Friday File: Stop Losses Everywhere, But so Much I ALMOST Want to Buy
by Travis Johnson, Stock Gumshoe | December 21, 2018 4:42 pm
Updates on the Real Money Portfolio and my Big Picture Thinking for our last 2018 Friday File
This is premium content. To view this article (and to have full access to the rest of our articles), sign up. Already a member? Log in.
Source URL: https://www.stockgumshoe.com/2018/12/friday-file-stop-losses-everywhere-but-so-much-i-almost-want-to-buy/
Travis, I apologize for posting the following question under this thread, but I don’t know if there is a special site I should go to for questions not related to the most recent articles.
The question is regarding the behavior of stock price when a pot/hemp company partners with one of the big, established companies in the S&P 500. When their partnerships were announced, stock prices of CGC, CRON, TLRY & CWBHF surged for a couple of days – and then came down shortly after. I get that; cannabis stocks are speculative, traded based on news rather than fundamentals, and not fully legalized on a Federal level, etc., making them the riskiest of investments.
What puzzles me is why their partners — Constellation Brands, Altria, Anheuser Busch and Novartis – were not in tandem with the short-lived surge. Quite the contrary, their prices continued to decline along with the rest of the market. Is it that investors have no confidence in the growth potential to be brought about by partnerships with the pot/hemp companies? Or is there a logic/reverse logic I am failing to understand?
Pot is an interesting future development for those big beer, tobacco and liquor brands… but it’s not going to impact their income statement anytime soon, for them marijuana is a future bet. Investors see it similarly, I imagine, marijuana may make Constellation a little more interesting in the long term, but it doesn’t begin to make a blip on their income statement. Constellation has something like $8 billion in annual sales of Corona and the like, $100 million in marijuana sales from Canopy, probably at lower margins, doesn’t have an impact.
I bought into STZ after they invested in CGC. I already own MO. Like you I wonder the same. Somewhere I read investors are concerned about the future outlook of STZ and MO. Personally I think both MO and STZ have a future vision of expanding their market so that should help them capture a new market share at an earlier stage. But I think some investors are focused on short term, which explains the decline in MO and STZ.
Travis, thank you for your wonderful analysis. It has been difficult lately buying the dips and only seeing stocks keep going down. I learn a lot from you, I just need to follow the stop losses and that is an area I am terrible at. Have a wonderful holiday season with your family.
Mr Travis, do you (or readers) follow India markets as a whole? My 401k mutual fund (I have no choice) on India did poorly the last year. But they are in the minority wrt political risk it seems. I pulled some money and thinking to move a small amount to India fund. Awhile ago (years) Harry Dent predicted India would stand tall during the panics. Any thoughts?
India in general is down in the past year, so it would be exceptional for any India fund to buck the trend. While I am a big fan of investing in India over the next 10-20 years, I only loosely follow the day-to-day news. My understanding is Modi may have trouble retaining the farmer vote in the next election, so that’s a big political risk. However, I figure demographic trends will overwhelm any particular election cycle, and the very fact that Modi must worry about the next election is more important than whether he actually wins.
Sorry, I don’t follow the India market (or the so-called “Emerging Markets” in general) but I chanced upon a brief write-up on WNS Holdings (symbol WNS) last month. The company describes itself as a “global provider of business process services”. Ho-hum, I thought…until I checked out the very positive analyst ratings and the sharp turn upward & continued price increase since the start of 2019. I don’t know if this scenario applies to other holdings in the India fund you mention but there seems to be something fantastic going on with this one stock other than its recent Earnings beat.
Wait. What? No Friday File next Friday? OMG. 🙂
Wow, Travis fantastic writing. So easy to read and with great logical structure.
Wow, I love your writing, Travis – subject matter aside, such a pleasure to read. Thanks for your sane perspectives and all the content as well. And your thoughtfulness about your readership.
Awwww, thanks! You (and tanglewood) made my day 🙂
Travis: The title of this article speaks volumes. Stops are important as you often say, but does it then make sense to use the funds to buy another stock (even as an appealing value proposition) which itself you might have been stopped out of had you owned it in the first place? You’re buying a stock which you might have been selling had the circumstances been only a bit different.
Of course this highlights the strange and delightful tug of war between the idea of buying and selling with limits vs. stops. Our inner rational investor so much wants to use limits, buying when prices are low and selling when high. (S)he would deny the validity of using stops altogether. Conversely our wise trader personality says to buy when prices are rising and to sell when they are falling, using stops for both buying and selling to accomplish this. This is a great paradox, and when you try to do both at once it can become quite confounding.
jamessko:
I so echo your comments on limits and stops. I am truly confounded, especially when facing the horrible & continuing drop in the prices of my (former) darlings, especially $ATVI and $IPGP.
Thanks for the fantastic writing! It has been a true pleasure to read. I appreciate your candid and thoughtful views, especially during this intense volatility. I have been nibbling away as of late though at times I feel I may get my fingers sliced by the falling knife. Good thing the sight of blood doesn’t scare me and I have plenty of band aids!!!! It’s a bloodbath out there. Here’s to being greedy when others are fearful.
re: stop losses/buy limits. Like most of the rest of you, I have my own personal investment philosophy on stop losses and buy limit positions, often on the same investments. I GENERALLY adhere to a 10-20% trailing stop on about 75% of my portfolio, with the other 25% being in no matter what happens I’ll hold investments (precious metals, oil, and some closed-end funds that pay a constant dividend through thick and thin). Sometimes grudgingly, I adhere to my trailing stop, even though I still have long-term optimism. I immediately establish a buy limit if it drops to the point that I would love to own it again. There are currently 17 positions where I have used this philosophy (I’m in 10 and out of 7 right now). Several of these investments I have been in and out of 3-5 times over the last 10 years, and have a zero cost basis on the current position ownership. It is very comforting to own 1-4 thousand shares of a position, and that your cost is $0.00 per share, particularly if it is paying 8-10% in dividends. By the way, I started investing 36 years ago at the age of 37, and have never taken a dividend, but rather, have allowed them to build value by reinvesting those dividends. The bulk of my portfolio (82%) is in a combination IRAs and a SEP IRA so the gains are tax-sheltered to some extent. My only complaint is the RMD that I have had to take out of the SEP and one smaller traditional IRA for the last 3 years (the rest is in Roth IRAs). The dividends we receive on the SEP and the traditional IRA more than offset the RMDs, but not by much, so the growth is slower than I would like. The SEP, which represents about 33% of my overall portfolio, is the result of the 31 years that I owned my own business, and was the vehicle I used to set aside the maximum amount of tax-deferred money in addition to the maximum Roth money allowed each year. The smaller traditional IRA is the remnant of a previous employer of my wife which I couldn’t convert to a ROTH due to the rules of their plan.
My 2 cents about trade updates…
I surely wanted to hear about TDOC. The nibbles could have waited until Friday. I have such a flood of ‘good’ email that I would hardly fault your few amongst them.
Please be very cautious with the wording of your ‘updates’. It’s easy to construe them as instructions (or so the watchhound lawyers think). Mostly the legal eagles are looking at your headline, er, subject line. Nothing containing ‘sold xxx’, ever. That is the specific attorney’s goon’s search for ersatz money managers to sue.
I will not be Fooled but I fear for the well being of our favorite stock gumshoe!
For example, I personally know of a southern California law firm that paid for more than twenty years to have evidentiary samples taken of all concrete poured en masse in Southern California in the 80’s-90’s. You cannot believe their richness now.
Never let it be said that those attorneys are not cunning linguists, er, adjudicators.
PS: I just checked out lifetime access and discovered that I already have it.
It was an investment well matured.
thank you. so nice to get your thoughts
Great read again, as usual. Please keep it up on the Trade Notes, they catch my attention and give me food for thought. The more Gumshoe insight, the better.
Happy holidays everyone.
I dont know if you guys have noticed, but Amazon and Walmart have had Apple Ipads on sale since black friday. They are getting cheaper as the shopping season continues. On Amazon its sold directly from Apple (on Wal Mart I’m not sure).
What i see is: AAPL knows that their new business model is services. In order to collect Money on these services they need to get more people onto the IOS system. They are giving away these Ipads for peanuts just for this reason.
Call me crazy, but i see a shift in the core business and will take a quarter or two for the dust to settle.
Thanks Travis for all you do for myself and the wonderful #Gumshoe community. Happy holidays to all!!
Seasons greetings from the UK Travis. Just wanted to reciprocate your good wishes from Brexit benighted Britain. I am a leaver, who wants to pay for two governments?
Have a peaceful holiday.
Hugh
@Travis
I too (and I believe many retail investors do) have a very difficult time selling tops, made terrific profits in MJ sector in prior to October only to be bag holding on a few companies year end. There is always that GREED sentiment that a holding will continue to rise (preventing the sale at top) and a very strong FEAR sentiment that a holding will continue to fall to abismo (convincing a sale at bottom).
Perhaps we can start a thread on strategies in selling discussing psychology, technical analysis. What I mean is its so difficult to determine a sell price on a stock, either on an uptrend or downtrend, and commit to that preset stop loss.
Thank you for these weekly write ups as well as your Thinkolator uncovered teases. Us gumshoers aren’t going anywhere and I speak for most here wishing you and your family a happy holidays and a merry Christmas. Best wishes in the new year!
I have a question about Doug Casey’s International SpeculTor. They are touting 1-1-8 Playbook….nickel sulfate and cobalt mining stocks. Does anyone have any info on these?
Great article as usual “ole Gumshoe strategist”.Merry Christmas & Happy New Year “ to you and your family as well as everyone in GS Land!
Regards,
Frank
Dec 21 Friday file: Your charts of the S&P do not represent anything “real”. Look at what stocks have been added – high growth, up and coming, new technologies, startups, while the decliners have been removed. Now, re-do the charts based upon the original stocks, and see what the increase has been .. my estimate is VERY small, and I hope I am wrong. Sorry I do not have the access to data or analytical skills to do this, but I believe it would be VERY instructional. Thanks for the great analyses you do, and best of the festive season. Roger
Enjoying so much again your analytical writing while listening to some «soft Christmas music». May family life largely overcomes the up and down feelings from the political and financial surroundings. Happy Seasons Time!
Hello Folks, Anyone has a view/thoughts on the power elite investing program by Jon Markman?
Talking about AAPL is like talking about religion or politics. You have true believers, agnostics, infidels, and every other shade of opinion, all deeply felt and vociferously defended. I won’t say which, if any, of these camps I am in, but I do find it interesting – puzzling? – that the most profitable company on earth has a lower p/e ratio (12.2) than Campbell Soup (16.4), a company swimming in debt, which has seen almost no revenue growth over the past five years together with collapsing profit margins, dividend cover, and ROE., and which runs a real risk of bankruptcy or dismemberment.