Friday, June 13, 2008

Bookkeeping: Selling off More Perfect World (PWRD) and Cummins Engine (CMI)

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I am selling off some more winners here from stocks we've discussed this morning and yesterday.

First Perfect World (PWRD) which we just discussed - as we just wrote we'd look for mid $25s to lay off more shares

The stock is now trading back to the mid $24s range, up 13% - as I outlined in the previous post on this stock I'll continue to cut back on this name as it approached resistance which in this time frame means mid $25s or so.

....and we got them within an hour (stock has hit $25.59), so I am cutting the shares I bought just last Friday in the $23.70 (which I had sold in the $26.20s). So in a week we made 7.5% on this batch and as we said this morning on the smaller stake I bought in the $21s-$22s we made a quick 12-13%. In other words, this has been a terrible buy and hold stock, but a heck of a trading stock. So far. In time it will become a great stock to hold as well if it continues to execute. But we want to see the stock above $26 and then I'll be happy to stay in. I outlined this strategy here. So we'll keep buying on dips and flipping into resistance levels - and then one day when the stock breaks above resistance we will have to "pay up" (buy at a price higher than we sold) but until then we can generate gains trading it.

Perfect World is now down to a 0.4% stake.

On to Cummins Engine (CMI) which I wrote a piece just a few minutes after I read the news yesterday, wondering why it was up so strongly. Well after a flood of news reports yesterday, we got more clarification ... it sounds even more bullish than on first glance BUT this has been a huge move on something that helps the company in the long run so I am going to take a risk here and take Cummins down to a very small stake (holding position) on this huge 2 day run. The stock is now in the $73s/$74 range so I am flipping out most of what remains and going down to a 0.15% stake, and look to buy back on a pullback. This is a bit of a risky move because the stock could just continue to run ... but a 20% move in 2 days in a stock like Cummins is like a solar stock going up 50% in 2 days... it's normally a relatively calm stock, but this is definitely good news. However it's good in the long term, and the market is repricing the stock very strongly in the short term. Further, at $74 we are reaching highs a month ago and potentially forming another double top ;) Last, I am taking all these rallies in the market as opportunities to lighten up on positions that run, because until market technicals improve - all rallies must be doubted; even those based on fictitious government reporting. But I do like both these stocks a lot and hope to get them at lower prices to rebuild in the near future. However, I cannot turn down 15-20% type of gains in such short time periods in this type of market.
  • However, Caterpillar will stop supplying engines to other North American manufacturers of these vehicles, starting with the introduction of engines designed to comply with 2010 U.S. clean-air rules.
  • As a result, Caterpillar's archrival in the diesel engine space, Cummins Inc (CMI), now looks poised to capture more of the North American market in coming years, analysts said.
  • That was widely seen as a victory for Cummins, because it leaves the Columbus, Indiana-based company "increasingly the sole independent engine provider to the U.S. truck engine market post 2010," according to a note from Citi Investment Research analyst David Raso.
Long both names in fund; neither in personal account


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