Monday, May 11, 2009

Bookkeeping: Some Purchases

I continue with my strategy of not chasing stocks in the stratosphere, and buying stocks on pullbacks - cognizant that a larger pullback could happen sooner rather than later. This is the antithesis of the current working strategy of buy whats running at 100 mph and sell to the next guy who buys high and sells higher. As I've sold down a lot of stocks that have run, I am simply redeploying that capital in names that are lagging.

I missed Riverbed Technology (RVBD) which I've been stalking for a long time this morning in the mid $16s... it promptly bounced to the low $18s. As always in this market the "theme" of the day switches every few days, what was sold off Thu/Fri was hot today (tech / healthcare) - we're just rotating from one group to another. Today commodities are weak but that means within 2 days every trader will pile back into them if the trend continues.

There is a very obvious gap in the RVBD chart where I have a limit buy order waiting but in case we are heading straight for S&P 1500 I wanted to at least get a position established and the top of that gap is $16.50 where the stock bottomed out the past few days. Missed it today but on my radar.

I added to the following names - not huge positions just incremental 0.5-0.7% stakes to each position
  1. Mosaic (MOS) - the data points seem to be horrid but as long as corn, wheat and the like strengthen (as they have) people seem willing to buy. And the fundamentals as horrid as they are, are far superior to natural gas which "investors" had no problem pushing up 20%+ last week.
  2. O'Reilly Automotive (ORLY) - after a stellar earnings report the stock pulled back as people chased more risky assets.
  3. Smith & Wesson (SWHC) - the company issued a material share offering last Thursday, about a 11% dilution to pay down debt and expand production. Everyone is doing share offerings so why not - unlike banks and REITs this actually hurt the stock price. SWHC does not have the greatest balance sheet so this move helps curtail some risk and the increase in production capability is a good thing, but I hope they don't overdo it unless they have some fixed government contracts coming in. We don't know how long this "guns and butter" theme continues to work - and the stock market is littered with wreckage of companies that overexpanded at the wrong time.
  4. Excel Maritime Carriers (EXM) - continues to be weak off DryShips (DRYS) leadership (down) I consider this a "commodity" play as that's how HAL9000 treats it.
Again - a very incremental approach in a market of hyper emotion. I continue on the thesis that the market was to continue further than people anticipated creating massive anxiety for those who took big losses early in the year and then found themselves underinvested... and then when we pullback it won't be such a neat and pretty convenient "4-7% correction" that allows everyone who missed the run to pile in. Nothing is that easy. The question is where exactly this larger pullback starts from... and when. Without knowing I'm just sticking to names I like on pullbacks... I am hoping to buy - even in these names at lower prices in the future.

I continue to see weakness in consumer discretionary as a lot of names are rolling over, forming tops, or breaking resistance ... hard to act aggressively until / unless the overall market sustains a move downward since they bounce so sharply when the market goes green.

As for today's buys... MOS looks tired to me but I lack commodity exposure so this is just as good as any...

Pull back to 50 day with an initial bounce today in a bad tape - notice big gap at $29 which is plausible on a serious pullback in market

Double top at $7.50 in retrospect, eh? Would love to add to this below $5

Slowly rebuilding this position as a trading stake, below $7 would be a nice place to add

Long all names mentioned ex Riverbed Technology in fund; no personal position

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