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What to Do After a Bad Day?

As for my portfolio, June was looking pretty good, then yesterday happened.  Worst relative performance day in 2 years.  The US Government announced that it would allow the export of partially refined crude oil, and US refiners got hit.  Two articles:

Sadly, this hits a concentrated area of my portfolio, which has a concentration in oil refiners.  That concentration has benefited my clients in the past.  So what to do now?


I do nothing.  I find many refiners, particularly those that I own, to be attractive at present levels, and at slightly lower levels, I will start to buy more of the refiners.

I knew this issue was out there, and I think the reaction was overdone, as said Fadel Gheit:

Oppenheimer’s Mr. Gheit said the selloff in refiners’ shares is an overreaction, but added that the news has increased investors’ focus on the sector. “My phone hasn’t stopped ringing today,” he said.

“The market is extrapolating this one step to mean this is a prelude to lifting the oil-export ban,” he added. “It’s a knee-jerk reaction, on a very little bit of information.”

The correct reaction to most sudden market moves is nothing.  Sit back, and analyze what the opportunity is relative to current prices, and if you conclude that your opportunities are markedly worse at current prices, sell some.  If opportunities are better at current prices, buy some.

I suspect I will buy more of the refiners over the next month, and I think I will do well with the position.  Refiners are less cyclical than they used to be, and their low valuations are unwarranted.  Also remember, many of these refiners have significant hedging operations; they are not just floating at spot.

So I do nothing at present, and I am not crying, nor compelled to action after a bad relative performance day.

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3 Responses to What to Do After a Bad Day?

  1. jorgelopez says:

    What I do after a bad day? I just walk and it works because it clears my thoughts and somehow recharges me.

  2. says:

    I too play in this space, with 10% of my holdings in refiners. This change to the law had been expected, not sure why the big 1 day drop? I have been selling OTM calls and rolling month to month. Several holding that were well ITM have now moved back to OTM. Now I am considering if I buy back those calls. I plan to stay in this space for a while. Great suggestion to consider adding to it.


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.

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