orders, and doing so at just 8% under your purchase price? The market is volatile and any stock could move by 8% within a pretty short time span. However, Expeditors is debt free and has steadily grown revenue in the low double digits even during the crisis. International trade is not going to cease. You're just shooting yourself in the foot by selling low and buying high (assuming you do decide to buy Expeditors later).

2008 Nov 05 07:48 PM

[Robert Free...:]

weiwentg,

You make excellent points in your comment. I also appreciate some of the fine financial underpinnings to this company.

I have shot myself in the foot many-a-time as I write if you would like to check my blog. Overall, I have done o.k.

My goal is not to identify value and to hand on to it. Rather, I am trying to develop a more dynamic system that identifies quality investments, minimizes losses, captures gains, and shifts from equities into cash depending on the market environment.

Perhaps it is too big a bite to swallow. On the other hand, my actions are not based so much on the individual prospects of the holding, or my own evaluation of their worth. Rather, I am trying to develop a more dynamic approach based on the price movements of the stocks themselves.

Perhaps I should just buy shares in a good mutual fund and forget the whole thing?

Meanwhile, I shall struggle on, trying to minimize my losses, and batten the hatches in this awful stock market climate.

Thanks again for writing and I cannot argue with your comment.

Bob

2008 Nov 05 10:36 PM

[Kinja Rules:]

A strict plan is best right now. On the other hand I feel that there is nothing that is a buy here in the US mkt. Some of the beaten down world mkt's yes.

You are Right. When a mkt settles, it is stationary. This mkt hasn't settled yet, nor will it for some time. Look for the flat line for a few mos.

You did the right thing.

2008 Nov 06 04:30 AM

[Blowout Ear...:]

For the love of god, please change that photo. It makes my children nauseous while we throw darts at it.

On a serious note, I would just stop trading, you are bleeding yourself and jumping around while doing it. Chances are, your initial investments will rebound and the next ones you moved to because the original ones failed you don't know as well. Or, go to Vegas, and bet it all on Red...your odds are better.

2008 Nov 13 04:03 PM

[Robert Free...:]

Blowout,

Sorry you find my photo so disagreeable.

You are right about all of my trading. I am applying the brakes to my trading by expanding my loss tolerance from 8% to 16% when I am down to just 5 positions (from my maximum of 20), and am continuing to reduce my exposure to equities my reducing the size of any replacement position to 1/2 of the average. I am over 50% in cash now.

My "system" as amateur as it is, represents my attempt to have my own holdings direct me to sell or buy based on their own actions. Which is just horrible in this market.

I might be better served by getting a "magic 8 ball".

Thanks for writing.

Bob

2008 Nov 14 08:45 PM

[Ken Caruso:]

Why did you buy EXPD?

If you bought EXPD because of the fact that it has consistently above averages returns, has a competitive advantage with its world wide network and good management then why the hell did you sell it so shortly after buying it at a loss? A company with a history of great numbers is going to have its ups and downs, you can't expect such a short holding period to reflect the true value in this stock.

You elude to the fact that you find its numbers "intriguing" but then you sell it shortly after purchasing it. This tells me that you are either way to emotional about your investment to let the numbers speak for themselves in the long run, or you are not confident about your ability to read these numbers and feels the market is hence they might know something you don't know.

Selling when you did at a loss did not "limit your loss" it "limited your growth", in my opinion.

2008 Dec 21 05:53 PM

[Robert Free...:]

SeaKC,

You make some excellent points. I indeed liked many of the numbers and data regarding EXPD. But this was not an "emotional" sale.

There are two parts of my investment strategy. I am sure that you too in some fashion utilize these two strategies. The first being stock selection. The second being the management of those holdings that are in my portfolio.

I have chosen to to limit my losses to 8%. This is far from emotional. It is entirely numeric and disciplined. However, in light of the volatility of this market, and the lack of follow-through in these stocks making nice moves higher, I have implemented two changes in my trading strategy: first of all, if I am down to my minimum of 5 positions, I now tolerate a 16% loss instead of an 8% loss. Second, when given a 'buy signal' that my own portfolio generates, instead of limiting myself to stocks making large % gains, I also utilize my broader list of 'investable' stocks that I review on my blog and give myself the option of selecting one of these---recently I purchased Sysco (SYY) on this basis.

I do not know if my system will work long-term. But I am working hard at honestly sharing with you and my readers my own strategy and trying to take some of the kinks out of the trading approach.

Thanks for your comments which are really right on the mark.

2008 Dec 22 10:37 AM