Friday, January 2, 2009

Bookkeeping: Closing ICON (ICLR)

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I was debating whether to keep or close ICON (ICLR), the 2nd of my 3 part contract research organization basket - I cut 1 of the 3 positions Wednesday, and I've decided to close this name out as well. First the chart is not improving and second I have a basket of about 6-8 names I am interested in buying on pullbacks, so to keep the portfolio focused and avoid position bloat I am going to cut this name for now and revisit later. This is definitely best of breed in it's group but the market simply does not want anything to do with this name despite good earnings [Oct 21: ICON (ICLR) Earnings Look Excellent on Initial Glance]. And unfortunately, there is no Obama thesis here to bail it out.

We began ICON Aug 13th in the $41s; while the stock has been slashed by more than 50% we've been trading around the position and cutting position size as it broke key support areas so are just taking a manageable loss of $6.3K. We have a lot of trading gains of late - so I'm keeping the winners and culling the losers. We are exiting the 0.8% stake today at $19.10s but we will be back to this name someday in the future - one of the best run companies there is. Judging by how badly this entire sector is acting, drug/biotech companies must be slashing spending on testing at a far higher rate than has been let out to the public thus far - almost the entire sector is moribund. Based on technical action, until proven otherwise, when these stocks rally to resistance - they are to be shorted.

One excellent thing about this 5 weeks of ignoring all bad news is you can see which stocks the market is favoring (relative strength); so the next time the market faces reality we now have a list of stocks to target to purchase as they pull back. While more "hot money" could be made speculating on the most beaten stocks or buying a dry bulk shipping stock every time the Baltic Dry Index goes up 0.0002%, I am taking a more long term approach and want to find names I can actually hold for months, and trade around in the long run - rather than buy and spit out every 72 hours. So I am building that list, and will start to deploy capital into these names on the next downturn.

Many of those leadership stocks are starting to stall now as investors move to the most beaten down merchandise - another sign we are closer to the end of this "bull" move than to the beginning. The junk is now rising as the speculators return - chinese small caps, las vegas casinos, banks, retail stocks! - hoo hah! HAL9000 is back after a few weeks of sitting in the shop being oiled.

Looking forward to this speech on the 20th - probably the most obvious buy the rumor, sell the news item in history ;) Midas shall soon part the seas...

No position


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