It’s not all rosy for all-time highs these days. Tonight, CROX was bludgeoned after closing at an all-time high and ‘missing?’ numbers.
I long sold this trendy biiitch. Still love the products. Until tonight my sells looked stupid, now just less so. The lesson is that trends end.
Expectations get too high, stocks get too loved, investors become complacent…now that CROX has a severely halted trend, the stock will act much differently. The shorts will become emboldened, especially those that just did so the last few weeks. A much bigger tug of war between the lovers and haters will take place. Here is the Whole Foods piece I did last year on Wallstrip that walks you through what happens when stock trends end. TIME is what the stock will really need now.
The end of Brian’s video tonight is a great walk-through of what can go wrong:
Wellcare (WCG) is an awesome example of why you must sell when given a chance. If you do this long enough, you just have stocks like these. Based on the tremendous runs in leading stocks, I expect much more of these scenarios over the next few years.
No strategy is perfect. Don’t fall in love with broken trends. They can end with a bang or a whimper but will eat your capital and spit you out if you get lazy or complacent.
Stocks fall faster than they rise. I ‘got lucky’ with this one, booking profits in the low 20’s . I have looked but not reentered, especially after we Wallstripped it again on our anniversary show.
If you held on, today you will likely be stopped out. It is a brutal part of the investment business. Too many great names right now for me to look at Smith and Wesson as a new position. The trend looks broken for now.
This morning’s plunge is a reminder of two other important investment habits you must practice:
1. Booking profits on the way up is not and a tool you must use.
2. Diversification
Stocks have had huge runs in the last few years, especially the stocks we have covered on this blog and Wallstrip. If you avoided this one, good. If not, sorry. Either way, use the Smith and Wesson news to remember that stocks don’t just go up. It sucks, but it’s reality. Don’t be hogs.
Buying the strongest performing stocks and adding great brands on 20-30 percent drops is what we do. It has been a great market so it’s not that we are smart, but we are proving that having a strategy works. Our first week of stocks from last October are up on average nearly 100 percent. They include Apple, RIMM, Chipotle’s, Adobe and Nike. Garmin, Baidu, Crox and Google have not been shabby. Starbucks, International Game Technology, Sony, Electronic Arts and Medtronic are companies that we profiled as brands you can own when prices get whacked. Only Starbucks has disappointed, but I remain long.
If you want to buy value and all-time lows…buy Warren Buffett, Berkshire Hathaway and the clones. They have proved they know what they are doing…you don’t.
Over time, Guns, Booze, Gambling, Internet and Sex will continue their outperformance. It may not be fair and may not seem right, but those that invest in these themes will be continually rewarded. Don’t overthink it.
I also think that a ‘One idea a day’ is plenty for 99 percent of the investing public. Over the course of the first year we have covered nearly 150 stocks and industries. That’s just an afternoon with Cramer I know, but we are not Cramer.
This is another post in a recent series of bad/stupid trades…
Back in December, I added two stocks - Smith and Wesson (SWHC) and a Tobacco play, MFW. Smith and Wesson was pulling back in a massive uptrend and MFW was breaking out of a very long base to all-time highs.
Today, MFW is at $59 . Yep – up another 80 plus percent since I sold it two months ago. The stock has more than tripled since it’s breakout in December – that’s 5 months. The Company does not have a new drug or new technology. they sell tobacco parts and licorice.
Trend following is about capturing OUTSIZED GAINS. A stock like MFW is to make up for 5-10 stocks that get chopped around, go up slowly, or drop. I was lazy and sold my last piece of stock at $37. I was ecstatic at the time. But, it hurts my performance more than all the other mistakes this year.
I hope this helps you. Me, I’m just drinking whiskey with my egg whites this morning.
I wish I was always this right on a stock. I am not.
What makes a stock easier to trade is periods of strong growth and Smith and Wesson (SWHC) has had it. This trend will end and they will disappoint and than disappoint again, just not anytime soon.
I am tired. Really tired. NOT. We are just getting started.
I was looking back through the archives of shows tonight and I am feeling pretty good. The shows are great and the stocks are doing really well save Smith and Wesson and Electronic Arts. Ouch on both. The big winners are Toyota, Altria, Garmin, Rimm, Crocs and Apple. Since we started the show in mid October, the markets have been real strong – that always helps. That said, I firmly believe that timing the market is not worth the effort and you are always best off buying the strongest stocks and being diversified.
Please remember that money management rules the day and that’s where the links, blogroll and Wallstrip blog come into play.
Portfolio’s need to be pruned.
In that vein, today we revisit Harley-Davidson. It is one of the great American Brands of all time. I have no position in the stock. Here are all my posts on Harley. Not bad .
For a fresh look, I asked my friend and Wallstrip regular Brian Shannon for the lowdown on Harley’s technicals. Here it is:
For why Harley does well despite technicals being good or bad – here is The Rad Report’s take:
Some exciting news is that the Wallstrip team is heading to PHOENIX for a week of shows. It’s actually cheaper than me going to New York . It’s also the only way to get Lindsay in a bikini. NOT.
Thanks for staying involved and spreading the word.
Disclosure – Long Apple, Smith and Wesson, Bidu, Copart, Dolby, Nike, Adobe (Was long CROX and RIMM at the time of the shows and have since sold and disclosed on the blog).
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