Why I Had to Sell Ecolab

I wanted to share with all of you my own disappointment at having to part ways with my recent purchase of 134 shares of Ecolab (ECL) that I had just purchased on 2/6/09 at a cost basis of $35.54. I sold these shares on Thursday in the midst of the continued market correction at a price of $31.5948. This represented a loss of $3.9452/share or 11.1% since purchase. (As I wrote this, ECL was recovering somewhat, trading at $32.04/share for a loss Thursday of $2.21 or 6.45%).

After an initial purchase of stock, my own trading strategy dictates a sale at an 8% loss, regardless of the duration of my ownership of that stock. And that includes selling shares after only 6 days!

With this sale on a decline, which for me means a sale on 'bad news', I am back to my minimum of 5 positions and shall be 'sitting on my hands' with the proceeds of this sale--thereby moving once again a little more into cash and away from equities!

What triggered the slide was apparently the disappointment in the 4th quarter 2008 earnings results which were announced Thursday. Excluding one-time expenses, earnings came in at $.45/share, unchanged from last year and in line with expectations of $.45/share. Revenue, which climbed 3% in the quarter to $1.48 billion from $1.44 billion was a bit 'light' from where analysts had pegged the company---$1.51 billion.

In addition, the company reduced expectations about the current quarter, guiding now to $.30 to $.34/share, well below analysts' expectations of $.41/share.

Even though full-year guidance was essentially in line with expectations, the disappointment on last quarter's revenue and the decreased guidance for the current quarter, was enough to make investors turn tail on this stock and resulted in my own sale as the stock hit and passed the 8% loss limit for me.

Disclosure: The author sold his shares of ECL.

Comments

[GregT:]

Quite honestly I'm not sure that your sale of ECL because of an 8% or greater drop is "news worthy". Imagine how clogged up my Yahoo news page would get if someone wrote an article every time a stock I track dropped 8% or more. Not every trade deserves a blog entry if there is no real substance behind or insight behind it.

Furthermore, your style of "investing" is more akin to gambling than anything else. I read a couple of your entries and you think nothing of putting 50% or your portfolio in a single short term trade. No true investor, whether trading for the short term or long term, would ever allocate so agressively.

Feb 13 08:43 AM

[Robert Free...:]

GregT,

Thank you for your comment and for taking the time to read a couple of my other entries here.

Rest assured that I do not choose which of my entries shows up here on Seeking Alpha or even on Yahoo. Seeking Alpha approached me regarding participating in their endeavors and I am delighted to be a participant in this multi-author website. Apparently Seeking Alpha and Yahoo have a special relationship whereby posts here on Seeking Alpha that pertain to individual companies are rather automatically included on the Yahoo Finance site. I would tend to agree that this particular entry of mine is not necessarily of broad interest. But then again, what I am trying to do is not to "gamble" as you have suggested but rather to develop a system including selling my losing stocks quickly on 8% losses that will allow me or anyone else to manage their own portfolios in a rational fashion.

While you feel I am not a "true investor" it is my "truth" that is most disturbing to you. I share with my readers each and every one of my trades and my rationale for those trades. I point out with each of my entries on my blog, Stock Picks Bob's Advice, that I am an amateur investor. I have never claimed otherwise. I am what I appear to be.

But while occasionally, and very occasionally indeed, I have chosen to make a "trade" as I did with Microsoft, I have each time resorted to managing my own core portfolio in a disciplined fashion, selling losing stocks quickly and completely, and gaining stocks slowly and partially at pre-determined levels. I am far from a "gambler".

Please do take the time to read more of my entries and my own approach to investing before dismissing it in haste. You may well find little there to your liking and approval and if so, I apologize for wasting your time. If, however, you find that maybe, perchance, there is some element of insight in what I write, then all will not be for naught.

Like the making of hotdogs, it is often best not to see the details too closely. Each of my transactions is but a detail in the overall picture of portfolio management. I hope that the "hotdogs" I create will be of better taste than the appearance of each ingredient.

Thanks again and I look forward to your future remarks.

Feb 13 06:11 PM

[Mozart:]

I've been purchasing this stock since 1983 and even in this economy plan to hold on to it for the long term. Ecolab has paid quarterly dividends for decades and has had at least 3 2-for-1 splits since I've been in it. It has historically been a growth company and has received many accolades for it's management and corporate citizenship.

Feb 17 03:54 PM

[Mark from M...:]

Y'all wouldn 't say that if you ever worked there. There are at least 3 pending wage-hour class action lawsuits going on against EL right now. Refusing to rehire veterans.. biz.yahoo.com/ap/09030...

Great "corporate citizens". yeah.

On Feb 17 03:54 PM Mozart wrote:

It has historically been a growth company and has
> received many accolades for it's management and corporate citizenship.

Mar 19 04:21 PM

[User 408920:]

when you are paid salary plus commission there is no overtime, you get what you put in to it and it comes out in the commission. The lawsuit against ecolab is about overtime pay, ask a car sales men if he gets paid for overtime or receive a salary.

May 06 09:50 PM