Many Things to Like About BE Aerospace - But I Sold It Anyway

There are many things to like about BE Aerospace (BEAV). That is why I recently added it to my portfolio. Things like the great recent quarterly result, and the "Five-Yr Restated" financials from Morningstar.com. 

But this blog is not about a love-fest of stocks. It is about building a portfolio of terrific stocks of terrific companies and then managing that portfolio of stocks in response to the vagaries of the market--the bullish and bearish influences that bear down upon each of us.

Recently I have modified my trading strategy to acknowledge that there are times that are so terribly negative that naively replacing stocks on 8% losses and continuing to maintain the same size of positions only allows a certain compounding of losses.

To deal with the negative environment that drives me down to under five positions (my minimum), I have chosen to do two things: to reduce my replacement size of a position being replaced to maintain that minimum to 1/2 of the average size of the remaining positions, and to allow each stock to dip to a 16% loss (instead of an 8% loss) to hopefully avoid unnecessarily replacing stocks that are victim of the increased volatility we are all observing.

Directly to the point, my BE Aerospace stock hit a 16% loss Thursday morning, and I sold my 215 shares at $9.4154. I had just purchased these shares 10/27/08 at $11.23, thus I had a loss of $1.81 or 16.15% since purchase.

With my holdings now down to four, I have another "permission slip" in my pocket to purchase a new position to make five, however, I am not in a big hurry to do anything. After having burnt my fingers over and over in this treacherous market, the nickel feels rather cool in my pocket - it doesn't appear to be burning a hole at all this time!

Disclosure: The author sold his shares of BEAV on 11/13/2008.

Comments

[Blowout Ear...:]

Robert, here is a free tip, any chart that looks like a downward ski slope, run away.

2008 Nov 14 02:04 PM

[Robert Free...:]

Blowout,

In general I agree. I like the charts that look like an upward ski slope :).

It is tough to go agains a bear market of this magnitude, isn't it?

Bob

2008 Nov 14 08:47 PM

[kansaslifter:]

I bought BEAV on Dec 12 at 7.25. I was pretty happy when it hit $10 two days ago. My opinion? The backlog in the aerospace industry makes these stocks bargans. I have 4 positions in aerospace companies and my portfolio is up a little over 20% since November.

Jan 09 12:33 PM

[Robert Free...:]

Kansas,

Congratulations! I have no problem with what you have done and certainly admire your performance.

I do not buy any stock like BEAV unless I find much to like about it. My own idiosyncratic stock investment strategy requires me to sell stocks after they become significant loss positions no matter how much I like them. In general, limiting losses is probably essential to managing a portfolio in any market.

A value investor may well find fundamentals attractive and with the right disposition and staying power may well end up with terrific returns as you have done. Kudos.

Thank you for your comment and reading my entry!

Jan 09 05:23 PM