Anatomy of a Sale of a Good Stock
Dec. 05, 2011 1:42 PM ETINTC
John D. Thomason's Blog
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Value, Contrarian, Dividend Investing
Seeking Alpha Analyst Since 2010
I am a retired (as of September 2001) IT manager. While I have always followed the markets, during my IT career my market research time was limited. Upon retiring, I have focused full-time on the markets and my own market education and growth. I have evolved my investment/trading strategy over the years to the point that I am comfortable with my approach, both from a suitability standpoint and from a results standpoint. In addition to reading and re-reading numerous investment classics, my education has been augmented by my experience, particularly the market declines of 2000-2002 and 2008-2010. I make money from dividends, occasional stock sales, and option sales, either covered calls or cash-covered puts. I only own dividend-paying stocks, and I usually am about 75% invested. I base my investment decisions on both fundamental and technical analysis. While I refer to numerous financial web sites, I spend more than 50% of my research time at Seeking Alpha. In recent years, I have expanded my knowledge to encompass U.S. Income Taxation of investment income, and from there to US Income Taxation overall. As of October 2015, I am an Enrolled Agent, which is recognition granted by the IRS to a tax practioner who has passed three Special Enrollment Examinations (SEE).
The articles I submit will illustrate "hands-on, real world" investment experiences based on my own activities as an independent, small investor, my purpose being to share what I've learned that hopefully will be helpful to others. I will strive to present my thoughts in relatively easy-to-understand terms, and will usually focus on the practical rather than the theoretical.
Note: This is an excerpt from today's blog at my website.
I made a sale this morning, taking advantage of the rally we have been seeing to sell 1/3 of my position in INTC at 25.15. My rationale for this move illustrates my strategy perfectly. If you visit my website, you will see that I consider INTC a “Tier1” stock, and as noted, I own it. I still own it, just 1/3 less than I owned at the open. Why would I sell when INTC is doing so well as a company, especially since on my “Tier1” list I specify I would only consider selling if it reached 28.00? My reasons are as follows:
I made a sale this morning, taking advantage of the rally we have been seeing to sell 1/3 of my position in INTC at 25.15. My rationale for this move illustrates my strategy perfectly. If you visit my website, you will see that I consider INTC a “Tier1” stock, and as noted, I own it. I still own it, just 1/3 less than I owned at the open. Why would I sell when INTC is doing so well as a company, especially since on my “Tier1” list I specify I would only consider selling if it reached 28.00? My reasons are as follows:
I had 150% of my authorized position size. I purposely oversubscribed back in March 2011, when it dipped below 20, with the thought that it was a good buy at this price, was safe enough to justify owning more even though I already had a full position, and (like all stocks I consider), it paid a good dividend.
The sale price represented a 25% gain on the price paid. This is enough of a gain that I consider it worthwhile. I’m not saying “always sell when you have 25%”, but only that 25% is adequate, and a sale may be advisable, after considering all factors.
It just paid a dividend. Another one won’t be coming along for another 3 months.
I hate to let a rally go to waste. Sometimes I just want to “ring the cash register”!
(I have to credit Greg Capra of Pristine Capital for that expression, from the book “Tools & Tactics for the Master Day Trader”, Velez & Capra.) It perfectly describes why I sold. I haven’t “cashed in” on anything so far this month, & I just wanted to “see some green” to post into my records.
Like all stock trades, only time will tell whether this was smart or dumb. If it turns out to be the latter, it won’t be the first time.
If we have the predicted (by some pundits, at least) selloff as the Euro crisis unfolds, I would certainly consider buying back INTC if it declines below 20 again.
Disclosure: Long INTC
If we have the predicted (by some pundits, at least) selloff as the Euro crisis unfolds, I would certainly consider buying back INTC if it declines below 20 again.
Disclosure: Long INTC
JT
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