One of the biggest pitfalls for most investors and traders is that they sell their winners and keep their losers. Similarly, another big pitfall for most investors and traders is holding onto legacy positions simply because they’ve owned them for a while and end up growing complacent. We are not most investors and traders and, along with picking Revolutionary companies to own, one of the main reasons we’ve been so successful over the years on Wall Street is because we are flexible, open minded and vigilant in our approach.
You don’t have to be All-In or All-Out. It’s impossible to game tops and bottoms in the markets, so if you want to outperform and protect your money over the long run, you want to use the ebbs in the market to add to stocks and the flows in the market to trim stocks.
I don’t think this Bubble-Blowing Bull Market is over yet…but I could be wrong, so always leave yourself room for error.
Regardless, I am going to do some culling of our portfolio, both longs and shorts, as I want to clear my mind and my portfolio from some of our laggards. I can always go back and repurchase/reshort any of the names I’m closing out today, but as I often do, I want to review my positions and make sure we’re staying in the right names that provide the greatest risk/reward for our buck.
So here’s what I’m doing in my portfolio today:
I’m letting go of our lone Water Revolution stock, Lindsay LNN. I’ve personally owned this stock for three years now. We’re up about 25% from my original entry point and we have taken profits on it at times when it’s popped and we’ve also gotten paid nearly 2% per year in dividends to hold it. The stock has lagged for the last year though, as irrigation and farm capital spending has declined during the commodities collapse. I like the management at Lindsay and I like their products and think that over time this stock might be one we revisit, but I want to clear it from the sheets for now and allow myself some air.
Next, I’m going to take a loss in my Whole Foods position. I do think that there’s a Healthy-Eating Revolution going on all around us in the US and that Whole Foods is a well run company helping to drive that revolution. But competition in the grocery market business is heating up and all the major grocery chains are focused on healthy-eating product growth. Whole Foods has disappointed me and Wall Street for the last couple earnings reports and again, I want to step away from the name so I can analyze the entire sector with a clear mind.
On a similar note, I’m selling my MCD McDonald’s puts, for almost exactly what I paid for them. The stock is down about five bucks since I bought the puts, but the puts are close to expiration and there’s no time value premium in them anymore.
On a similar note: If you were panicked and hurting and/or crying during yesterday’s 1000 point crashette, you are TOO long. Sell a little bit and relieve that pressure while stocks are up 1000 points from those lows just 24 hours ago.
Investing and trading shouldn’t be about emotions. Emotions are the enemy. Analysis and playbook and being calm and cool in times when the markets are full of euphoria and in times when the markets are full of panic are what drive me and that’s part of why you’re subscribing to this service.
One other note I want to share with you. Here’s a text message I got from a friend who works at Google on Monday: “Dude thank you for telling me to sell in July. Brilliant. Now I’m nibbling again. Still taking large losses but nowhere near what it would’ve been. So thank you. Hope your family is well. Think about you a lot.” When I’d visited him in SF a few weeks ago over dinner he told me he was long all kinds of call options in tech. I said, take your profits and chill out with common stock. Lucky? Good? Nope. It’s just the Trading With Cody Playbook in action.
Keep your heads up, keep your cool and stay vigilant. We have a playbook for this market and its volatile swings.
I’m also putting the finishing touches and wrapping up my homework on a small cap biotech Revolutionary company that you’ve never heard of, so stay tuned for that in the next few days.
I’ll also be sending out a complete run-down of my Latest Positions to you this afternoon.