Recent Portfolio Moves – The Aleph Blog

Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control

Posted on 17 July 2008 by David Merkel

Over the last few trading days, I did rebalancing buys of Lincoln National, Gehl, Charlotte Russe, Group 1 Automotive and Anadarko Petroleum.? As the market has declined, so has my cash position, from 18% to 8%.

One reader has asked my opinion on stop loss orders, and I must admit, I have never used one.? I use the “economic sell rule,” which tries to look forward at the value of companies, rather than analyzing past price movements.? I sell when companies no longer offer me a good return on my money versus other investments.? I sell a little in rebalancing trades, because there is value in redeploying fundsafter quick moves up.

Do I take some losses from not having an automatic sell rule when prices fall?? Yes, but it is more than made up for from the gains on companies that I would have sold , but didn’t.

Don’t blindly adopt a sell rule, but use your head, and estimate the future value of the company, rather than agonizing over the paper loss.

Full disclosure: long LNC GEHL CHIC GPI APC

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. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.