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Babson Capital Corporate Investors Message Board

  • imjustpiddling imjustpiddling Jun 19, 2010 4:12 PM Flag

    Questions about MCI in IRA account

    I am new to investing, having just gotten divorced and for the first time controlling the investments in my IRA. I have 3000+ shares of MCI (which represents more than 1/3 of my IRA value) and am very happy with the dividend, however, I'm a little concerned about holding such a large % of this stock long term. Since I basically "inherited" this stock,and still learning, please give me your reasons why I should/should not hold on to it. Thanks.

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    • You can put a stop loss at 25 for say 80 percent of the shares. 1/3 of your portfolio is risky so you need to quickly make a move if the stock is in trouble. This high of a dividend indicates problems so be careful.

      If you like high dividend, you can diversify some of the shares to MO, JNJ, EMR

    • Had some thoughts for you on position sizing for your portfolio

      it is called Percent Risk Sizing

      assuming your 3000 shares at 26.60 (June 29 close) that is 80 K approx

      you said that it was 1/3 of your portfolio, so 80x x 3 = 240,000 portfolio

      lets set up a 1% risk position in MCI

      *1% risk of 240K = 2400 so of risk for any one position

      *next choose a stop-loss protection point on MCI, lets us an extreme for the example, use the market and MCI lows from March 2009, so that is 14.50

      *determine risk point, close of 26.70 minus the risk point of 14.50, so that is 12.10 of risk allowed

      *take the 2400/12.10 = that would be a max size of 198.34 shares

      again that is an extreme

      a 1% risk sizing metric works better on a 1 M+ portfolio, so at the 250K area you could decide to maybe use a 4-5% risk model and be ok

      so that would be about 991 shares at 5% risk

      you could also chose a different stop-loss protection point that is tighter, the 14.50 is very low and hopefully never seen again

      The key is choosing what works for you, if you do use a % risk sizing method, make sure to size all of your positions the same way

      well, food for thought, hope I did not confuse you

      on the MCI side, barring any position sizing and personal situation decisions on your part

      MCI is solid, with a great dividend yield and a long term performance record that is hard to match

      select size you are comfortable holding, turn on the re-invest dividend option and lets this baby compound for you over time, MCI is a great cornerstone for any portfolio (just my opinion)

    • The deserve to be a key holding,maybe not 33%, but deserve a spot
      (could stay at 33% if you really dig in and do your due diligence MCI is that good, but do whatever is necessary for proper diversification given your situation)

      The main reason is short (I have mainly more, but have to run today) is their long term track record. I have been a holder for many years.

      Here are a few things to do

      Look around familiarize yourself with the company
      http://www.babsoncapital.com/Strategies/Trusts/MCI/Default.aspx

      pg 3
      http://www.babsoncapital.com/BabsonCapital/CI%20and%20PI/BC_TRUST_REPORT/MCI/Annual%20Reports/CI-Annual%20Report_2009.pdf

      Have to run, take care

      Also pay attention to NAV and the discount premium.

 
MCI
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