What a trading environment - you have stocks like Lennar (LEN) up and down 15-20% a day, among quite a few others. Only a place for daytraders - with the rules being changed it appears many traders are simply ending the day in cash afraid of what will change overnight.
We have reduced our coal positions from 4 to 1 and kept James River Coal (JRCC) saying we'd use it for the entire group - just like I have Lennar as a proxy for the entire homebuilding group. For many months now there has been no reason to own multiple names in any 1 sector. This is no longer an investment environment where individual stock selection means a thing (in 95%+ of the cases) - it is simply sector rotation on a daily basis. Yesterday homebuilders were destroyed - today they are in favor. Two days ago commodities were in favor - 4 days before that they were destroyed.
James River Coal did a small offering today of 1.5 million shares - they had 25.5M shares before hand so thats 6% dilution. But not in this market. The stock is down 16%. So 6% I can attribute to dilution, and the other 10% is HAL9000 doing his daily movement in and out of sectors. We sold this down to a 0.1% stake Monday near $36, and now the stock is back down to the mid to upper $27s. Truly a market of no memory from day to day.
Since James River will represent our entire coal exposure (formerly 4 names) we will begin to make it a bigger position when we rebuild it, but for now we are still starting conservatively and taking it up from 0.1% to 1.4%. If the stock gets back to the $24 range or so we'll begin to load up, but already in the span of 48 hours its dropped >20%. It remains a brutal market where no gains are safe and those that you have must be locked in, lest they be lost in short order.
To that end, Lennar (LEN) is up 17% today and we're taking the gain as the stock approaches $15 and dropping it from 3.4% to 0.8% of the portfolio. The way this market is, these two stocks both will probably reverse directions and we'll do the exact opposite of today's action in 72 hours. At which time I guess we sell JRCC and buy LEN. It is that binary and random out there. Only good for daytraders. Which I believe a lot of large money investors have become since there is no safety in holding anything overnight with the rules being changed and Washington DC more important than London or NYC. I doubt anyone is looking at any fundamentals out there anymore - just make a trade and get back to cash by 4 PM. A sad situation. For now all we can do is sit high in cash, trade with a small portion of the portfolio to try to snag some of these huge daily changes and wait for a day when fundamentals matter again and you can hold something not named Walmart (WMT) longer than 48 hours. Only thing I'm sticking with are the healthcare stocks - everything else is simply a 'trade' - get some when it falls, sell some when it rises - never build a large position because it can drop 30% in 3 days if the market turns against you. An exasperating experience for people who actually like to invest.
Long Lennar and James River Coal in fund; no personal position
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