Sometimes I need to stop and listen to what the market is trying to tell me. There are times when I get caught trying to be cute and fancy and, as a result, usually end up losing money on those trades. One example is looking for stocks to buy (and buying) even after the market is getting ‘overextended’. I got caught upside the face with a few erstwhile trades that I took in $TIF, $CVLT and $VSCP last Friday. Those didn’t turn out so well.
Into the early week weakness, I decided to get the hell out of a number of names in industries/sectors that just aren’t going anywhere. While short sellers were busy cracking celebratory Busch Lights, I was busy trying to figure out is this sell off had legs. By Thursday, the disconnect between the price of oil and a bunch solid performing (over the past 6 months) oil related stocks had peaked my interest.
The unrest and chaos in the Middle East isn’t going away anytime soon, therefore the price placed on their most abundant and precious commodity is likely to match that chaos. If nothing else, companies with oil interests throughout the rest of the world are likely to see the cost of their product increase, therefore they are likely to make more money and eventually that will pass on to the shareholder (or so my theory goes).
Following my trades, you can see that I basically cast a net over a few different oil industries. In addition, I wanted exposure to the real deal so I bought some $USO. Just for shits and giggles I added a minuscule position in $ERX as well (better late than never). My stock purchases weren’t random, but I also wasn’t staying up late reading the quarterly reports of these companies either. My ongoing strategy is to take profits quickly on the majority of shares in these stocks, keeping a smaller amount around in order to add on pullbacks or to limit my risk should prices reverse. As always, I have exit plans in place for these stocks as well. Nothing beats building a winning position over time with house money versus your own risk capital.