Thursday, September 18, 2008

Bookkeeping: Closing 3 Positions

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This market is more than dangerous. When you can lose 40% in 1 hour due to a rumor it is simply not worth it.

I am cutting back even further. I am cutting 2 of the 3 positions in my "non solar alternative energy" bucket - we have 2 big losers and 1 big winner of these 3. I am keeping A-Power Energy (APWR) despite the horrific fall. I cannot believe it is 5x earnings for 2009, but I cannot believe many things I've seen the past 13 months.

Our big winner in this group was Fuel Systems Solutions (FSYS) - we have a $22.6K gain here in the stock we started on July 2nd. The company blew out earnings as we anticipated and the stock roared. Those were in the days when fundamentals "sorta" mattered. I've cut it back on the way up and have not been buying on the way down. One of their main plants is in Italy which is shut down for August and a few weeks in December - with high riding stocks like this people expect them to beat and do better than the quarter below. I've been hesitant to buy this in case they do a good quarter but not enough to satisfy heightened expectations. Obviously running a plant for 2 months of a quarter instead of 3 will cause sequential growth to not be so great. I don't think most investors in this name are expecting that. So I'm in a position where I like the fundamentals, but I don't want to add until at least after the next earnings so in this environment we might as well cut it; so we are here at $46.

One of our big losers has been American Superconductor (AMSC) - it is up 17% today as this is a short sellers favorite. It is up 17% today - coincidence I am sure. (p.s. APWR was up nicely this AM before reversing hard) I am going to take my $10.9K loss and call it a day. Without positive earnings until 2009 and a speculative bent to it, this is not the type of merchandise the market prefers. I still like it, but then again I like a lot of stocks I've been punting the past 6 weeks and the market has been mauling. We're closing the 1.0% stake today just over $20, and have held it since Jun 02.

Outside of this "basket" I created, I am selling Exactech (EXAC) which is a small medical equipment company I like. Since its earnings report it has not done much - just sort of floated downward. It is actually lower than where we entered the position post earnings (which I liked but the market didn't) but we are up $200 just from trading around the position. It broke below the 200 day moving average a week ago and has at least not gone into freefall. Since it is up 5% and making an attempt to challenge this resistance area I am going to sell while the selling is good - we only had a 0.1% stake remaining so it's one less position to look at. $200 in this market is like $20,000 in 2006.

We continue to shrink. Friends, if you can make heads or tails of this market you are a better man, woman, or computer than I. It is so random and since my methodology does not work (whose does?) in this market it is just dart throwing. This gives us no advantage - darts are a 50/50 probability. That's not my thing. You can't even step away from the computer for 1-2 hours anymore. (I don't have the ability to place stop orders which is another problem) So I continue to find this market dangerous and useless as a money making mechanism. I just saw the market spike up 1.5% in about 10 minutes out of the blue on no news. I just saw a few banks on my watch list Regions Financial (RF), Wells Fargo (WFC) and BB&T (BBT) make 12-20% spikes in 30 minutes. This makes no sense to me - whatever the quant funds are doing is boggling and moving stocks so violently my head is spinning. Nothing really is making sense so I continue to hide as much as possible.

EDIT 2:20 PM - a reader sent me this, I guess this explains the super spike in both the exchanges and the financial stocks. But again, if you are not watching this market every millisecond it can turn against you on any minor news item. Not worth it.
  • The UK Financial Services Authority imposed a temporary ban on short-selling financial stocks on Thursday, saying the measure was needed to prevent further instability in the financial sector.
  • "We have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector," FSA Chief Executive Hector Sants said in a statement.
  • The FSA said the ban will remain in force until Jan. 16 next year and will be subject to an initial review after thirty days.
  • In addition, investors with an existing short position of more than 0.25 percent of a financial company's share capital must disclose their holdings every day from Sept. 23, the FSA said. (sounds VERY similar to the SEC proposal we discussed this morning - obviously they have been talking)
Have I mentioned these are historic times?

Jeff Macke on Fast Money said it best last night - when you don't even know the rules, or they are changing them on you - how do you invest? You simply cannot.

Long A-Power Energy in fund and personal account

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