Investment Decisions - August 2016

One decision I made in August was to change the name of these monthly blog posts where I document my purchases and sales of stocks and ETF’s to something more in line with my key service of my coaching practice, which is to help people make better and more successful investment decisions. I was never happy with Investment Activity Review (just too clunky) so I decided to pitch it.

No new positions were added in August, but I decided to take some action and bank some profits on some positions that I think have had a good run.

Added to short position on S&P 500

The market pretty much cleansed itself of the Brexit hangover and continued its ascent.  Record high have again been the norm for the US stock markets. With that my short position continues to get pounded. While there were murmurings of the Federal Reserve actually having the guts to increase interest rates, like clockwork it never materialized and it looks like it will be quite a while.

Despite the world of hurt my short position has taken, I stubbornly continue to remain steadfast that this Red Bull, debt-infused market cannot be sustained. The longer this goes the worse the hangover is going to be.  So I’ve continued my program of adding to the short position every few months to average down the costs.  

Now just because I think the overall stock market is over valued doesn't mean I don't think there are some high quality companies that have some upside on their respective stocks. 

Sold position in Cisco Systems (CSCO) for 20.6 pecent gain

My position in Cisco crossed my personal 20 percent threshold that I've set for my investments and so I decided to review and determine if there was any additional upside or should I just take the profit. Factor out currencies and I was up almost 36 percent on the position.  Fundamentally not much has changed with the company. They continue to pivot the business towards a bigger role in the Internet of Things space and they seem to be setting themselves up to become a significant influencer in the space.  That being said, the stock has had a pretty good run since I bought in January. The stock was at $22.75 in January and I sold at just under $31. Currency effects chipped away at my return sadly. It is a common theme in all the stocks I sold in August. I’ve heldCisco stock several times and each have yielded positive results. Each time I bought in when the market sentiment on the stock was negative, despite the fact it is very a much a high margin, positive Economic Profit business. If the stock were to pull back in the low to mid-$20’s I wouldn’t hesitate to buy back in again.

Sold position in Nordstrom (JWN) for 22.5 percent gain

Another stock I bought during the January correction, the stock continued to go down in 2016 as the company reported strong profits but the forecasts were shaky but I continued to buy in to average down the price. My costs came in at about $39. Sure enough the company caught a draft and posted some good numbers which took the stock back up to over $51. At that point the stock was up near 31 percent, factoring out currencies and so I thought the stock had a pretty good run and factoring in currencies I was up past my 20 percent threshold, so I decided to bank the profit. Again I like the company and if the market were to pull back and luxury retail sales continue to track down, I wouldn’t have a problem buying back in.

Sold partial position in Walmart (WMT) for 20.9 percent gain

I wasn’t really planning to sell Walmart, but the stock just has been a demon in 2016. I picked it up in October 2015 as the company was reporting pretty salty earnings (it was still making boatloads of money, just not enough for Smart Money People on Wall Street). It was getting pretty hammered as the stock was trading around $60 in one of my portfolios when I bought in. At one point in 2015 it was trading in the mid $80’s. I also have a position in another portfolio at a cost of $63 which I still own.  Since then the stock has regained some of that loss. In my case one position was up 22 percent. Again I reviewed the stock and to me I thought it would be low hanging fruit to bank the profit and then buy back in when the stock falls back which will usually be when market doesn’t like it again. It will happen. For the remaining position, I will still hold but would sell that too if the stock continues to move up. If it decides to move down, I would be OK with adding to the position. Walmart for all its warts about how it treats people, bullies suppliers and credit card companies is one fo the great wealth creating companies in the history of capitalism. To ignore it would be a mistake so if it falls back again, I’ll probably have look at it.

Takeaways

The common theme in each of these sell decisions was that I bought them when they were out of favour by the analysts and the market and I sold them when they crossed a particular return level that I was seeking. I bought low and I sold high.  I bought them because they were from my perspective high quality businesses that consistently create tangible wealth. I am executing my investment ideology in a rationale, methodical manner. The stocks can still continue to go up and it’s happened a fair bit to me and it is a weakness with me that I don't hold my winning stocks longer, however I feel that the key is establishing some discipline and a comfort level with a level of profit and return that I can live with, I can create a lot of winning positions over a long period of time and hopefully I will have more money than when I started.