Friday, October 8, 2010

Bookkeeping: Forced to Cut Back F5 Networks (FFIV)

Whereas F5 Networks (FFIV) fell to its 50 day moving average yesterday and bounced, this morning's downgraded has dealt a seeming death blow to the chart.  Analysts have been unleashing terror on our holdings this week.  I had a very small position going into yesterday but bought some on the open, which is now being punished.   In the first 40 minutes the stock has been between $91 and $93s area... so to be cautious I am going to lock in a loss on about 2/3rds of the newly formed exposure and observe from there.  If the stock breaks below $90 I will be out of the rest, and this stock turns into a great candidate to short (especially if the broader market can suffer a breakdown) as there is a yawning gap in the upper $70s.

But one step at a time - first reduce exposure.  Next step is to exit completely if there is a further degradation in price.  I cut 2/3rds of the overall position which is essentially everything I added yesterday.

As always, I am amazed at the power of analysts to influence prices.

In a broader sense - its a tough time on the long side because all the stocks I like had an epic run in September and are prone to what has happened the past 3-4 days.  People (the computers?) are rotating in lower growth areas now since they are trying to find anything that has not had a rocket rally the past 6 weeks.  I don't like those areas as much since I am a growth type of investor.   So either I have to stand aside, or chase after the current in flavor stocks, which are being bid up mostly for reasons that have little to do with growth prospects and simply finding the last few areas that have not been inflated.  With that said, when people are chasing after low growth sectors in the "what is left to run up?" game, that usually signals we are close to the end of a move... traditionally.  I cannot speak to the "Fed is intent to inflate everything" environment, as it is a new ball game.  Until the dollar rallies, we are sort of in limbo.

Long F5 Networks in fund; no personal position


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