This is my first article on Seeking Alpha,
As with any first attempt please forgive any errors or mistakes I made.
Cramer of Mad Money constantly touts buy best of breed companies. If you are a Buy Hold and Forget type of investor this strategy will probably pay off in the long run, assuming your retirement age does not land at the time a recession hits. Most of us here at Seeking Alpha are anything but BHF investors. We tend to look at stocks not as company,how good it is, we tend to look at them as nothing more than numbers. That is the way it should be viewed in my opinion.
The only thing that matters is the stock price, will it or won't it appreciate. Which in my opinion is the best way to invest. A cold callous unemotional attached view of investing. Math tells me that I don't care if a company will give me 3% annualized over 10 years. I care if a stock is going to give me 10% or more annualized over the next two years.
There is one thing Cramer and I do see eye to eye on, and that is playing with house money. We however have different ways of doing it, Crammer on Mad Money touts taking money off at 25%, and then incrementally from there reducing your stake until it is house money. I prefer a riskier play. I sell my stock when I am able to keep 25% or more of my initial shares, and get my money plus 7% or more. The reason I don't like Crammers method, is it involves multiple commissions, Mine only requires 3, 1 to enter into a position, the second to get my investment plus back, and 3 to close out my position entirely. I seldom use the third one.
Yesterday I sold off 75% of my Sirius(NASDAQ:SIRI) Stake, my initial investment plus a 7% return on Invested capital. Essentially this means if Sirius goes broke, I still made 7%. This move prompted my roommate (who is heavily in the bio-tech market) to ask. Why didn't you A)Hold your shares until the buyback has completed or B)Sell all of your Shares.
The answer is simple I want free stock and I hit my exit price, I don't care in the short term now if Sirius goes up or down a little. In-fact even if it goes bankrupt I got my money back, Plus 7%. Now I can put my money back to work. -Oh the joys of money working for me, it's so much better than working for my money.
In poker terms we call this a free-roll, the worst case scenario is I loose all of my Remaining Sirius Investment, I don't care, I already got paid, if I get paid again it will be what I consider a bonus.
So as of this morning my stake in Sirius is essentially risk free(being that I can never loose money on this stock unless I purchase more). With my investment and my new capital I looked for a Sirius like investment. The two I chose were Rite-Aid Corporation (NYSE:RAD) and Pengrowth Energy Trust.
I choose RAD, because the debt situation, and the return to profitable quarters look exactly like Sirius did 2 years ago.
Two totally different companies, operating differently in different segments, not much in common with anything expect, the financials look eerily similar to Sirius of the past. I have a two year horizon on RAD and in those two years, I would not be surprised to see another round of debt refinancing, especially if interest rates continue to stay this low. My current price target Ironically is 3.10 Sirius current price.
The position I added in PGH was equal to my 7% that I took home from Sirius. I am essentially using the gains to give my self a monthly raise.
The bottom line, in my opinion investing is not about good companies, or long term BHF investments, the landscape changes too quick for that, to me investing is about taking profits, and making your money work for you.