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Joseph P. Porter
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I am a retired college faculty in Philosophy, with specializations in Ethics, Socio-political Theory and Rational Choice/Decision Theory. My teaching focus was on Business Ethics, Medical Ethics and Logic. After retirement I freelanced as a Grant Writer/Fund Raising Consultant. I have taught at... More
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Joseph P. Porter's Instablog
  • When It's Low, You Should Buy; Then You Hold Until You Die. 0 comments
    Oct 11, 2012 12:32 AM | about stocks: AGNC, NLY, CIM, MFA, CXS, ARR, TWO

    One of the investing maxims we hear a lot directs us to "Buy and Hold." Now, this might seem like a good thing - and it is, to a point. If you believe a stock is going to be a regular gainer, then yes, buy and hold, by all means.

    I purchased CUR a few weeks ago, and that puppy has been up and down like a yoyo. But I knew the stock was speculative when I bought it, I did my due diligence thingy, and decided that - while it may take a while - CUR was an investment worth holding on to.

    On the other hand, I have championed mREITs for quite some time. I have had as many as 7 mREITs with about 60% of my portfolio in them (my portfolio is not exactly huge, and mREITs looked like a great opportunity to make it at least a little "huger").

    When it began to be clear that Chimera (CIM) was on the way down, I cut it loose.

    When Annaly (NLY) began free falling, I put a stop loss on it, and - sure enough - Annaly was lost.

    Not too long ago, American Capital (AGNC) was dropping rather precipitously. I set a stop, and set it low enough that I really didn't think AGNC would drop that low. But it did. For about 30 minutes. While I was asleep. Then it proceeded to climb back up - without me.

    Today, in the face of tremendous price drops, I let MFA go. I had decided that, given the current state of affairs, some mREITs may have to go. But I will buy MFA back when things clear up. And I might get a really nice price.

    I now only have Armour (ARR), Two Harbors (TWO) and CreXus (CXS). And I must admit that CreXus is the only one I will hold on to until I die. ARR and TWO are fair game, as far as I'm concerned.

    It strikes me as somewhat foolhardy to hold onto a company that is losing value (and cutting dividends, to boot). I avoided losing money on AGNC, and it is now lower than when I sold it. I broke even with NLY, and it, too, is below my selling price. We needn't discuss CIM (it is higher, but on the way down).

    "Buy and hold" may sound like good advice, but like any other situation where there are conflicts, you have to choose your battles. For a stock I believe in, sure, I'll fight to hold on. But if the environment that made an investment attractive changes, then maybe discretion is the better part of value. With QEternity actually working this time, and with refinancing becoming fashionable, the mREIT investment scene has changed, and it may not come back the way it used to be.

    In this case, maybe it's better to say goodbye, at least until the dust settles a bit.

    Disclosure: I am long CXS, TWO, ARR.

    Additional disclosure: I am long on virtually everything until I decide it's time not to be long on something anymore.

    Themes: mREITs, investing strategy, losses Stocks: AGNC, NLY, CIM, MFA, CXS, ARR, TWO
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