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.

2 comments:

Anonymous 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?

Rizzo 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.