Wednesday, July 7, 2010

Bookkeeping: Closing Cummins (CMI)

Cummins (CMI) is a company with one of the weaker charts as people have fled industrials en masse lately.  It is sort of funny to see how the lemmings have run away from the groups they were running into in February - March and April 2010, especially consumer discretionary and industrials... these were bullet proof sectors as the recovery 'playbook' was being used by the institutional masses.  [Mar 7, 2010: CBSMarketwatch - Riding the Rally, How to Money in the Bull Market's 2nd Year]   The ETF for retail was at an all time high!! (Not 52 week, but ALL TIME)   [Apr 14, 2010: SPDR S&P Retail ETF (XRT) Approaching All Time High]   Now you can barely give away a retail stock or most of the global industrials.  Who knows what the mood will be in 3 days or 3 weeks, all depends on if HAL9000 thinks the future reads "01101001010" or "110101000110".

There could be more upside here in Cummins, especially if the S&P 500 moves to near 1100 as the entire market is one big correlation with the index but I have plenty of other names to capture index related moves, and I want to stick with the highest relative strengths in a very tough market to play from the long side.  So with that I am going use today's surge to sell the last 0.4% exposure in Cummins for a 5% loss.  Once it broke support it's just been sitting around at the bottom of the portfolio and not a name I wanted to pile back into as the chart is broken.  If, indeed, the bipolar market believes in 1 month that everything is well again in the world I expect the stock to be back in favor, and on 2011 estimates its cheap.  I still love the exposure to Chindia in this name and it will be back at some time into the portfolio. [Feb 11, 2009: WSJ - Cummins Engine Shifts Gears Amid Stall]  [Sep 23, 2007: Stock to Watch: Cummings Hitting on all Cylinders] 

No position


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