Why I Sold My Shares of Microsoft and WMS Industries 7 comments
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As is my policy on my blog, I try to keep you posted as soon as possible regarding trades in my own 'trading account'. I also try to reasonably follow my own investment strategy that may lead me to part ways with stocks that I otherwise admire and otherwise would be thinking of holding.
Occasionally I 'toss out all of the rules' and do what I call a 'trade' which might mean holding a stock for hours, days or weeks, but otherwise is a purchase outside my own relatively rigid strategy for buying and selling of stocks.
My Microsoft (MSFT) purchase on 1/22/09 was one of these trades.
On that day, the stock was under severe pressure when the earnings announcement failed to meet expectations and an already 'beaten up' stock was beaten up further to levels not seen in over a decade. It was with that thought in mind, that perhaps things had really been 'overdone', that I chose to purchase what for me would be a very oversized purchase of 1,000 shares at a cost of $17.69.
Wednesday, with Microsoft trading about a point higher, I chose to unload those 1,000 shares and sold them at a price of $18.68. This worked out to a gain of $.99/share or a 5.6% gain in the two weeks since my purchase. Overall, with a 1,000 share position, with a total cost of $17,697.99 and a net of $18,671.89, this yielded a gain of $973.90 on this trade.
With about half of my equity tied up with the Microsoft position, and with my own purchase outside of my usual trading rules, I was rather anxious to take my profit and run. However, this does not mean that I do not like Microsoft, but rather that my aim with that purchase was to exploit the short-term over-reaction on the stock price and pick up a short-term gain. Fortunately I was correct on this educated guess.
My other sale Wednesday was one of my regular positions: my 72 shares of 
WMS Industries (WMS) which were all sold at a price of $19.69. These shares were just purchased on 10/28/08, so I had a loss of only $.43/share or 2.1% since purchase.
I have actually sold shares twice at the 30% gain (quite frankly an oversight, because the second 1/7th position was sold, forgetting the first sale at the 30% gain!). I sold 13 shares 11/4/08 at $26.05, and 11 shares on 12/3/08 at a price of $25.48.
However, after a single sale at a gain, it has been my policy to sell all shares should a stock holding decline to under break-even. Normally, after a purchase of shares I wait for an 8% decline before pulling the plug. WMS has been sold previously at a gain, and now has declined into a losing position. No matter what my own personal affection for the stock, my 'trading system' was directing me to dispose of shares.
Ironically, the behavior of WMS in the market mimics the activity of MSFT prior to my own purchase. I am torn between wanting to override my own trading policy and actually buying shares at this point or following my rules and selling shares. With the market acting as anemic as it is, I chose the conservative action and entered the sell orders!
Looking hard for news, the best I could come up with Wednesday was the announcement of a 'downgrade' of shares by analysts over at JP Morgan who changed their recommendation from "overweight" to "underweight" and the rest is history.
In fact just a few days ago on January 29, 2009, WMS announced 2nd quarter 2009 results with total revenues increasing 12% year-over-year and earnings coming in at $.41/share, a nickel ahead of estimates of $.36/share per Reuters. Revenue at $178.4 million also beat expectations of $175.7 million expected. However, the company did guide slightly lower for the upcoming quarter with revenue of $178 to $185 million now expected, below the street's expectations of $188.1 million.
In any case, I felt that Wednesday was a day of sticking to rules, getting out of profitable trades, and otherwise taking stock of the market while maintaining a cautious optimism over future prospects!
Disclosure: The author sold his positions in both MSFT and WMS.
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This article has 7 comments:
Did you just get scared or are you thinking of concentrating more on day trading, because of the current volatile environment?
Photo, I am sorry that you believe me to be a moron. I purchased Microsoft in an 'outsized' position as a trade. I otherwise have a very 'disciplined' trading strategy that determines my own purchases and sales of stocks in a defined fashion. Microsoft appeared overdone to say the least on the downside. With the stock moving up a point, I sold that position and saved my equity for another day. My own sale was not based on my view of Windows 7, Apple Computer, the Stimulus Plan, or the price of Oil. It was simply a trade.
Fred, your comment about my $34,000 trading account is amusing. As it is said in Fiddler on the Roof, 'when you are rich, they really think you know!' Perhaps you would prefer to take your investment advice from John Thain or Bernie Madoff? I have other investments that I employ managers to monitor. I write this blog about my 'trading account' to share with readers my own experience. I do not believe that the size of one's portfolio is necessarily related to the wisdom being imparted. I am sorry if I have wasted your own time with such a trivial amount.
351563....fool? It is never foolish to take a profit. I will leave it at that.
Jake, you make a good point. I would have hoped for more on the Microsoft trade. I am not comfortable with this market and am concerned about my overall performance--percentag... wise--as I look to stay ahead of the S&P. I post every single trade I make on my blog. Wise or foolish. The 600,000+ in new unemployment numbers this week should give everyone a pause. The Stimulus plan may not be stimulative, the TARP funds may be inadequate to bail out the banks, and Afghanistan, Gaza, and North Korea may implode.
Thus, with all of my anxiety, it is likely we are near a bottom and climbing the proverbial 'wall of worry'. I know I am not comfortable about things.
Thus I revert to my minimum of 5 positions, and wait for my own signals to be adding a smaller positions as #6 or replacing one of my five as needed.
Thank you for understanding.
Whatever makes you happy. There's an old trading expression that no one ever gets poor taking profits, so for that I commend you. With respect to investing, I really believe you are missing the bigger picture here with MSFT. In my humble opinion, this is a winner over the long-term. Way too many positive things in the pipeline (despite all the bad vista press, etc.). No question the weak economy will impact them, but that will impact mostly everyone. Better to be in cash for the most part these days, but if you have some fraction of money you can put away for the long-term, you can't find a better diversified company with lots of cash and opportunity (via software) to leverage this growth in technology that will remain strong over the next 20 years at least.
It isn't about what makes me happy, although I am glad you are concerned about my good humor. I also appreciate the 'bigger picture' on Microsoft. I do not think Microsoft is going to go bankrupt or disappear from the software scene. I do believe the stock represents great value and shall likely reward investors who are patient and can see far into the future. It is just that my own idionsyncratic trading system requires me to carefully add positions and manage those holdings just as closely. My Microsoft purchase was just for a trade because just like you, I believe that the value after the earnings announcement, was quite compelling and that a rally in the share price would likely result. I simply chose to take that money off the table without my sale being a condemnation of the Microsoft stock which as you will note continued to move even a little higher today.