My Basket of Deplorables

[billyjoe]

We've all got some. Here are mine. Not all bad stocks. Just bought at the wrong time. I'll hold and am sure most will recover in a month, 6 months, a year?

CONE- at least it pays 3.8% div

LCI--who knows what's going on with these healthcare stocks

AG---silver and gold

AU---gold

SA---ditto

PAAS- hope is on the horizon. I know, you shouldn't overload on precious metals. I did it and am willing to wait.

Put your list here. Nobody's perfect. Even Mr. Market has a few turkeys.

-------------------billy

[Deaddog]

I'm not perfect and I certainly don't have Mr. Markets consecutive win record. I consider myself a long term trader rather than an investor.

My investment plan incorporates stop losses so that I don't end up with a basket of deplorables.

To my way of thinking it doesn't make sense to hold onto a stock that isn't performing.

If the argument is that a losing stock might yet increase in value you have to ask yourself if there isn't another stock that is more likely to go up. Why tie up your capital in a stock that isn't doing what you want it to?

I consider stocks in my portfolio as employees, hired specifically to contribute to the objective of increasing my wealth. Any employee, regardless of how good looking or how promising, that doesn’t contribute has to be let go.

I know, Murphy's Law dictates that as soon as I sell, a stock will go up. I look at it this way; I would rather have a stock go up with me on the sidelines than have it go down with me owning it.

[jiesen]

I've never liked the idea of stop losses, the reason being it incurs losses when you use them. I like profits, but not losses, so I only sell my stocks when they go up. Thus, I also have a winning streak as long as $$MM's, in one of my accounts.

That said, this strategy does indeed give me my own basket of deplorables. And because I also hang onto stocks even longer than $$MM (even $$MM takes a few losses every now and then), I've got a rather extensive collection in my basket... and a good reminder of what not to buy in the future.

Anyway, here's my list of most recently picked deplorables:
TNH
ASX
RHI
ZUMZ
LCI
LXFT

Sound familiar? They should Anyway, these are mostly down ~50% or more from my initial entry, but with some averaging down I'm only down about 15-25% on a few (i.e. LCI and LXFT).

Others that I own, and have nearly written off include:
VDSI
APOL
AFLYY
TBT
CBK
BOOM
IKGH
TOL

So yeah, that's a pretty big list for me.

[billyjoe]

Thanks for sharing. Now don't you feel better? I keep seeing LCI and still have hope for its recovery. As long as we don't put everything into a small number of stocks it doesn't do much damage. If you put 2% of your funds in a stock that loses 50%, you're only down 1% of the total. Not much pain.

----------------billy

[mimo_100]

Thanks for sharing. Now don't you feel better? I keep seeing LCI and still have hope for its recovery. As long as we don't put everything into a small number of stocks it doesn't do much damage. If you put 2% of your funds in a stock that loses 50%, you're only down 1% of the total. Not much pain.

----------------billy

billy,

Where it really hurts is when the losses are in my Roth account - since I cannot take advantage of any tax losses.

[riverbabe]

Okay, looks like I'm in good company here. Listing only what is currently >10% in the red. Still have lots of hope for some of them. And I can be patient when I need to.

SAFM
NKE
GDX (should woulda coulda sold while green)
CI (pesky regulatory hurdles to Anthem takeover))
KR
PFE
UVXY (trying to unload)

close to 10% -

FEYE
HRL

What gives with the food stocks already? SAFM. HRL, KR?

[billyjoe]

River, KR is building giant superstores around here and wiping out the competition. In store liquor stores and even furniture. Newly opened in Sandusky, another being built 18 miles west, another 30 miles west of that. They get mobs of customers like the early malls.

--------------billy

[jiesen]

billy,

Where it really hurts is when the losses are in my Roth account - since I cannot take advantage of any tax losses.

Keep in mind that it's only a loss if you sell. If you sell when it goes back up, then you don't need to pay taxes on the gain! Win-win!

[Louetta]

Some of these look like buys here. If you'd buy it here then don't sell it here. The groceries are interesting. We have Wegman's (private) coming in here. The one near me has a two level parking garage and free wi-fi. They sell booze cheaper than the liquor marts. Upscale stuff to compete with Whole Foods. Prepared foods to go, great, real food. You can even order a pizza to take out. They sell groceries too.

[Deaddog]

I don’t mind taking the odd loss as long as it is a small loss.

I look at the value of my overall portfolio not the value of any individual stock.

I check the charts of each stock in the portfolio to determine the trend of the individual stock.

It doesn’t matter what I paid for a stock. What matters is what direction the stock price is moving.

If a stock is not contributing to the growth of the overall portfolio there is no reason to keep it.

I guess it comes down to how you measure your investment performance. I measure mine by the dollar value of my total portfolio. At the end of the year that value has increased or decreased. The percentage value of that change is how I can measure my performance against other investors or the indexes. It doesn't matter if I had more winners than losers or how many winners I had in a row.

I put my capital to work to fund my lifestyle and hopefully increase my wealth. Holding on to losing stocks is detrimental to that objective.

[Deaddog]

If you put 2% of your funds in a stock that loses 50%, you're only down 1% of the total. Not much pain.

----------------billy

But if it gains 50% it's not much of a gain.

I think a 50 stock portfolio would be hard to manage.

[Deaddog]

Keep in mind that it's only a loss if you sell. If you sell when it goes back up, then you don't need to pay taxes on the gain! Win-win!

If you hold on to a losing stock because you think that it might turn around eventually, you have to ask yourself is it more likely to go up than any other stock. Are you missing opportunity to buy another stock that has a greater probability of increasing in value than the one you are holding that hasn't performed the way you had hoped.

Are you more concerned about being right than you are with making money?

Is your objective to have no losses compromising your potential to earn future gains?


As far as the tax considerations; If you sell a loser to buy a winner you get to write off the loss when you sell the winner. Win Win

[jiesen]

Perhaps, but in the case discussed here, the trading occurs in a Roth IRA, where no taxes are imposed, and so no writeoffs are allowed, or relevant, even. When you trade with taxes in mind, it can also serve as a distraction from trading with the most profitable strategy in mind. My opinion is to just count your taxes up in April and pay it, whatever that might be. Forget about taxes when you trade, and if you can do it in a tax-exempt manner (Roth IRA, or similar) even better.

When I don't sell because my stock is down, it's because I don't want to lose money, simple as that. I picked the stock because it will go up. If I pick one that doesn't up, I'm not selling then to fix the mistake (that only makes it worse). I'll learn something (in theory) and pick a better stock, one more likely to go up, next time. (See Will Rogers for advice on this... he's right, you know) And when the beat down (but still good) stock comes back up, then I'll sell it and make money.

You just can't keep all your money in perfect stocks at all time, and shifting your money around constantly chasing that dream just causes lots of friction in trading costs, and wastes your time, which could be better spent on research, learning about which companies are better investments, economics in general, etc.

You have to be good enough at this to pick stocks that in aggregate will make you money. If you're not making money, you'd better just quit trading, since you're costing yourself money and time, and go back to school, or hit the books, and perhaps paper trade until you learn better.

[billyjoe]

Unfortunately my traditional IRA funds are much greater than my Roth Ira funds so much more trading is done in the non Roth account and it is more likely the losers will be in the non Roth. I ask myself "why did this good stock go down" is it just out of favor with the current economy or is the business going bad. Then there's always the factor of running up the total of consecutive winners. If my goal is 100 in a row and I'm getting close to that number I'm less likely to sell a loser. Maybe this isn't financially prudent, but there's certainly a value in bragging rights if I were to hit 100 straight. And with a low percentage of my $$ in any one pick I say it can be worth the risk.

--------------billy

[Deaddog]

(See Will Rogers for advice on this... he's right, you know)

I love that quote. It is the best explanation of the market I have heard.

"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

My whole investment strategy is based on that quote. I just added a line. "If it goes down dump it"