We were stopped out of AET.
Meanwhile, the day after the election brings us back to.....nothing. Although many pundits wrote about the glories of a gridlocked government where no major laws could pass and predictability was possible, I thought that view was crap. It's like a card trick right before the big magic show: it doesn't really matter.
Someone asked a very good question. If we had gotten in, would we at least have made some money even in a pullback? It depends on the STOP prices. Many of our top picks are up 5%. If we had a tight STOP (5%), and these stocks fell back, we might have gained some, or we might not. If the STOP is more flexible (10%), then we might actually lose money if they pull back more. A real example is UCTT. We could have bought back last week at $12.8 and watched it zoom up to $13.8 on Monday. A 5% STOP would have had us out ~$13.1 a 2.5% gain but that's assuming we caught it at the peak that day - more likely we would have set a stop closer to our buy price. Guess what - it's back to $12.8 today.
So why am I bearish? Actually, I'm not. I'm being greedy.
I think that this has been a great quarter and Disney and Cisco will give a very nice cherry-on-the-top ending. I think that we are still growing and still have some economic life.
I'm drooling over many stocks (UCTT has a 20 PE and grew 54% from one quarter to the next - can you say undervalued?). I believe that the normal ebb and flow of earnings season will give us a buy-in opportunity in a few weeks, once the earnings excitement has passed and the market gets nervous again about oil and retail sales.
I have also revised my expectations somewhat about when to expect a market pullback based on a slowing economy. The herd mentality of Wall Street means that they are slower to react to basic shifts in the economy until those shifts materialize in the numbers. I understand - that's the safest way to proceed. Until trends become facts reported in quarterly earnings, Wall Street hesitates to pull the trigger. Housing is a case in point. The domino effect is obvious when you consider a crash in housing construction and home prices. In July, homebuilders still talked a good game. Not 3 months later and the losses are more severe than expected and talk is now doom-and-gloom. I submit that everyone knew, but nobody says "the Emperor has no clothes" until it becomes obvious.
Oil is the same - everyone knows that oil is a commodity that sinks in October and rises again when snow hits New York. And then there were OPEC's wanrings that it wants a $60 floor. Anyone who listened to me and bought the LEAPs on ESV and DO is very, very happy. (I bought plain old call options, so I'm only very happy.) But the market simply can not take the longer term view, due to various pressures, whereas you and I can.
And that's the beauty of investing: you can take advantage of Wall Street's herd mentality. But it takes time for Wall Street to catch up. I expected a 1.6% GDP to be bad for the market - so far the market is still going gangbusters. and invest your money before Wall Street does. move faster than Wall Street and move your money accordingly.
This is part of my trading approach, and sometimes I am very, very wrong. But I'd like to think that I can focus on some great stocks and take advantage of market momentum and pullbacks.
On that note, I am 30% through with my stock review. I am targetting a publishing date of this weekend.
Happy investing!
