Thursday, April 26, 2007

2 great stocks today, one dog

Two of my stocks are making nice moves today:

Loopnet, Inc. (LOOP), up 10%
Meritage Homes Corp. (MTH), up 7.8%

On MTH, I got in at 34, so this move is only helping recoup losses. I like this as a long-term hold -- home builders have been so beat up, and of all of them, I think MTH is positioned well for the long-term. I have had some folks look at me cockeyed for buying this, but it goes back to another favorite Warren Buffett quote: "Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." The market is down on home builders - I see an opportunity to get in.

Besides Novastar Financial (NFI), the other dog of my portfolio is Planetout, Inc. (LGBT). Down 15% today, and down 64% for me overall. Luckily, I hold only 50 shares, so basically a $360 investment has turned into $130. I really thought they would get bought out by News Corp., but alas it hasn't happened yet. Q1 revenue failed to meet expectations; hence, the freefall. NFI and LGBT - two of those stocks that I have a hate-hate relationship with. Do any of you ever get "attached" to your stocks? I wouldn't call it love, but seriously - how can you not love a stock like Middleby (MIDD)? Up 77% from where I bought it less than a year ago? It is best not develop "personal relationships" with your stocks. But how can you help yourself from cursing a blue streak at NFI or LGBT? You just hate holdings like that!

The key is to not let your emotions, be they positive or negative, get the best of you.


KMull said...

That's the tough question for me. I have 3 stocks all north of 60% in 12-14 months of investment. Decent dividend yields too (3%+). Do I get rid of them and lock in those gains?

Q said...

I can answer that easily..... it depends. (d'oh!)

I don't know how old you are, nor what your investment/retirement horizon is. Nevertheless, I believe there are five reasons that one sells a stock:

1. If you have found a better place to invest
2. The company's story has changed
3. If you need the money
4. If a stock's price rises to what you consider to be its max value
5. If you need to balance your portfolio

Investors will react to those five reasons in different ways, but I believe those are all great reasons to sell.

In under 12 months of investing, I have two stocks that are north of 100%. I am not selling any of them, as I believe they have room to grow, and none of them are making up more than 1% of my portfolio. I am not much of a trader. In the last year, I have bought over 40 stocks. I have sold one (and I only sold half my position in it).

So I would say that if you still like what the company does, you think it has a future, you don't have a superior investment to make at this very time, and you don't need the cash, you should hold onto them.