Bookkeeping: Closing General Cable (BGC)

I am closing the last of smaller position General Cable (BGC) today. I am going to place this in the same category as Cummins Engine (CMI), a position I closed in mid November on worries that the stock will be hit by slow US growth, despite liking the actual business prospects and increasing global exposure (of both companies). For now, perception is reality... and the perception is slower worldwide growth will hurt these type of companies. I sold a few other similar type of companies in the fall, and have avoided the dry bulk shippers and those types for the same reasons. Even if reality ultimately proves the thesis to be untrue (the thesis being that these companies cannot do well in a slower growth economy), it really doesn't pay to be intellectually correct, when the stock prices fall due to 'perception'. At some point in the future I will be moving back to these industrial type names (BGC could be classified as an infrastructure play in many ways), but it appears it will need to be at some point later in the business cycle.

I do expect these types of stocks to bounce simply because they are oversold, but at this point what isn't. And I'd rather have cash in stocks that don't have this overhang of bad perception, even if its unjust in my opinion. I have a few other names suffering a similar fate in the networking sector as well. When the market gets back to normal, everything will bounce - but I think some other names will have more pop than BGC. In terms of General Cable, it is a 0.7% type of position in the fund - if everything else were holding up I'd be adding to this type of name but with other stocks I have more confidence that perception won't ruin a good story, also falling, I might as well focus my cash and energies on those names. The stock has also fallen below its 50 day moving average but then again, mostly everything has. :)

I am closing out this position with a $2200 type of gain (which means it contributed about 0.2% to the fund's performance since inception). It was never a large holding for the fund (nor a fast mover, but solid), and I've held it since day 1 of the fund - usually with a 1-1.5% type of holding. I really do like the long term prospects, especially with its purchase in September which made it a more global brand. This is really a pure play on global growth and rebuild of infrastructure in many ways, so I expect to return to the stock at some point in the future. Ironically if the "global economy/emerging markets" won't be affected by the US slowdown, I am unclear why these industrial names levered in large part to international markets are taking such hits. Shows a clear discrepency - either US investors are overreacting to the downside or there is a lot of kool aid in the belief that emerging markets are impervious (I am betting on the latter, but as I said yesterday it took 6 months before US investors faced the music of slow growth so it could take that long or longer before 'emerging markets' are seen as NOT immune).

I believe with this sale, I am completely out of the 'industrial' type names...
This also brings the total # of long positions back down to 56.

No positions