I am closing both Apple (AAPL) and Research in Motion (RIMM) for technical reasons - they are among the weakest charts in our entire portfolio. In a normal bull market, I'd never touch charts like this, but good technical setups are so rare nowadays so we have had many stocks trading below both the 50 and 200 day moving averages. What you want to see when the market shows any strength is a pick up in the stocks you hold - usually those who lag during periods of strength in the market, will lag further should there be a sustained move upward in the market. Both these names are not even making serious attempt to breach the 50 day moving average. Right now these 2 names are signaling either market expectations remain too high, estimates are too high, or the consumer (and corporate spending in RIMM's case) will be far worse than we assume in early 2009. I'd vote for the latter, but the "reason" means nothing - we want to see good price action and we are not getting it.
As I said in this week's round up - these sort of charts could simply be marking time and the longer a base is (sideways action) the more powerful the eventual move. The question will be, up or down? If up, we'll catch these stocks on the upside - for now it's dead money. Further, in the monolithic trading nature of this market as I pointed out this morning [Apple Has Turned into the S&P 500?] - one might as well just own a 2x long ETF - in technology or otherwise and you basically get the same moves as the stocks. That said, Apple's chart holds more promise than RIMM's but the concept is the same.I still like these on a fundamental basis, and I like to say technology as a whole is a too hyped area - the growth in technology companies in the U.S. has been poor for a long time with a few pockets of outperformance - mostly names everyone knows. Most are quite cyclical in nature (i.e. semiconductors) and really no different than buying housing stocks, or industrials - if you buy them at the right time in the cycle you are fine, but the type of companies we like with sustained growth of a 25-30%+ nature are not quite so prevalent as people think in technology. These were 2 names, but until hedge funds return to these names they are sort of just sitting dead in the ocean. We'd like to see Apple back north of its 50 day moving average ($100) on volume and RIMM north of its 50 day moving average ($50) on volume; better to pay a higher price with a stock which has finally created an uptrend than pay any price for stocks going sideways or down.
- We restarted Apple on October 10th which was the "low of the year" in terms of new yearly lows in individual names (the index went down farther in November) in the $93-$94s, so we made a few bucks this time around as we traded around this position - nothing of note. We only had a 0.1% stake going into the week so we're exiting just under $95. Correct timing on this purchase, but wrong instrument (stock).
- We restarted Research in Motion two days earlier on October 8th in the $59s. We had sold it a month earlier (early September @ $103!) yet even by repurchasing in the $59s we've lost badly on this trade as the stock is now in the $37s. We've been trading around the position but still managed to lose $6.3K. Considering the stock is off by over one third in 75 days that's manageable. We're exiting the remaining 0.5% stake today.
We prefer growth names - but growth names that hedge funds are pushing up. For now, just buying either an index ETF or technology ETF can get us the same performance without the company specific risk.
Baidu.com (BIDU) despite a similar chart to the 2 stocks we're selling continues to work like a charm for us - I was thinking strongly about closing this one out as well today but since China has some blessing by the market right now I've decided to keep it around but with a tight leash. We've been able to buy this recently in the $110-$115 range and selling in the $120-$135 range, and repeat a few times. The stock is now making a move today, on a Goldman upgrade right back to its 20 day moving average where it has failed repeatedly so we are going to exit most of our remaining position, taking this from a 0.7% stake to 0.1% in the $129s (these shares were bought at $111 last week). Not sure why we keep getting wins with this name considering how bad the chart is, but this weaving in and out (jab, jab, jab) of positions is the only thing working in this market. I'm going to give the stock a chance to work higher, but if it falters soon I most likely will exit this name for the same reasons (technical) as I listed above. We do now have the Chinese ETF to offset exposure to "China" so we'd still have a proxy on the hype of China - which apparently is directly tied to the Baltic Dry Index. If the Baltic Dry Index - a shipping rate - goes up, that means China is booming - if its down, China is dying. And hedge funds scurry in and out each day based on that rate. It's really remarkable how all these sophisticated educated investors/traders use the most simple of 2nd grade level concepts... but once again thesis is all that matters on the "Street".
Long Baidu.com in fund; no personal position
