SODA was the biggest winner in my portfolio not so long ago. I made a big addition to my position when it was at 70 because at the time I thought the stock was on its way to 80. Soon afterwards there was a lot of bad press, as I'm sure you all remember, and the stock got killed. Even after great earnings and a very encouraging conference call, SODA wasn't able to get back to 70 and then the whole market soured.
They say this is a bull market but from what I can see it is only a bull market for the big index traders. Every time there is a sell off I watch individual stocks I own or have on my watch list give up all their gains and then some in a matter of a few days. In the last bull market I observed, everything was pulled up to insane heights, even complete garbage. In this market I see a lot of quality stocks stagnating, or else being run up and then shot down. I think this is actually a fairly bearish market in which fast moving traders dominate the action and the biggest winners are the professional index traders.
Anyway, I am still bullish on SODA, , but I am getting worried about the market. If the market goes into a big decline, SODA will get killed and I will be in big trouble, because my SODA position is much bigger than any other in my portfolio.
I am at the point I am considering selling my position for a break even just to make cash in my account and prevent the possibility of losses. I think it is better to have a large cash position right now than a large SODA position because if the market gets increasingly bearish and SODA really starts to sell off, the losses in this one stock could quickly destroy my account..
Ideally, I would like to buy SODA back at a lower price, but I know if I sell and the market reverses, SODA is likely to shoot up and I will miss out. The problem is, since I added to my position at 70, my downside risk is now a lot greater than my upside.
Any advice from the board? Thanks.
thanks everybody for your replies. I'll consider all your ideas as I make my decision. I think I'll just reduce the size of my position somewhat to begin with, so I don't have so much on the line if the market really gets grim. I'd prefer to sell into a rally and I was hoping that rally might come yesterday, but the market just keeps grinding down relentlessly. only exception I saw was the 3D stocks. SSYS was absolutely flying. Strange times.
Personally I have watched this stock from its infancy have have actually day traded it more than held it. However , I personally feel the market is in for a real big retreat and the fast growing small cap to mid cap such a TSLA, GMCR, MNST, will get killed and you could purchase these stocks at a much lower price. I would personallt sell some to cover any potential further losses and see what happens in the next few months. However all bets are off if the fed slows down with his "gas pedal" spending and if interest rates start to rise as I suspect they will, then get out and short them. Best of luck.
Your situation is much like mine. When I really believe in a company and the stock price deteriorates, I add to my position and become over exposed (greater than 5% of my portfolio). At this point, I sell some shares to rebalance and/or I sell covered calls for income. I do not completely abandon a position. I agree with your assessment that the market is over bought in general but there are some issues which will not be hurt much or may actually appreciate. I use Bollinger bands to determine good buy and sell points.
Sell down to your sleeping point. With the cash, sell some SODA put options to generate an awesome return with the worst case scenario being forced to buy SODA back at a much cheaper price.
Short term you are correct, the market will most likely sell off and SODA with it. Its nothing against SODA, this stock is a gem to own over the next 18 month and should see triple digits. The question is can you hold out that long and what is the short term bottom in this stock if the market does sell off? You might want to sell some of your original position and for tax purposes use FIFO to lock in gains, if you believe that the market will be heading lower over the next 30 days. Then buy some shares in the mid to low 50s to lower your average cost of your more recently purchased position. I'm just speculating, but this stock has a high beta so a 10% market correction could translate into low 50s for this stock.
Either way, if you are worried about the size of your position then you should reduce it until you can sleep at night, losing sleep over the stock market is unhealthy and if you need the money you should consider less risk.
Downside is greater than my upside ?????? This stock is now trading at 14x my next years earnings estimate....bring it down I will buy a lot more.......your upside is into the triple digits ........your downside risk is limited due to the fact that they are growing like a weed and growth managers will always buy growth....could it go down 10 more points.....sure but that would put it at 12x next years earnings.....back the truck up at that point
Cold, in a rising interest rate environment, stocks can get killed for years. How high do interest rates go? I agree the future for Soda is bright. The place to be is in individual stocks with high growth. But shorting the market is a good hedge. Amazing that the solid dividend stocks are getting killed.
Put a collar on the stock. For instance, if you don't think soda can get thru 67.5 without an earnings catalyst in late October, sell that October call option. Take that premium and buy sept puts at 60 for a net credit. That will get you thru most of september and most importantly, the FED's next meeting. Just one example
of what you can do. Another might be to take the credit and buy UVXY sept call options. Point is, there are many ways to insulate against a move without selling the stock in question. Of course there is a risk of some catalyst that propels the stock and your gains are limited because of the calls sold.
Sell a portion of your holdings if you need to free up some cash. Take a tax loss. The market stinks. Instead of selling Soda and Apple and the other stocks I want long-term tax benefits in owning I short the market. SH is a stable way to short the S and P 500.
However, there are still stocks that can do well in a correction. Owning Apple at $70 in 2007 was a good place to be. Soda is a catalyst driven stock. We have the Whirlpool machine coming out soon and a new onslaught of advertising coming this Fall. Plus the Source is now priced right for the holidays at $99. I suspect other news as well.
Drjohn, Do you have a strategy for using SH? I am reluctant to try it because it involves timing the market and I never seem to have much luck at that. I tried taking short positions in the market for the first time earlier this year and I think it scared me away from shorting forever. I tried using things like VXX and SDS at times when the market was looking really bad. There was bad news; people were saying the bull market was over.. and then... Every time the market came raging back! and I got whipsawed and ended up losing a lot of money. I know this latest correction could be the real thing, much more serious and longer lasting, but who knows for sure? It's all a guessing game. I can just see it, the moment I buy SH, there's a huge rally and SPY slashes through 170!