A Reader Writes, part 2

I love questions! I prefer questions be asked here, on this blog, however, so that I need answer only once for many people rather than 100s of times for one person. What follows is a private email that I make public, and attempt to answer...

"What if anything can we learn from the president of WFMI selling about 50,000 of his 56,000 shares on 8/1?"

What is it you would like to learn? Your question includes an implied comment and assumption. My answer to your implied assumption is this comment (originally posted elsewhere)...

1) Share transactions occur anyway - for every seller there is a buyer; for every buyer there is a seller
2) That I know the sellers' names and where they work matters little, if at all
3) Without investigating, these shares likely are 100% of the public half of a private transaction
4) Insiders are notoriously wrong. It is (too) widely perceived they hold some special insight; they do, but re the company, not its shares. This is a critical distinction: there is a difference between a company and its publicly traded shares
5) Limiting one's investment opportunities to those with zero insider selling is folly. Even if you decide to make that Filter #1 it still is only one filter of several, if not many
6) Investing means buying and selling. Otherwise, why invest?

"On a down day like this, did you increase your positions in any of the companies you've highlighted over the last few months in your blog? Or is your time frame too big for that."

Investing for me is a never-ending process; I buy and sell continually. I have sold (and purchased, albeit smaller-sized lots) many positions the past 3-5 days. However, all these transactions occur from a limited list of opportunities. This 'news' should not come as a surprise, as I have warned -- repeatedly, copiously, and loudly -- that the market is about to decline. I consider the action today to be only the opening salvo in that decline. I always am wary that what has been a leader -- stock, group, or sector -- no longer will be, so I ceaselessly seek reversals.

"What was going through your head in the weeks and days before Google's recent earnings announcement and why?"

Please read the blog; I posted so often re Google/GOOG ahead of the earnings report that I was in danger of being a one-trick pony, all Google/GOOG and nothing but Google/GOOG. It is all there for you to read at your leisure. Perhaps needless to say, nothing re the trading activity or pattern for Google/GOOG the past ~2 months surprises.

"What if anything did you do to your Google position at that time and why?"

I did nothing, nor will I. I own my investment position, and will not relinquish it for reasons as common as market movements.

"If you didn't own any Google the day before the announcement, what if anything would you have done differently and why? Did you do any lot swapping on GOOG since its earnings report? If so, at what price points, and how exactly did you do that? Just put in a few limit/ stop/limit orders days/weeks in advance, and kick back, or what?"

Please read this blog's archives. I have recommended investors purchase Google/GOOG as an investment for months prior to its IPO. I continue to recommend its purchase but within reason. You had better know why you buy any investment at all time highs and after a powerful run higher.

"Why is this guy wrong in what he says about GOOG?"

This guy states that if the market declines so will Google/GOOG. Do I miss some additional content that provides a deeper insight than that? For the record, I differentiate between the market's laggards and coevals, and its leaders. Google/GOOG is more than a leader, it is "a singular opportunity"®.

"Under what time frame(s) and for which investor type(s) -- trader, speculator, investor (as you categorized them in dmg) -- are the positions you listed in your "A Reader Writes" post a buy today?"

This answer would require a spread sheet, and more time than I have. (BTW, what is "dmg"?)

"On Sunday night I looked at the IBD 100 and picked, among other stocks, GIL because I liked the chart and its low debt/equity ratio, liked that earnings were coming out this week, and liked that they sell clothes keeping in mind that there seems to be a buzz (rumors?) around several clothing outfits (pun intended) at the moment. Did I just get plain lucky or was it more a combination of luck and sound thought?"

People believe they are brilliant -- or their investment selection methodology is -- but in the end each investor is captive to other market participants wanting to own and hold the shares and to buy them. This buying creates a rising share price, sometimes expressed as a rising trend. Make your decisions simple: learn how to identify trends, how long they endure, what signals they provide when they are about to terminate any direction, etc GIL is in a powerful uptrend. Congratulations.

"Should I have sold the stock at about 2:45pm today? I didn't because while thinking about that I read that the analysts turned rumor into news (I think that's how you put it in one of your early dmg articles) and raised targets."

I understand neither your question -- you provide no basis -- nor your paranthetical comment that alludes to the sentence previous.

"Scottrade has got to be better than Schwab for online investing, right?"

I use Scottrade for some of my monies. The firm is okay. They have many glitches and shortcomings, but I like it that the company continually strives to be better.

"Even though you encourage posts on any topic, I haven't posted questions like these. The question I did ask was a response to your writing 'questions...?' I know how much time it takes to thoughtfully answer a question, and since I'm not sure how thoughtful and worthwhile my questions are relative to others I should be asking and since you're not getting compensated for your valuable advices except with thank you's, I've spared you. Besides that, I make an effort to keep a low on-line profile. If some of my questions are worth posting and answering on your blog, please let me know."

Well, now you know ;-)

I accept 'donations' from my Amazon wish list (and have received gifts; thank you to the giftors).

I prefer questions to the words, "thank you" because in attempting to answer the questions, we each learn something. Or so I hope.

"As you can see from my questions, I'm still hard at work on the 'knowing thyself' part of investing. I think I'm a speculator who doesn't at the moment have enough time to do the due diligence necessary to speculate; yet I've been acting like a trader for the last couple of weeks, and though I've learned a lot (I think), I've paid more than my share of tuition to Market University. My positions at the moment, though, look more like an investor, I think."

Perhaps of note is that I have been mulling over a post that would discuss some of what you mention. Watch for it, if interested.

Anyway, at the moment, here's what I'm holding in equal proportions except for a higher position in Google, not that you have to comment on any of it --

GOOG (stopped holding out and increased my position 50% today. Rationale--it's a 300 internet stock down 81 cents on a bad day, I'm going to buy it again some time, let me stop playing games and buy it now. By the time I figured that out, 15 minutes went by, and I purchased at 296.94.)

Okay, another person who waited until the stock rose to $300 before buying. Oh well. What will you do with these recently-purchased shares if Google/GOOG declines to $250, or even $200, rather than continue its rise?

AAPL
With the market in its current state, AAPL's chart setup and pattern could become despoiled rather quickly, alas. Pending additional 'bars' to discern future direction, there is the possibility I might not hold in the teeth of a ferocious decline

URBN (increased from my half to full position on it today)
I sold this (at $62) along with several other specialty apparel makers and retailers, as I noted ~10 days ago the ground shifting beneath the feet of this group

EBAY
More basing required. Define your time frame, and then align it with what transpires in the appropriate periodicity.

JNJ
It is now caught in a vice whence it might break down rather than up, alas

QCOM
More basing required. Define your time frame, and then align it with what transpires in the appropriate periodicity

GLW
I hold during up trends of this type rather than buy. I am a pre-momentum buyer and a holder during periods of momentum (or trend), not a buyer of momentum.

CCJ
This pattern should resolve itself upwards within the next 6-8 weeks. If the coming decline in the market takes this stock down, so be it.

I avoided other stocks you've mentioned [for various reasons]. Thanks for reading.

Hey, thanks for writing!