Author: Bob Freedland
Covestor model: Buy and Hold Value
Disclosures: Long AFL, SBUX, WNI, IDXX, TJX, CHD, COST, HIBB, ITW, JWN, PETM, SHS, PRGO, WM
On August 4, we witnessed a very large correction in the stock market.
Between the period of July 1, 2011 and August 3, 2011, I initiated a new position in Aflac (NYSE: AFL), believing that the stock represented good value in light of its already steep correction after the Japanese tsunami earlier this year (AFL has considerable exposure in Japan in the insurance business), and added a new position in Starbucks (NASDAQ: SBUX) after the company reported a very strong 3rd quarter including strong sales in China.
I also added a new position in Schiff (NYSE: WNI) as this small vitamin company seemed to be on the right track with its “MegaRed” Krill Oil product as well as Vitamin D and anti-arthritis OTC products. Technically, the stock appeared to be quite strong, and I added this to the mix.
The fourth new position was IDEXX Laboratories (NASDAQ: IDXX) which announced a terrific quarterly report which exceeded expectations and found the company announcing positive guidance.
In addition, I added a small position in TJX Companies (NYSE: TJX), the parent company to TJMaxx as the possibility of a double dip grew.
Except for those stocks, as the month of July unfolded and the debt ceiling negotiations intensified, investors seemed to be losing their taste for equities and gradually the weakness in the market appeared to be intensifying culminating in the big blow-off today. Throughout this month, I generally spent time shaving off positions into smaller holdings and working to build my cash reserve.
Positions were reduced in Church & Dwight (NYSE: CHD), Costco (NASDAQ: COST), Hibbett (NASDAQ: HIBB), Illinois Tool Works (NYSE: ITW), Nordstrom (NYSE: JWN), PetSmart (NASDAQ: PETM), Perrigo (NASDAQ: PRGO), Sauer-Danfoss and (NYSE: SHS), Waste Management (NYSE: WM). There was nothing particularly wrong with any of these holdings, but my effort to avoid participating in the steep correction led me to continue to sell portions of each of these holdings as I tried to move more towards cash without eliminating the possibility of participating in the ultimate rebound.
There is no greater challenge than to try to time the market. For that reason, I shall not be seeking to completely get out of stocks but rather to reduce the size of each of my holdings and then selectively close out individual positions should they turn into significant losing positions within my portfolio.
Market performance from Google Finance, https://www.google.com/finance
SBUX Press Release.
IDXX Press Release.