1st Year Stock Portfolio

It has been just over a year since I’ve been investing seriously in stocks; and I’d like to recap how the market has treated me and what I’ve learned over the last year.

1) Know When to Take a Loss
Every informed investor should be aware of the overwhelming problem in the subprime mortgage market that has tumbled over into the prime mortgage sector, homebuilders, and consumer spending. For a little over 2-months, I owned Accredited Home Lenders Holding Company (LEND). LEND melted down to a low around $6/share but is currently still far from their 52-week high of $36.95. Luckily I saw the negative signs early and took a minor 10% loss. If I had held until today, I would have realized a 60% loss. Some people will not want to write down a loss, but sometimes you have to figure out why a stock is down and understand if it has the fundamentals to rebound or not. In the case of Accredited Home Lenders, I didn’t see any kind of foreseeable stabilization in the housing market and I got out.

2) Ride Momentum For Big Gains
In my Las Vegas Sands investment, I got a 72% gain in just under three months and I rode the stock to new yearly highs. Instead of pulling out with a 10-20% gain, I saw the positive signs of their Venetian Macau opening, Singapore hotel casino in the works, and other investment options. Of course, I would have been up 90% if I had held it, but another thing you have to do to be a good investor is be happy with your gains, and don’t let it affect other investments. Even when LVS dropped 20 points in mid August, I knew they had good fundamentals and global growth opportunities and I wasn’t in any rush to sell.

3) It’s Hard to go Wrong With Oil/Energy
I made a lot of trades with oil and coal companies, and those companies would have provided me with even better overall gains if I had held them longer. With oil at an all time high and staying in the $80/barrel range, it is only time that is standing in the way of $100/barrel oil. Unlike technology that can get outdated, oil is not being replaced soon by any other commodity.

4) Diversity is Difficult
I truly believe that it’s extremely difficult to have a completely diversified portfolio of stocks unless you have at least $30,000 to invest. That way, you can invest in $3,000 blocks and have no more than 10% of your portfolio in any one stock. If you only have $2,000, that can buy you 2 shares of Google and 7 shares of Apple. On top of that, each stock represents 50% of your investments. Never put all your eggs in one basket so even if you have less than $30,000, at least try to invest in different sectors. As you can see in my stock investments below, I had investments in oil, coal, retail, housing, casinos, ethanol, and technology.

5) Just Make Money
For young investors, go ahead and take those short-term capital gains. Don’t worry about saving taxes by holding your stocks for more than a year because who knows if you’ll even have a positive return later. If you make a 10-20% gain in a few months, I would take those gains so you have a cushion before dipping into another investment. It is also a very good psychological boost to know that you are making profit.

My investments dating back to as far as September 2006 are shown below. I have provided information on the short term capital gain or loss that I incurred. I also included the current gain or loss I would have if I had held the stock until today.

Company Ticker Symbol Actual Gain/Loss Current Gain/Loss
Hot Topic HOTT 04.23% -25.15%
Sandisk SNDK 02.10% -07.17%
Peabody Energy Corporation BTU 03.93% 35.80%
Peabody Energy Corporation BTU 09.05% 42.48%
Statoil STO 08.34% 41.66%
Statoil STO 14.75% 50.05%
Peabody Energy Corporation BTU 09.19% 38.91%
Qualcomm QCOM 00.89% 13.61%
SAIC SAI 03.20% 02.77%
Halliburton HAL 08.37% 32.91%
BJ Services Company BJS 00.55% -10.48%
Qualcomm QCOM 00.89% 13.61%
Finisar FNSR 06.27% -22.89%
Accredited Home Lenders LEND -10.17% -60.34%
BJ Services Company BJS 12.13% 00.90%
Las Vegas Sands LVS 71.81% 90.07%
Archer Daniel Midlands ADM 03.79% 03.79%
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